AXT 2007 Needham Presentation

AXT, Inc.: 

AXT, Inc. Phil C.S. Yin, Ph.D. CEO Wilson W. Cheung CFO January 2007

Safe Harbor Statement: 

Safe Harbor Statement This presentation contains forward-looking information about the Company’s business and financial outlook. Forward-looking information addresses matters that are subject to risks and uncertainties. In addition to the risks associated with developing complex technology, the Company’s future results will depend on a variety of factors, including the cancellation or modification of major contracts; the timing of significant orders; the cancellation of orders and returns of product; the ability of the Company to bring new products to market; the timing of product releases; product announcements by the Company’s competitors and other competitive factors. For further discussion of risks and uncertainties relating to the Company, please see the Company’s filings with the SEC.

Investment Highlights: 

Experienced and committed management executing effective operational turn-around and driving revenue and profitability growth AXT’s products serve rapidly growing handset, HBLED and solar markets Increasing content of GaAs devices in handsets creates additional growth opportunity Increasing market share with leading customer qualifications Defensible market position driven by sustainable cost competitive advantages Raw materials and 6” GaAs substrate capacity are constrained Investment Highlights

New Management Driving Operational Turnaround: 

In Millions AXT Begins Polishing and Cleaning at China Facility Post Epi-Haze Begins to Affect Revenues New CEO, COO and Sales Organization Joins AXT Quality Issue Identified and Process Improvements Put In Place New Management Driving Operational Turnaround

AXT Management Team: 

AXT Management Team Phil C.S. Yin, Ph.D. – CEO AIXTRON, ATMI Epitaxial Services, Crysteco Minsheng Lin – COO Wafer Works/Helitek Company, MEMC Wilson W. Cheung – CFO interWAVE Communications, Yahoo!, Deloitte & Touche Morris Young, Ph.D. – CTO Co-founded AXT, Lawrence Livermore National Laboratory Davis Zhang – President, Joint Venture Operations Co-founded AXT Hani Badawi, Ph.D. – VP Applications Engineering AmberWave Systems, ITT, Grumman Aerospace John Cerilli – VP Global Sales & Marketing AIXTRON, National Semiconductor, Motorola Bob Ochrym – VP Business Development AIXTRON, Uniroyal Optoelectronics, Northrop Grumman

Compound Semiconductor Value Chain: 

HB LEDs Wireless Substrates Epi-layer Epi-layer + Devices Systems AXT Compound Semiconductor Value Chain

Product/Market Applications: 

GaAs Substrates, 2”– 6” Semi-insulating HBTs (power amplifiers) pHEMTs (switches) GaAs Substrates, 2” – 4” Semi-conducting LB LED’s (for novelty applications) HB LED’s (LCD backlighting, general & and solid state lighting, automotive, etc.) Ge substrates, 2” and 4” mainly used for: Solar Cells (space & terrestrial – gov’t & commercial) InP substrates, 2”- 4” mainly used for: Laser Diodes for optical storage & printers Product/Market Applications

Total Market Opportunity: 

Total Market Opportunity Demand for AXT’s substrates is increasing by 18% CAGR TAM growing from $500m in 2005 to $1.1b in 2010, a CAGR of 16% Source: Strategy Analytics 18% CAGR

Handset Shipments Drive Demand for SI GaAs Substrates: 

SI GaAs substrate to grow 20% CAGR, 2x handset shipments growth rate of 10% CAGR Growth driven by strong handset unit growth, increasing die size and more GaAs content per phone SI GaAs substrate market growing from $113m in 2005 to $244m in 2010, a CAGR of 21% Handset Shipments Drive Demand for SI GaAs Substrates Source: Strategy Analytics

LEDs Drive Demand for SC GaAs Substrates: 

SC GaAs substrate market growing from $99m in 2005 to $179m in 2010, a CAGR of 13% LEDs Drive Demand for SC GaAs Substrates Source: Strategy Analytics 13% CAGR

Photovoltaic Drives Demand for Ge Substrates: 

Photovoltaic Drives Demand for Ge Substrates Poly-Silicon is in shortage Ge has higher energy conversion rate than Silicon and is becoming more cost effective Ge substrate market growing from $49m in 2005 to $126m in 2010, a CAGR of 21%. Terrestrial applications growing from $0 to $68m over same time frame. Source: Strategy Analytics 21% CAGR

Market Share Gains in SI GaAs through Customer Validation: 

Market Share Gains in SI GaAs through Customer Validation Q205 market share ~ 5% Q306 market share ~ 12% 2005 TAM by Customers Q205 AXT Customer Position Q306 AXT Customer Position

Market Share Gains in SC GaAs through Customer Validation: 

Market Share Gains in SC GaAs through Customer Validation Q205 market share ~ 6% Q306 market share ~ 10% 2005 TAM by Customers Q205 AXT Customer Position Q306 AXT Customer Position

AXT Competitive Advantages: 

AXT Competitive Advantages AXT has advantages in all elements!

GaAs Industry Utilization Rates Increasing: 

GaAs Industry Fab Utilization GaAs Industry Utilization Rates Increasing Fabs increasing capacity & converting to 6” Substrate suppliers not increasing capacity Source: Strategy Analytics

Incremental Capacity Requirement for the GaAs Market: 

Source: Strategy Analytics Incremental 6” substrate capacity demand to grow by 24% CAGR from 2005 to 2010 CAGR 24% Incremental Capacity Requirement for the GaAs Market

Benefits of Joint Ventures: 

Five JV Operations started in 1999 - 2001 Supplies critical raw materials Ga, As, Ge, pBN, B2O3 All located locally; Beijing/Nanjing AXT uses 100% of JV’s capacity All JV’s expanding capacity Current market on allocation Provides price and volume stability/guarantees vs. competition purchasing on open market Benefits of Joint Ventures

AXT, Inc.: 

2005 - 2006 Financial Summary AXT, Inc.

Financial Leverage in Operating Model: 

Revenues – Higher ASP products and industry capacity constraints Gross Margins: - Capacity utilization - Product mix Operating Expenses: - Current infrastructure can support revenue growth - Nominal capital expenditures required to grow revenues Financial Leverage in Operating Model

2005 - 2006 Statement of Operations: 

2005 2006 (in millions) Q2 Q3 Q4 Q1 Q2 Q3 Revenue $6.0 $6.2 $7.7 $8.5 $10.4 $12.5 Gross Margin 2.1% 18.6% 8.4% 17.8% 26.6% 27.7% Op. Exp.* $3.4 $3.4 $4.0 $3.8 $4.4 $4.5 Net Income (Loss) $(3.3) $(2.1) $(2.7) $(2.2) $(0.9) $0.7 *Restructuring / Impairment $0.2 $- $0.5 $- $- $1.4 *Stock Comp Exp. under SFAS 123(R) $0.3 $0.2 $0.2 2005 - 2006 Statement of Operations

2005 - 2006 Financial Metrics: 

2005 2006 (in millions) Q2 Q3 Q4 Q1 Q2 Q3 Unrestricted Cash & Equiv. $25.0 $24.2 $23.0 $22.0 $17.3 $15.9 Total Debt $7.8 $7.6 $7.7 $7.6 $7.4 $7.3 Total Assets $77.3 $75.6 $74.8 $74.1 $72.2 $72.6 Cash Use Ops $(2.3) $(0.6) $(1.6) $(4.2) $(2.6) $(2.6) 2005 - 2006 Financial Metrics

Investment Highlights: 

Experienced and committed management executing effective operational turn-around and driving revenue and profitability growth AXT’s products serve rapidly growing handset, HBLED and solar markets Increasing content of GaAs devices in handsets creates additional growth opportunity Increasing market share with leading customer qualifications Defensible market position driven by sustainable cost competitive advantages Raw materials and 6” GaAs substrate capacity are constrained Investment Highlights

AXT, Inc.: 

AXT, Inc. THANK YOU! © Copyright 2006, The Nasdaq Stock Market, Inc. Reprinted with permission.