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As a high-technology company, AIXTRON maintains a strong Research and Development (R&D) infrastructure, with signifi cant resources devoted to R&D projects. AIXTRON’s R&D activities are critical for the Company’s long-term strategy to maintain its position as one of the world’s leading provider of gas-phase deposition equipment for the manufacture of complex device structures for the semiconductor industry.

AIXTRON’s R&D organization works closely with its own global sales and service organiza- tion to develop systems, tailored to customers’ individual needs.

AIXTRON maintains its own R&D laboratories in Aachen and Herzogenrath in Germany and in Sunnyvale, California. These in-house laboratories are equipped with AIXTRON systems for researching new equipment and processes, as well as for producing reference samples of semiconductor materials. As part of the R&D efforts employed, AIXTRON regu- larly collaborates with many well-known universities and research centers worldwide and participates in numerous government and European Union-funded development projects.

The absolute increase in R&D expense in 2007 compared to 2006 was largely due to increased development activities and the consequent increase in headcount of temporary and permanent staff, higher cost for test and consumable materials and increased amortization charges year on year.

Key R&D Information 2007 2006 2005 2006 2007

R&D expenses (million EUR) 26.5 23.9 30.5 11%

R&D expenses, % of sales 12% 14% 22%

R&D employees (period average) 210 181 188 16%

R&D employees, % of total headcount (period average)

Next Generation Non-Volatile Memory Development

AIXTRON continues to participate in the European Commission-funded CHEMAPH (Chemi- cal Vapor Deposition of Chalcogenide Materials for Phase-change Memories- EU IST Project) project. The scope of the project is aimed at the development of chalcogenide- based phase change materials. The consortium carrying out this study consists of three academic and three industrial partners from fi ve European countries, namely CNR (National Lab MDM-INFM) (Italy); ST Microelectronics (Italy); SAFC Hitech (United Kingdom); Consejo Superior de Investigaciones Cientifi cas (CSIC) (Spain); Vilnius University (Lithuania); and AIXTRON AG (Germany).

Phase-change memories (PCM) are some of the most promising candidates for the next- generation of improved non-volatile memory structures, beyond Flash memory.

The project aims at demonstrating the feasibility of a fi lm manufacturing process based on metal-organic chemical vapor deposition (MOCVD). This technique is known to enable the production of thin fi lms with superior quality compared to those obtained by the cur- rently most used methodology, known as sputtering, a physical vapor deposition (PVD) technique.

AIXTRON’s participation in this project is expected to result in the more rapid development and refi nement of the range of its MOCVD systems for chalcogenide phase change mate- rials, which can potentially be used in the production of next generation memory devices in the silicon industry.

Organic Light Emitting Diodes (OLED) for lighting applications

As part of a German Ministry of Science and Technology (BMBF) program (OLED 2015), the BMBF has committed EUR 100m, over a 5 year period as support for the development of organic light emitting diodes (OLED) for lighting applications. The 33 partners within the OLED initiative, including AIXTRON AG, are expected to collectively contribute the equivalent of EUR 500m to achieve the technical targets required to develop OLEDs for lighting applications. The primary stated scope of the initiative is the creation and intro- duction of an OLED lighting technology into the lighting market.

As part of the OLED 2015 funded initiative, AIXTRON participates in an specifi c R&D project; OPAL 2008, with the Company’s Organic Vapor Phase Deposition (OVPD®_{) tech-}

nology platform in a consortium together with OSRAM Opto Semiconductors GmbH, Philips GmbH, BASF Future Business GmbH and Applied Materials, Inc. (formerly Applied Films).

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Consolidated fi nancial statements Notes to the consolidated fi nancial statemant

The fi nal goal of OPAL 2008 (Organic Phosphorescent lights for Applications in the Lighting market 2008), is the development of an OLED production technology capable of manu- facturing a high performance white OLED device at a target cost of a few euro cents per cm2_.

To reach this target, the individual research activities of all partners within this group will be coordinated to maximize the feasible development synergy effects. The specialized organic materials required will be developed by BASF Future Business GmbH. The device architecture for the lighting modules and the adapted OLED processing technology will be developed by OSRAM Opto Semiconductors GmbH and Philips GmbH. AIXTRON’s contri- bution to the project will be to improve the production capabilities of the OVPD® _process

by designing appropriate equipment for such OLED devices. The research will be carried out in Aachen, Germany at the Philips production site in Aachen Rothe Erde where a prototype OVPD® _{system is already installed and running. Additional scientifi c support is}

provided by RWTH Aachen University.

White LEDs on silicon for lighting applications

AIXTRON participates in a UK Department of Business technology program, which aims at developing low-cost LEDs for solid-state lighting based on GaN structures deposited on large area Silicon, serving as cost-effective substrate, using AIXTRON’s MOCVD technology.

Next generation CMOS circuits with III-V Compound based Transistors

AIXTRON participates in a research project together with a number of other academic and industrial partners, namely IBM Research (Switzerland), ST Microelectronics (France), NXP Semiconductors (Belgium), National Center of Scientifi c Research (Greece), IMEC (Interuniversitair Micro-Electronica Centrum) (Belgium), LETI (Commissariat a l’Energie Atomique) (France), University of Glasgow (United Kingdom) and Katholieke Universiteit Leuven (Belgium) aimed at developing a dual-channel CMOS technology comprising high channel mobility Germanium (Ge) pMOS and III-V compound semiconductor based nMOS transistors co-integrated on the same complex engineered Silicon substrate. This approach potentially delivers high performance switches as an option for the 22nm technology node for the Nanoelectronics industry.