19 Aug 2020
Optical packaging firm reports solid growth in telecom applications but industrial laser business continues to shrink.
Fabrinet, the advanced optical packaging company with extensive operations in Thailand, has reported better-than-expected results for its latest financial quarter, after Covid-19 had less of an impact on its business than had been feared.
For the three months ending June 26, the Bangkok firm posted sales of $405 million - identical to the same period in 2019, but higher than it had predicted back in May.
Company CEO Seamus Grady told an investor conference call that a flexible business model and less severe supply constraints than anticipated meant Fabrinet has been able to ride out the effects of the pandemic thus far.
"All-in-all, we remain optimistic about the markets we serve and, in particular, the demand trends that we see for the products we're producing for our customers despite the Covid-19 headwinds," he said.
While the company’s performance remains closely linked to swings in demand for optical communications equipment, Grady indicated that silicon photonics and automotive lidar technologies were now offering some bigger opportunities.
Lidar in particular could help to offset the ongoing decline in demand for industrial lasers, where Fabrinet also plays a significant role as a manufacturing partner, producing a range of sources including diode-pumped solid-state and fiber lasers.
The decline in industrial laser demand over the past year - much of it driven by the wider automotive slump - saw related revenues slip to $41 million in the latest quarter, while automotive sales (Fabrinet produces a range of different sensors as well as lighting products) fell to $27 million.
But those declines were offset by the ramp in demand for optical communications components, where Fabrinet is a key partner for the likes of Lumentum, Acacia Communications (soon to become part of Cisco Systems), and Infinera's Coriant division.
Silicon photonics uptick
The swings in demand mean that optical communications accounted for 78 per cent of the firm’s revenues in the latest quarter. And according to Fabrinet’s latest annual report, which covers the year to June 26, Lumentum represented 19 per cent of its business in fiscal 2020, with Acacia and Infinera each contributing 10 per cent.
Within optical communications, Grady noted a continued uptick in sales related to silicon photonics. The technology was responsible for $90 million of Fabrinet’s sales in the latest quarter - up 4 per cent sequentially and similar to last year's figure in the June quarter.
While current trends suggest continued strength in telecoms in particular, and ongoing weakness in industrial lasers, Grady does see a growing opportunity in the automotive sector:
“We believe that current ramps of new automotive products such as lidar sensors from Velodyne will soon begin to offset some of the weakness in the traditional automotive markets,” he told investors.
For the current quarter, Grady and his executive team are expecting sales revenues to rise slightly, and end up somewhere between $410 million and $430 million.
“We remain optimistic about demand for products in the core markets we serve, despite Covid headwinds,” said the CEO.
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