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15 Aug 2024
Demand for lasers and transceivers driven by cloud services and data center applications expected to boom in coming years.
California-based photonics giant Lumentum says that it is investing heavily in indium phosphide (InP) manufacturing capacity, to ensure that supply can meet the expected surge in demand over the next few years.
Despite posting a sharp decline in its latest full-year sales revenues - alongside a net loss of close to $550 million - the firm’s Nasdaq-listed stock price jumped in value by more than 15 per cent shortly after CEO Alan Lowe and colleagues outlined their expectations of fast-growing sales through 2027.
Major new transceiver customer
That confidence is partly the result of a significant new customer that is expected to place major orders for Lumentum’s latest high-speed optical transceivers, which are set to be produced in volume by contract manufacturer Fabrinet at its facility in Thailand starting early next year.
Although the latest figures for the June quarter showed revenues dropping 17 per cent year-on-year, to $308 million, Lowe said that he was confident of hitting a targeted $500 million quarterly run-rate by the end of next year.
That should be driven largely by higher sales of both transceivers and externally modulated lasers (EMLs), with further significant growth in 2026 and 2027.
“We are executing on new cloud and AI opportunities that we expect will elevate our cloud business to a multi-billion annual run rate in the coming years,” the CEO told an investor call discussing the latest results.
Having invested some $43 million in its InP wafer fabrication facility in the latest quarter alone, Lumentum’s capacity is set to rise by more than 40 per cent over the next 12 months.
“We booked record orders for datacom chips used in data center applications and saw emerging positive trends in the broader traditional networking market,” Lowe said, with the Lumentum team expecting quarterly sales to rise to between $315 million and $335 million in the current quarter.
Femtosecond trending up
In the June quarter, the firm’s cloud and networking segment accounted for $255 million in sales revenues, while Lumentum’s industrial technology business - largely lasers used in materials processing - delivered just under $54 million.
Lowe said that demand from the industrial segment remained generally weak, with customers still working through excess inventories.
However, the CEO also pointed out that computational demand for artificial intelligence technologies has prompted collaborations with several semiconductor equipment firms on new processes, and an increased migration from picosecond to femtosecond pulsed systems.
Lumentum’s industrial technology business experienced a sharp decline in the full-year figures, with sales of $274 million down 38 per cent from the $445 million reported a year ago as 3D sensing applications also ticked down.
• In after-hours trading following the latest update, investors warmed to Lumentum’s positive outlook, sending the firm’s stock price up in value by around 16 per cent. At just under $53, the Nasdaq-listed stock equates to a market capitalization in the region of $3.5 billion.
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