BLOG

Fabrinet: Nuggets Search in Optics Mess

May, 2018

All of the previous, unusual amount of commotion going on in the telecom/datacom optical market has been further complicated with the ban on sales to ZTE. Yet, it cannot be ruled out that there may be at least small opportunities for growth in the space for contract manufacturer, Fabrinet, as a result of the potential moves of the large component companies in dealing with the crisis of a major drop downward in margin generation in their traditional businesses. Of course, if the US federal government’s investigation into Huawei gets escalated to another level, then all bets are definitely off until after the bargaining of these chips is completed, as this writer has commented on earlier.

Fabrinet would have the most to gain from possible shifts in direction by Finisar, which also has the benefit of having the least exposure to China of the four big US componentry firms. Of course, its new CEO, Michael Hurlston, in coming from Broadcom, would be extremely comfortable in moving to a model, which is based on farming out more of the production.

The biggest impetus would be our expectation that the upcoming plan for Finisar, which will be announced in June of this year, will reflect a determination that the optical ecosystem has been so damaged that vertical integration can no longer offer a significant cost advantage in producing transceivers. Hurlston will also likely be inclined to move downstream as quickly as possible to focus manufacturing/development efforts at the chip level in which the potential for profitability would be the greatest.

Hurlston can reasonably make the argument that such an atypical acceleration of this kind of change is necessary as market conditions have not been this bad since the bubble burst almost 20 years ago. Moreover, the combination of Lumentum planning to use Oclaro’s fabs increasingly for consumer applications along with the former looking to concentrate further upstream in its traditional business, may provide greater opportunities for Finisar to offer modules with a greater amount of sophisticated integration, which can demand a better premium, and hopefully provide Fabrinet with a decent amount of volume business.

Concerning the Lumentum/Oclaro merger in the short term, the former is already its largest customer, and we had heard through the grapevine that before the announcement of the marriage that the latter was considering moving at least some, if not all of its contract manufacturing for its IPBU (Incubated Photonics Business Unit) from Venture, in Penang, Malaysia to Fabrinet. A lot of the work on its line-side offerings, including its ACOs and coherent optics has been performed at Venture. Fabrinet has been getting business from Oclaro’s PCBU (Photonic Component Business Unit) for client-side apps.

The key point is that after closing the purchase, Lumentum will likely want to simply matters (as well as reduce its costs) as speedily as feasible in order to more efficiently absorb the acquisition by moving the Oclaro portion of the operation to just using Fabrinet.

As always fibeReality does not recommend any securities, and this writer does not invest in any companies being analyzed by us.

To follow us on our totally separate, daily company blog with 365 posts a year, which is exclusively on fibeReality’s LinkedIn page, please click here.

[written by Mark Lutkowitz]

 

Share Article

Add Comment

 

Back

 

Read Comments

  • brian kinn  
    May 10, 2018 at 17:18 PM Reply
    "... 20 years ago" Indeed, though not "quite" 20 yrs "yet" . I was there for the whole show. from the beginning ... when the "Asian crisis" was the bear's delight of the moment, followed by the first Fed move in some large number of years, which, in tandem with the world suddenly realizing there was an internet , created the whole dotcom craze (Also, Clinton had a balanced budget to rave about ... which made the cigar incident with Monica all the more endearing). And then one day in 1999...NT had a Q report somewhat lacking in the usual "cherry pie in a stratosphere" enthusiasm. Indeed some say it bordered on bleak,.... and the market's breath suddenly stuttered ( still remember Roth's smiling face as he talked about "firing on all cylinders" ... on the previous Q). As the dominoes began to line up for the fall, JDSU, LU, and CIEN, refused to admit defeat .... but eventually joined in surrender to the onslaught as their gorged p/e's began to shed lbs and shrink from XXXXL plus sizes.... all the way down to petite sizes (my girlfriend is a "0"... that's small, right?). Having lived through that, and having emerged on the other side an older and wiser player, I'd like to state for the record that the "status quo" is quite different these days. As several have mentioned over the last 5 years, the infrastructure dependent companies are not only making money now (as opposed to 1999), but their constructs are becoming sorely taxed in more areas every day. Long gone are the water cooler remarks of a fiber glut, but what seems to be overlooked is that capacity has been getting crushed and services are seeing some backlash (off net), in more ways than one. However, to coin a phrase "you aint seen nothin yet".. There is so much "work" on the horizon, and we really are just getting started on what many thought would happen overnight, allowing impatience to lead them astray, and I am again reminded of the histories surrounding disruptive technology developments, the few shareholders who built more wealth, and the many that got in, got burned, then later missed the boat entirely because they just did not understand the companies, their products, the markets they served, and the fickle intricacies, and varieties of demand. ..... "I shall be telling this with a sigh, somewhere ages and ages hence...." As transformations and consolidations ensure, inventories subside, and demand pressure becomes visible, even to the general heard, opticals will thrive. Keep us abreast of your insight, Mark. Your perspective is much appreciated.
  • rtaletoasg  
    August 19, 2018 at 20:17 PM Reply
    [url=http://missreplicawatches.com]does daily cialis work[/url] cheap cialis pills http://missreplicawatches.com
  • wtaleteabu  
    August 20, 2018 at 01:12 AM Reply
    [url=http://rabbitinahat.com]can you mix cialis and viagra[/url] what strengths does cialis come in http://rabbitinahat.com
  • xhmuzr  
    August 20, 2018 at 20:19 PM Reply
    [url=http://camadian-pharmacya.com]viagra substitute[/url] brand viagra online http://canadian-pharmacya.com
  • upsuec  
    August 26, 2018 at 06:27 AM Reply
    generico de viagra en argentina http://canadian-pharmacyon.com buy viagra on line
  • ptwqos  
    August 30, 2018 at 00:35 AM Reply
    buy viagra online melbourne http://canadian-pharmacya.com [url=http://camadian-pharmacya.com]buy viagra soft[/url]
  • aqglwr  
    August 31, 2018 at 13:13 PM Reply
    buy cialis online overnight delivery http://canada-pharmaci.com how to order cialis online
  • lmytqn  
    September 03, 2018 at 14:20 PM Reply
    [url=http://cialisn.com]cialis from canadian pharmacy[/url] review cialis online http://cialisn.com
  • guzmhi  
    September 06, 2018 at 09:56 AM Reply
    buy cialis online best price http://canadian-pharmasy.com best place to buy generic cialis online
  • ttaletzihs  
    September 11, 2018 at 01:43 AM Reply
    [url=http://gigawatt6.com]cialis ingredients[/url] female cialis online http://gigawatt6.com
  • ztaletetgr  
    September 11, 2018 at 18:27 PM Reply
    [url=http://usedrestaurantequipmentaz.com]brand cialis name online order[/url] buy generic cialis online with mastercard http://usedrestaurantequipmentaz.com
  • gtaletfjoo  
    September 11, 2018 at 18:47 PM Reply
    [url=http://canadian-pharmabuy.com]buy sale viagra[/url] order viagra 100mg http://canadian-pharmabuy.com
  • rtaletdjah  
    September 11, 2018 at 19:30 PM Reply
    [url=http://viciolatino.com]best online pharmacy for viagra[/url] cheap viagra in usa http://viciolatino.com
  • htaletdkjh  
    September 12, 2018 at 03:03 AM Reply
    [url=http://usedrestaurantequipmentaz.com]cheap cialis overnight[/url] best online pharmacy for cialis http://usedrestaurantequipmentaz.com
  • rtaletkbgt  
    September 12, 2018 at 03:20 AM Reply
    [url=http://canadian-pharmaonline.com]cheap viagra no prescription[/url] buy generic viagra cheap http://canadian-pharmaonline.com
  • ntaletukkt  
    September 12, 2018 at 13:46 PM Reply
    [url=http://valladium.com]order internet cialis[/url] order cheap cialis http://valladium.com
  • ataletteem  
    September 12, 2018 at 16:02 PM Reply
    [url=http://waltzweekend.com]order viagra online india[/url] mail order viagra canada http://waltzweekend.com
  • ltaletjljq  
    September 12, 2018 at 20:20 PM Reply
    [url=http://gigawatt6.com]cheap cialis 20 mg[/url] order cialis online without prescription http://gigawatt6.com
  • ctaletjqlz  
    September 13, 2018 at 03:09 AM Reply
    [url=http://h-m-j.com]viagra online canada[/url] cheap herbal viagra http://h-m-j.com
  • etaletvzyf  
    September 13, 2018 at 04:40 AM Reply
    [url=http://usedrestaurantequipmentaz.com]cialis pill[/url] how to order cialis online safely http://usedrestaurantequipmentaz.com
  • wfuetd  
    September 13, 2018 at 13:42 PM Reply
    cialis versus viagra http://canadian-pharmasy.com order cialis canadian pharmacy
  • ataletfqup  
    September 13, 2018 at 17:50 PM Reply
    [url=http://missreplicawatches.com]can you order cialis online for canada[/url] cialis online http://missreplicawatches.com
  • otaletllpx  
    September 13, 2018 at 18:08 PM Reply
    [url=http://waltzweekend.com]buy viagra internet[/url] buy viagra las vegas http://waltzweekend.com
  • btaletwqnc  
    September 13, 2018 at 20:22 PM Reply
    [url=http://unishade.com]buy cialis overnight delivery[/url] order cialis online us pharmacy http://unishade.com
  • ntalethcky  
    September 13, 2018 at 22:28 PM Reply
    [url=http://baymontelreno.com]cialis canada mail order[/url] cialis 20 mg http://baymontelreno.com
  • ztaletjxsh  
    September 13, 2018 at 23:42 PM Reply
    [url=http://motechautomotive.com]cialis 20mg online[/url] generic cialis 20mg http://motechautomotive.com
  • ntaletdtqd  
    September 14, 2018 at 04:25 AM Reply
    [url=http://timsbmw.com]is levitra over the counter[/url] how long before levitra works http://timsbmw.com
  • ntaletsdnq  
    September 14, 2018 at 09:06 AM Reply
    [url=http://canadian-pharmasale.com]generic cialis canada[/url] how to order cialis http://canadian-pharmasale.com
  • ztaletfbai  
    September 14, 2018 at 11:23 AM Reply
    [url=http://baymontelreno.com]cheap cialis canadian[/url] canadian online pharmacy generic cialis http://baymontelreno.com
  • utaletvyue  
    September 14, 2018 at 19:53 PM Reply
    [url=http://unishade.com]brand cialis name online order[/url] cialis online canada http://unishade.com
  • utaletdqbq  
    September 14, 2018 at 22:49 PM Reply
    [url=http://canadian-pharmaonline.com]generic viagra canada[/url] buy viagra online no prescription http://canadian-pharmaonline.com
  • rtalethvtg  
    September 14, 2018 at 23:14 PM Reply
    [url=http://timsbmw.com]viagra v levitra[/url] coupons for levitra http://timsbmw.com
  • rtaletfwke  
    September 15, 2018 at 04:58 AM Reply
    [url=http://canadian-pharmaonline.com]viagra cheap prices[/url] order herbal viagra http://canadian-pharmaonline.com
  • wtalethrsm  
    September 15, 2018 at 05:53 AM Reply
    [url=http://timsbmw.com]picture of levitra[/url] levitra v viagra http://timsbmw.com
  • ttaletckvj  
    September 15, 2018 at 08:27 AM Reply
    [url=http://canadian-pharmaonline.com]buy viagra from canada[/url] cheap canadian viagra http://canadian-pharmaonline.com
  • xtaletzwbn  
    September 15, 2018 at 12:38 PM Reply
    [url=http://h-m-j.com]order generic viagra[/url] generic viagra sildenafil http://h-m-j.com
  • utaletumbv  
    September 15, 2018 at 13:23 PM Reply
    [url=http://buyviagraonl1ne.us]where to buy viagra online[/url] online pharmacy viagra http://buyviagraonl1ne.us
  • staletzivv  
    September 15, 2018 at 23:48 PM Reply
    [url=http://canadian-pharmasale.com]order generic cialis online no prescription[/url] buy cialis online with prescription http://canadian-pharmasale.com
  • okynyo  
    September 16, 2018 at 19:54 PM Reply
    online pharmacy canada generic cialis http://canada-pharmaci.com cheap cialis 10mg
  • btaletfugg  
    September 18, 2018 at 01:25 AM Reply
    [url=http://valladium.com]cheap cialis 20 mg[/url] order cialis without prescription http://valladium.com
  • ztaletoqfg  
    September 18, 2018 at 01:49 AM Reply
    [url=http://canadian-pharmabuy.com]buy viagra without a prescription[/url] order viagra online without prescription http://canadian-pharmabuy.com
  • rtaletygto  
    September 18, 2018 at 02:39 AM Reply
    [url=http://vico4me.com]viagra for sale online cheap[/url] brand viagra online http://vico4me.com
  • smzcgq  
    September 18, 2018 at 03:57 AM Reply
    [url=http://cialisn.com]buy cialis online europe[/url] buy cialis europe http://cialisn.com
  • dtaletvrnl  
    September 18, 2018 at 04:12 AM Reply
    [url=http://canadian-pharmasale.com]order cialis now[/url] mail order cialis from canada http://canadian-pharmasale.com
  • gtaletwsfa  
    September 18, 2018 at 11:58 AM Reply
    [url=http://usedrestaurantequipmentaz.com]buy cialis online safely[/url] generic cialis in canada http://usedrestaurantequipmentaz.com
  • staletkhmk  
    September 18, 2018 at 12:02 PM Reply
    [url=http://waltzweekend.com]cheap viagra tablet[/url] buy viagra online cheap http://waltzweekend.com
  • xtaletyodq  
    September 18, 2018 at 22:45 PM Reply
    [url=http://buycialisonl1ne.us]cheap cialis canada[/url] cialis generic canada pharmacy http://buycialisonl1ne.us
  • rtaletztsk  
    September 19, 2018 at 05:52 AM Reply
    [url=http://bullsac.com]levitra cost walmart[/url] viagra vs levitra http://bullsac.com
  • gtaletkimu  
    September 19, 2018 at 06:57 AM Reply
    [url=http://rabbitinahat.com]buy cialis from india[/url] generic cialis from india http://rabbitinahat.com
  • mtaletprsj  
    September 19, 2018 at 11:51 AM Reply
    [url=http://waltzweekend.com]natural viagra pills[/url] buy online order viagra http://waltzweekend.com
  • ytaletohqp  
    September 19, 2018 at 22:58 PM Reply
    [url=http://unishade.com]cheap cialis from canada[/url] generic cialis usa http://unishade.com
  • ztaletsgvz  
    September 20, 2018 at 17:56 PM Reply
    [url=http://baymontelreno.com]buy cialis online prescription[/url] cialis 40 mg online http://baymontelreno.com
  • mtaletkhfa  
    September 20, 2018 at 20:09 PM Reply
    [url=http://buyviagraonl1ne.us]buy viagra now[/url] ordering viagra online http://buyviagraonl1ne.us
  • ntaletgnrv  
    September 20, 2018 at 20:27 PM Reply
    [url=http://viciolatino.com]generic viagra online canadian pharmacy[/url] generic viagra online canada http://viciolatino.com