At present, this is a challenging period for all optical communication enterprises, but for stronger enterprises, it is also an opportunity to surpass competitors and gain market share. Luck also plays a role. All enterprises not in Wuhan should consider themselves lucky. In the first quarter, the sales revenue of Accelink fell 49% on a month on month basis and 40% on a year-on-year basis due to the half-time suspension of business. But the company now appears to have fully resumed production and plans to catch up quickly. China’s 5G deployment has strong demand for wireless fronthaul optical devices, which will help the company recover (the company won multiple such contracts in early 2020). In addition to Accelink, Wuhan based Huagong Zhengyuan has also won a number of wireless fronthaul contracts.
In terms of foreign optical communication enterprises, Lumentum reported a 12% month-on-month drop in sales revenue, down 7% year-on-year, which was a welcome result for the quarter with weak seasonal performance, but their expectation for the second quarter was a disaster. Lumentum said that covid-19 would have an impact on second quarter sales of more than $90 million (more than 20% of first quarter sales in 2020), with half of the losses due to tight supply chains and production constraints (closure of business in Malaysia) and the other half due to a decline in consumer and industrial market demand. Broadcom also noted that business closures in Malaysia and the Philippines resulted in longer delivery times for IC chip packages.
This is also a danger signal for II-VI photonics, which operates a large transceiver manufacturing plant in Malaysia. But unexpectedly, chuck Matera, II-VI’s president and chief executive, said in a recent financial conference call that the company’s Malaysian plant was operating without interruption (at least so far). II-VI is pleased to report that sales revenue in the first quarter fell 6% month on month, down year on year 7.5% (compared with the sum of sales revenue in the first quarter of 2019 that Finisar and II-VI are keen on). Among them, transceiver sales revenue was flat year on year, down 9% month on month. For the second quarter, II-VI is pleased to predict that sales revenue will increase by 8% month on month (based on the middle point of the guidance value), and that the order flow is very strong (many of which are long-term supply agreements), the order volume of transceiver is more than 40% higher than expected, and the order volume of ROADM is up 50% month on month.
Chuck Matera was also very pleased with the company’s performance: “I want to really thank our global supply chain organization. They did a great job. They are able to limit the supply chain to a very small number, keeping our affected sales revenue in the low single digit millions of dollars. “
Excellent supply chain management is necessary for a successful business, and in case of interruption, it is priceless. On the one hand, large companies will always have an advantage in obtaining suppliers’ supply. On the other hand, vertical integration can also be an advantage of II-VI photonics, and it seems to be a great advantage. For large companies with more resources and extensive business, it is an opportunity to expand market share.
According to LC’s interview with leading suppliers of optical devices and modules, production in Wuhan is recovering rapidly at this stage. In May 11th, the novel coronavirus Pneumonia Control and Prevention Command Headquarters issued an urgent notice to the Wuhan epidemic prevention and control command department. The decision to carry out the new crown virus nucleic acid screening in Wuhan city (about 11 million permanent residents) within 10 days.
This uncertainty about the future does cause anxiety. Some device suppliers say orders have tripled, most likely because their customers are building inventory. This may be the right strategy, but it will also create more shortages in the supply chain that has been stretched before covid-19. By the end of 2019, the demand for optics in cloud data center, DWDM Network and wireless front transmission has increased dramatically. In the first half of this year, these demands were still stronger than expected.
Ford tamer, chief executive of Inphi, quoted Winston Churchill as saying: “never let a good crisis go to waste.” Inphi is another strong company in the first quarter, with year-on-year sales growth 69.6% to one point three nine four Billion dollars. In addition to the revenue contribution from the acquisition of esilicon (the acquisition was completed on January 10, 2020), the company said that the demand for cloud and telecom products is very strong, and predicted that in the second quarter of 2020, based on the strong product cycle and demand for Telecom and cloud, sales revenue will achieve organic growth month on month. In the words of Ford tamer, “Inphi electro-optical data mobility solution meets the needs of customers at the right time.”. INPI founder LOI Nguyen in his blog “the rise of the Internet Three (The Rise of Internet Three ）”More background information is added to the story in.
“The way the world operates and delivers important services, such as telemedicine and distance learning, is changing rapidly and permanently,” concludes chuck Matera. This evolution of human behavior is clearly putting pressure on wired and wireless infrastructure and driving cloud operators and service providers to work on upgrading infrastructure. ” The demand from cloud computing companies and communication service providers may be stable, but due to economic uncertainty, the investment in enterprise network sector has declined significantly. It may not be until 2021 that we see a real pick-up in sales of optical, network, and data center hardware.