Optical components

JDSU: Selling Out?

5:30 PM -- Among the things new CEO Thomas Waechter might be pondering at JDSU (Nasdaq: JDSU; Toronto: JDU) is what to do with the company's optical fabs.

That hasn't been a major question for the company, but there's apparently a rumor going 'round in China about JDSU eventually outsourcing its optical manufacturing to Fabrinet Co. Ltd. (NYSE:FN)

That's the latest word, according to editor Jacques Liu, who's assisted Light Reading in the past and posted the rumor earlier this week.

The theory, which JDSU isn't commenting on, is that the Shenzen fab could sell to Fabrinet for $2 million (which seems really, really light). JDSU would then use Fabrinet for its manufacturing, much as competitor Avanex Corp. (Nasdaq: AVNX) already does.

Would it make sense for JDSU to outsource? Fabrinet is certainly established enough to take on the job. (And even might have gone public in a better market: See IPO Alert: Fabrinet and IPOs Clanked in 2007.)

It's not like the companies are strangers, either. JDSU lists Fabrinet as a supplier and a customer, and it's sold pieces of facilities to Fabrinet before. (See JDSU Sells Manufacturing Operations, JDSU Cuts Continue, and Trimming Continues at JDSU.)

Then again, not every company is embracing the "fabless" optical model. Bookham Inc. (Nasdaq: BKHM; London: BHM) stuffed a lot of money, time, effort, and heartache into moving its manufacturing to Shenzhen, claiming that it could only achieve cutting-edge results through ownership of its own fab. (See Bookham Shows Signs of Recovery and Georgio Anania, Ex-CEO, Bookham.)

Finisar Corp. (Nasdaq: FNSR) owns its own fab, but chairman Jerry Rawls says that's partly because the company got a great deal on a Malaysian facility back in 2001, when prices crashed.

I don't know how seriously to take this one. It's plausible, considering JDSU's optical innovation seems to focus on integration-fed design rather than from advantages in manufacturing processes. (See OFC: JDSU & Superblade!)

Separately, it's unclear whether "outsourcing" would include JDSU's non-Shenzhen optical facilities. The company still has fabs in the San Jose area and at Picolight's digs in Colorado, if I recall correctly.

— Craig Matsumoto, West Coast Editor, Light Reading

DarkWriting 12/5/2012 | 3:24:39 PM
re: JDSU: Selling Out? Craig,

Is this all speculation or are you an (un)witting accomplice in telling the people at these two US fabs that they should be looking for a job? Why don't you stop beating around the bush and tell us who at JDSU is feeding you the information? New CEO at JDSU doesn't have any VC buddies to bail out so these fabs can be shut down now?

^Eagle^ 12/5/2012 | 3:24:32 PM
re: JDSU: Selling Out? Craig,

Don't forget that JDSU still has that White Elephant EPI and FAB in Santa Barbara that they got from Agility.

LOTS of money spent on that one. Even though JDSU bought it at a big discount, so the capex is largely written off, the monthly burn rate to keep that FAB opened in one of the highest cost areas of the USA is really a stupid business decision. Now that there are no VC's to pay off, I expect that facility to be shut pretty quickly.

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