Optical Industry Adjusting After Thai Floods
That's the impression given during the current set of earnings calls, anyway. JDSU (Nasdaq: JDSU; Toronto: JDU) said the US$15 million revenue hit it took due to the floods was less than expected. Oclaro Inc. (Nasdaq: OCLR) estimated the impact at $10 million to $12 million, pretty much what the company anticipated, and said it's restarted production on four of the five product lines affected.
For Oclaro, there will be "very little impact left in the June quarter," CEO Alain Couder said on his company's Jan. 26 earnings call. Other executives are saying similiar things -- even at Opnext Inc. (Nasdaq: OPXT), which was hit particularly hard. (See Thai Flooding Clocks Opnext.)
More details could arise when Fabrinet Co. Ltd. (NYSE:FN) reports earnings Monday afternoon. Fabrinet is the Thailand-based contract manufacturer that supplies much of the optical components industry and upon whom JDSU, Oclaro and many other companies depend. (One big exception is Finisar Corp. (Nasdaq: FNSR), which does a lot of its own manufacturing.)
When Fabrinet's older campus, named Chokchai, got five feet of flooding, there was some concern about how this might affect components vendors. Work had to stop, obviously, and Fabrinet customers also lost some product inventory and some test equipment.
Components vendors set about seeking alternative manufacturing capacity -- whether at their own prototyping facilities or over in China. Similarly, systems vendors looked for alternative suppliers. That went well for Infinera Corp. (Nasdaq: INFN), at least; flooding didn't interrupt much business, officials said on the company's earnings call Thursday.
Fabrinet, meanwhile, has moved its Chokchai customers to Pinehurst, a newer campus built with some modern considerations -- for instance, buildings are five feet above ground level in case of things like, you know, flooding. (Chokchai is an old warehouse site that got converted into factories back before Fabrinet was born.)
It doesn't sound like Fabrinet is in danger of overcrowding from all this. Pinehurst is much bigger than Chokchai and still had some vacancy. And Fabrinet, being in growth mode, had already started on building new facilities.
Chokchai might not reopen at all, even though Fabrinet's lease on the facility lasts until April 2014. "The question is whether we would want to go through that again, when we have factories we built with flooding in mind," Fabrinet CFO Mark Schwartz tells Light Reading.
In a pretty obvious move, officials have said they plan to expand into other locations. "Other" doesn't have to be very far away; farther north within Thailand is one option they've mentioned.
— Craig Matsumoto, West Coast Editor, Light Reading