LightTrends

 

Avago selling its optical module business to Foxconn; what will it mean?

 

 

LightCounting Releases a new Research note

 

Rumors of Avago selling its fiber optic module business arose months ago and became a poorly kept secret in recent weeks. Recently it has been reported publicly that Foxconn (legally Hon Hai Precision Industry Co., Ltd) is the buyer with the deal expected to close in November 2015. Many people know Foxconn as the world’s largest contract manufacturer with 1.3 million employees, and as Apple’s chosen partner for the manufacture of iPhones. Supplying the product that allowed Apple to ship 13 million iPhone 6s’s in its first weekend speaks volumes to Foxconn’s scale and capability. Foxconn has a market cap of $1.343 trillion. Last quarter, net income was a razor-thin 2.64% on revenue of $29.5 billion. Another contract manufacturer, Fabrinet, did better at 6.3% net income with a focus on assembling optical modules.

Description: http://www.dreyer-elektronik.de/avago-logo-2C-sml.jpg










So is the future of Avago’s fiber optic product line going to be razor thin margins that accelerate the rapid erosion of optical module pricing? Only time will tell and competitors do have cause for concern. But the Avago fiber optic product line is actually going to Foxconn Interconnect Technology or FIT, a Foxconn business unit that is not a contract manufacturer. FIT is more of a classic connector company started in 1974 that competes with the likes of TE Connectivity, Molex and Amphenol. FIT has 70,000 employees and they focus on cables, connectors, cable assemblies, and some specialty fiber optic products. The FIT business unit claims 9,000 patents along with strong investments in R&D and test. They have a couple of lights-out assembly lines. Optical R&D is centered in Taiwan and Brea, California. The Taiwan group is working on silicon photonics. FIT is operated largely as an independent business unit of Foxconn and thus require R&D investment and margins similar to their direct competitors.

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In-depth analysis of the market landscape is available in LightCounting’s State of the Industry report

LightCounting publishes an annual “State of the Industry” report, which provides a holistic analysis of the global communications industry, and the factors affecting profitability at each level of the value chain. It examines the profitability and long-term strategies of traditional telecom service providers, as well as the newer Internet content providers, and their respective equipment and component suppliers.

For additional information see http://www.lightcounting.com/SOTIR.cfm

Recently published reports:

  1. State of the Optical Communications Industry, May 2015
  2. High-speed Datacenter Interconnects, June 2015
  3. Next-Generation FTTX Optics, July 2015
  4. Optical Communications Market Forecast, August 2015
  5. Quarterly Market Update Report (September 2015)

Coming soon:

  1. Mobile Fronthaul Optics Report & Forecast, November 2015
  2. Active Optical Cable Market Analysis & Forecast, December 2015




ABOUT LIGHTCOUNTING MARKET RESEARCH
LightCounting is a leading optical communications market research company, offering semiannual market updates, forecasts, and state-of-the-industry reports based on its analysis of primary research with dozens of leading module, component, and system vendors as well as service providers and other users. LightCounting is the optical communications market’s first choice source for the accurate, detailed, and relevant information necessary for doing business in today’s highly competitive environment. For more information, visit: www.LightCounting.com or follow us on Twitter at @LightCounting.