Lumentum (LITE) Barclays 22nd Annual Global Technology Conference 2024 summary

Acquisition and business trajectory

• Acquisition of Cloud Light provided direct access to the data center interconnect market, validating the strategy of moving closer to cloud operators and expanding the transceiver business.

• Growth in the transceiver business is supported by new customer wins and deeper engagement with existing customers, with expectations for further expansion.

• Revenue trajectory saw a dip to a $50 million run rate but is expected to recover, with potential to double the business size over the next year.

• Customer base is diversifying, with two new customers ramping up at 800G and 400G speeds, reflecting broader market adoption.

• Vertical integration and U.S.-based manufacturing are strategic advantages, aligning with hyperscale customer preferences and geopolitical trends.

Market and technology trends

• AI-driven demand is accelerating transceiver unit growth, with projections of 40 million units in 2025, outpacing GPU deployments.

• The market is shifting rapidly to higher speeds, with 800G and 1.6T transceivers leading adoption and a second wave of customers emerging.

• Silicon photonics, EMLs, and VCSELs are all part of the technology roadmap, with EMLs expected to see increased capacity and adoption due to performance and power benefits.

• Capacity constraints in EMLs are a key industry bottleneck, but significant investments are being made to double capacity by the end of 2025.

• Indium phosphide content is rising as transceivers become more complex, further driving the need for manufacturing expansion.

Competitive landscape and differentiation

• Only a few suppliers can deliver 200G EMLs, and being two years behind in technology now means being left out of the market due to shorter product cycles.

• Broad customer base for EMLs, including most major transceiver vendors, with supply diversity and technical differentiation as key selling points.

• Performance, scalability, and supply stability are prioritized over price, with innovation in power reduction and high-speed photonics as core differentiators.

• VCSELs may eventually catch up at higher speeds, but EMLs are expected to dominate the next few years, with 400G per lane on the horizon.