Coherent looks to AI, SiC for recovery
Coherent, the former II-VI business, is looking to the boom in AI and silicon carbide to recue its results for the rest of the year after a significant fall in revenue in the first quarter.
The revenue of $1.05bn at Coherent in its first quarter was at the mid point of expectations but down from $1.2bn last quarter and $1.5bn a year ago. The company is moving manufacturing out of China and looking to close compound semiconductor fabs as a result.
The consolidation of compound semiconductor wafer fab and device manufacturing facilities, including the closure of half of these facilities is a multi-year and cross-cutting initiative. The company plans to consolidate into its most modern facilities to drive higher utilisation while reducing costs and improving new product introduction (NPI) cycle times.
There has been no announcement yet on how this will impact the aging fab at Newton Aycliffe in the UK which makes optoelectronic devices such as filters with GaAs, SiC and InP. The fab cut its staff by 100 earlier in the year and is currently undergoing a review of its operations. The company has over 40 sites across the UK and Europe.
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“Macroeconomic uncertainty continues to impact our near-term growth and visibility; however, we expect sequential improvement in revenue growth throughout the remainder of fiscal 2024,” said the company in its letter to shareholders.
“In the wake of the initial surge we saw at the end of our fourth quarter of fiscal 2023, we have seen strong follow-on orders for our AI/ML-related Datacom transceivers which has driven a significant increase in our backlog for 800G Datacom transceivers,” it said.
The guidance for the full year is $4.5bn to $4.7bn, unchanged from the previous guidance but down from $5.16bn in the year just gone after the merger between II-VI and Coherent.
“Our recently announced silicon carbide transactions resulting from our strategic review process announced in May 2023 significantly enhance our silicon carbide business and free up future cash flow for debt repayment and other growth initiatives. Denso and Mitsubishi Electric have agreed to invest an aggregate $1 billion in our silicon carbide business and to enter into long-term supply agreements that support their demand for 150 mm and 200 mm silicon carbide substrates and epitaxial wafers.”
In the fourth quarter of fiscal 2023, the company implemented a restructuring plan with site consolidations and closures as well as the relocation and requalification of certain manufacturing facilities.
The company is consolidating sites in China and the rest of Asia, including the closure of certain manufacturing facilities and sales offices and the establishment of new regional design centres closer to our customers in the Global South. This will replicate the state-of-the-art manufacturing lines in China to other parts of Asia to increase resiliency to both internal and external supply chain.
Europe is 23% of revenue and saw a sequential 3% decrease with a year-over-year increase of 1%. “Demand in Europe continues to be challenged due to ongoing macroeconomic uncertainty with weakness in Germany having a particularly pronounced impact. During the quarter we saw strong orders in our networking segment and expect this trend to continue in the coming quarters,” said the company.
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