FREE subscription
Subscribe for free to receive each issue of Semiconductor Today magazine and weekly news brief.



3 June 2009


Oclaro to swap New Focus for Newport's high-power laser diode business

Oclaro Inc of San Jose, CA has signed a definitive agreement to acquire the high-power laser diode business of Newport Spectra Physics in exchange for laser and photonics components supplier Newport Corp of Irvine, CA acquiring its Advanced Photonics Solutions division's New Focus business (which makes photonics products including tunable lasers, optoelectronics, high-resolution actuators, stable opto-mechanics, vacuum and ultra-clean solutions, and OEM-engineered solutions). The two businesses are comparable in size, each with revenue of $20-30m in the 12 months to end-March 2009. But, to reflect differences in revenues, Oclaro will also receive $3m in cash (which is expected to fund most related transition and integration costs). The transaction is expected to close early in the fiscal quarter ending 26 September.

“The New Focus acquisition brings a strong intellectual property position, a well-recognized brand, and a highly differentiated product portfolio to Newport,” says Newport Corp’s president & CEO Robert Phillippy. Of New Focus’ $30m revenue in 2008, 70% came from products that will be integrated into Newport’s Photonics and Precision Technologies Division, 20% from a family of tunable and single-wavelength lasers (which Newport currently does not offer and which will supplement its Lasers Division), and 10% from subsystems for OEM applications (mainly for semiconductor manufacturing equipment). “From a strategic perspective, we are acquiring a portfolio of high-value photonics products and systems that serve our core markets, while exiting a diode laser business that is less aligned with the focus and profit model of our Lasers Division,” adds Phillippy. Most of the photonics products are currently made at Oclaro’s plant in Shenzhen, China, and will be transferred to Newport’s facility in Wuxi, China (roughly doubling its output). Lasers and electro-optical products currently made in San Jose will be transferred to other Newport facilities. 

Oclaro was formed only in late April through a merger that combined the optical components expertise of Bookham Inc of San Jose, CA with the modules and subsystems expertise of Avanex Corp of Fremont, CA to create one of the largest suppliers of optical components, modules and subsystems to the long-haul and metro optical telecoms markets. The firm says that the transaction will enable it to expand its high-power laser diode portfolio with a deeper expertise in systems and packaging to target higher-value solutions in new markets. The Newport Spectra Physics high-power laser diode product line is complementary to Oclaro's single-emitter and bar products and offers new growth opportunity for Oclaro in the medical and analytic, printing, and industrial markets in Japan and North America, it is reckoned. By leveraging the Newport product line plus Oclaro's brand, chip design, technology innovation and manufacturing infrastructure, the firm claims that it is poised to become the largest merchant supplier to the high-power laser diodes market.

Oclaro adds that the acquisition enhances its core competences and expertise in the design and packaging of optical chips and leverages its existing global manufacturing infrastructure. Due to the process and manufacturing technology compatibility of the Newport Spectra Physics high-power laser diode products with Oclaro’s manufacturing sites, the firm expects to lower overall costs and enhance operating efficiencies through economies of scale, with greater factory utilization.

As well as the intellectual property of the diode business, Oclaro acquires the operating assets of the Spectra Physics' wafer fabrication plant in Tucson, AZ (while Newport retains all obligations under the facility lease). The consolidation of the fab into Oclaro's fabs in Caswell, UK and Zurich, Switzerland is expected to increase wafer volumes by about 30%. Oclaro reckons that the overall high-power laser diode portfolio has the potential to yield gross margins of 40% or more, boosting gross margin for the firm's telecom products.

The agreement includes a 4-year supply agreement whereby Oclaro will be the sole-source supplier of diodes to Newport (for incorporation into its Spectra-Physics laser products) for a one-year period, followed by majority allotment for the next three years. With no customer overlap, the acquisition is expected to be seamless to both Oclaro and Newport customers. Both firms will provide transition-related services to the other during an integration period of 6-12 months.

“Oclaro owns highly differentiated intellectual property in diode technologies and has significant design and manufacturing resources at its facilities in Caswell, UK, and Zurich, Switzerland,” comments Phillippy. “By combining our diode laser business with theirs, we will have access to Oclaro’s technology and manufacturing scale to purchase industry-leading diode lasers at very competitive price levels,” he adds. “With Oclaro as our trusted partner, Newport can focus on its own core competences as a laser systems supplier,” says Dave Allen, VP & general manager of Newport’s Spectra Physics Laser Division in Mountain View, CA. “We chose Oclaro specifically as our outsourcing partner, due to their world-class chip design and manufacturing infrastructure. Those strengths, combined with the Spectra Physics systems understanding and packaging expertise, will create a power house in the high-power laser diode business, ideally suited as the primary supplier to Newport,” he adds.

“Oclaro is executing on its strategy to become a predominant force in the fiber-optics industry,” says the firm’s president & CEO Alain Couder. “Through a series of strategic moves, Oclaro plans to leverage our core competences to expand our leadership position in selected markets and accelerate the pace of photonics innovation,” he adds. “The high-power laser diodes business is ideally aligned with Oclaro's business model, corporate growth strategy and core competences.”

See related item:

Bookham and Avanex merge into Oclaro

Search: Oclaro Newport New Focus Laser diodes