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30 October 2019

Emcore sells CATV production assets to Shenzhen-based Hytera for $5.5m

Emcore Corp of Alhambra, CA, USA – which provides indium phosphide (InP)-based optical chips, components, subsystems and systems for the broadband and specialty fiber-optics markets – has announced the sale of its cable TV (CATV) production equipment and transfer of its CATV manufacturing operations from its Beijing facility to Hytera Communications (Hong Kong) Co Ltd and Shenzhen Hytera Communications Co Ltd. The sale price for the equipment is about $5.5m and is expected to be received beginning in the December 2019 quarter and continuing over the ten months through the September 2020 quarter. Hytera will use the equipment to manufacture CATV components and subsystems from its facility in Southeast Asia.

In its fiscal third-quarter 2019 earnings call, Emcore discussed plans to take four actions to improve profitability and cash flow while eliminating exposure to tariffs associated with the import of products manufactured in China. With the execution of this agreement and subsequent production transfer to Hytera, Emcore will complete the first of these actions – streamlining operations and moving to a variable-cost model in its CATV product lines. Additionally, Emcore completed two other actions in the quarter by reducing the size of its CATV team and reducing the capacity of its wafer fab to one shift.

These actions incurred one-time costs of $0.4m in the quarter to end-September and are expected to result in annual cash savings of about $3m beginning in the December 2019 quarter. These operational changes in CATV also fulfill a strategic objective of positioning the CATV product lines to generate positive cash flow to help fund Emcore’s other growth areas in Aerospace and Defense.

“We’ve been working to transition to a true EMS (electronics manufacturing services) model for our cable TV products since 2015 when we launched the automation initiatives in our Beijing facility,” says president & CEO Jeffrey Rittichier. “Insertion of automation into Beijing dramatically improved yields and reduced cycle times, clearing the way for the final move to an EMS model,” he adds. “Hytera has been with us during our entire transformation, and this agreement with them finalizes the realization of our strategy... We are looking forward to many years of success together. Along with our other improvements in operational efficiencies, we expect this agreement to enable Emcore to steadily improve gross margins over the coming quarters,” Rittichier concludes.

See related items:

Emcore’s quarterly revenue falls by 20.8% due to soft CATV demand and Huawei-impacted chip sales

Tags: Emcore InP

Visit: www.emcore.com

Visit: www.hytera.com

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