Strategically Blogging

Fiber Laser Market Continues to Evolve

Allen Nogee 09/05/2014

I’ve always been a person who has been very interested in the latest technology, and sometimes it’s hard for me to believe how much technology has changed over the years.

Everything from flat screen TVs, DVRs, audio equipment, cables and wiring, computers, tablets, smartphones, and so many others have evolved over the years, and in most ways, the new technology is quicker, smaller, cheaper, and more energy efficient. Today we take all these things for granted, but it wasn’t that long ago that a flat screen TV or a smartphone was a novelty. Today we just can’t even imagine living without these things.

Martin Shih

A Win-Win Situation: Cree Announces Investment in Lextar through Private Placement

Martin Shih 09/05/2014

Cree recently announced plans to invest US $83M in Lextar Electronics, one of Taiwan’s major LED manufacturers, in order to acquire 13% of Lextar shares and to enter a supply/royalty agreement. Cree will become Lextar’s second largest shareholder (AUO, Lextar’s parent company, is the biggest shareholder) and obtain one member of BOD. This deal is expected to be done at the end of 2014 and the lock-up period is 3 years, which means Lextar will reserve its capacity for Cree for 3 years.

Lasers in Medical Imaging: The Forecast Looks Very Bright

Allen Nogee 07/11/2014

Almost all medical imaging to date has used one of three technologies: X-rays, magnetism (MRI), or ultrasound. X-rays alone have been used for almost 120 years now, and although today’s imaging technology has improved vastly over the many years, the fact remains that x-rays, ultrasound, and magnetism are all technologies that, due to many factors, produce coarse images, at least by today’s standards. But what if a very coherent light source was used instead, maybe a laser?

Actually, Optical Coherence Tomography (OCT), which produces images based on the reflections of coherent light, is not a new technology. OCT has been used since the early 1990s, especially in the area of ophthalmology, where the images produced by OCT are 100 times finer than standard images produced by ultrasound. In just the last five years, OCT has become one of the most important retinal imaging techniques used today.

The Impact of the Epistar Acquisition on the LED Industry

Martin Shih 07/09/2014

Epistar (2448.TW) announced a plan to fully acquire Forepi (3061.TW), the second-largest chipmaker in Taiwan, through a share swap (1:3.448), implying 18% share dilution to Epistar. The effective date will be the end of 2014, and Forepi will be delisted from the TAIEX.

After the merger, Epistar will become the world’s largest LED chip maker in terms of capacity with a global market share of 15%, which will better position the company to lead in future technology development.

EPA's New Emissions Cutting Plan Could Have an Effect on LED Lighting

Philip Smallwood 06/30/2014

On June 2nd, the Environmental Protection Agency (EPA) proposed a rule designed to cut carbon dioxide emissions from existing coal plants by as much as 30 percent by 2030, compared with 2005 levels. The EPA will finalize the proposal in mid-2015 and then give states a year to design their own plans to meet targets. The organization will let states meet emission targets for power plants in several ways, including through plant upgrades, by switching from coal to natural gas, by improving energy efficiency, or by promoting renewable energy outside the plant site. This approach will give states greater flexibility in designing plans to meet the EPA’s targets.

Consolidation, Part 2--Is Oclaro consolidation or redistribution?

By Tom Hausken
So Bookham and Avanex finally merged, forming Oclaro . This is a sign that the industry is consolidating, right? Reducing the number of suppliers by one, yes. But it may just amount to moving market share around, and not necessarily to fewer players.

Bookham and Avanex don't have greatly overlapping product lines. And the new management claims it will continue manufacturing parts the way it has been. That is, it will keep the Bookham fabs and its Shenzhen facility but will also keep using Fabrinet as Avanex did.

The company points out that now they have a wider range of products to compete against bigger competitors, like JDS Uniphase and Finisar. I've never fully believed the one-stop-shop argument though. Of course, Cisco and any other customer would like to reduce its list of suppliers. But the customers also want suppliers to be competitive, and they want the best products they can find, provided that the supplier is qualified. Grouping products into one company doesn't necessarily make Oclaro more competitive in those products.


There will certainly be some synergies gained from consolidating various functions, such as procurement and corporate overhead. The figure shows Oclaro's vision of the gains it can make in gross margin from the merger. One of the bigger synergies would be the use of the Bookham fabs to supply chips for Avanex products. This is a change in market share, shifting sales from the former suppliers (such as JDS Uniphase) to Oclaro, possibly improving Oclaro's factory utilization. It might also steal some margin from contract manufacturers.


Source: Oclaro


That may turn out real good for Oclaro, although it doesn't necessarily constitute consolidation if it just spreads market share more evenly among some of the bigger players. Without knowing how it plays out product by product, it could actually increase competition and reduce consolidation in some segments.

Oclaro's CEO Alain Couder notes that the company also gets to spread Bookham's credit line over a new balance sheet that is low in debt and with a nice chunk of cash. That's never a bad thing, for Oclaro. And despite claims to the contrary, the management may make more moves once the excitement has died down. Anything that tips the scales dramatically in Oclaro's favor would essentially increase consolidation, even if the number of suppliers is nominally the same.

This may turn out real good for Oclaro. But I wouldn't call it industry-scale consolidation. Not yet.

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