Optical component manufacturer Lumentum continued its acquisition spree, striking a deal to acquire IPG Photonics for an undisclosed sum. The announcement comes less than two weeks after Lumentum closed a previously announced deal to buy Neophotonics for $918 million.
The terms of its deal with IPG were not disclosed, other than the fact that the transaction will be an all-cash arrangement. As part of the deal, Lumentum will net IPG’s telecom transmission product lines and development team for digital communications ASICs, including coherent DSPs.
Beck Mason, SVP and GM for Lumentum’s Telecom Transmission business, said in a statement “Increasingly customers in the cable MSO and wireless network operator space are turning to wavelength tunable pluggable transceivers to help expand their network capacity and this acquisition brings highly synergistic product lines addressing this rapidly growing opportunity."
Dell'Oro Group VP Jimmy Yu told Fierce Lumentum is one of the two largest optical component suppliers in the market, with the other being semiconductor company II-VI. He noted Lumentum has traditionally done well in the line systems and ROAD-M spaces and said this deal could be the company's first step toward making its own ASICs.
"If they're getting a team, maybe this is really about getting the resources. Acquiring a group of ASIC designers, that's going to give them their first step into making their own ASICs, being more vertically integrated, which will help them in different ways," he said. "At the end of the day, they'll have a lower cost of making products if they make their own ASICs instead of buying it from others. Because right now, every optical pluggable that Lumentum ships out they probably bought the ASIC that's in there from someone else."
During the company’s fiscal Q3 2022 earnings call in May, CEO Alan Lowe noted supply constraints weighed on the company's results, leaving it unable to provide products for $65 million worth of demand. The CEO predicted the gap between its supply and demand would widen in FQ4 to $100 million.
Lowe stated it was increasing its manufacturing capacity for its 10G and forthcoming 25G tunable products to help meet demand amid rapid adoption of the technology.
“New applications for our 10G tunable transmission products are accelerating. These include metro access and fiber deep applications for cable MSO and networking customers, as well as wireless fronthaul for mobile networking customers. The wireless fronthaul application is just starting to be deployed and is expected to deliver meaningful revenue by the end of the calendar year," he stated.