Optical devices and modules

The average net profit margin of listed optical device and module vendors was positive for three of the past seven years. On the contrary, the growth rate of the market has grown for six of the past seven years. If market growth remains stable, will these companies continue to make profits in 2014-2015?

If the answer is yes, as shown by the shaded part of the average profit rate table, this will be the first time that the average net profit rate has remained positive for 2 consecutive years. 2008 and 2010 are positive, and 2009 and 2011 have plummeted. The reason is that the economic crisis and recovery are much slower than expected.

The macroeconomic environment continues to affect the business of optical devices and module vendors, but these manufacturers have grown a lot more than 2-3 years ago. The merger of Opnext and Oclaro and the post-merger restructuring have greatly helped improve the average profit margin. The merger of Ascension and WTD, and the sale of Emcore's VCSEL business have made the industry more efficient and profitable.

The excellent performance of Finisar and JDSU in 2013 partially offset the losses of the smaller manufacturers. These manufacturers’ forecasts for 2014 also support our view that the market continues to grow and manufacturers continue to make profits.

However, optical device and module manufacturers only account for a very small part of the global optical communications industry chain, and their business may still be full of variables. LightCounting's latest market report details these changes in the industry chain and their impact on device vendors.