Lumentum Holdings Stock

Lumentum Holdings Inc. (Lumentum) optical and photonic products addressing a range of end-market applications, including Optical Communications (OpComms) and Commercial Lasers (Lasers) for manufacturing, inspection and life-science applications.

The company seeks to use its core optical and photonic technology, and its volume manufacturing capability, to expand into attractive emerging markets that benefit from advantages that optical or photonics-based solutions provide, including imaging and sensing for consumer electronics and diode light sources for a variety of consumer and industrial applications. The majority of the company’s customers have historically been, and are, original equipment manufacturers (OEMs) that incorporate its products into their products, which then address end-market applications. For example, the company sells fiber optic components that network equipment manufacturers (NEMs) assemble into communications networking systems, which they sell to communication service providers, hyperscale cloud operators, and enterprises with their own networks. Similarly, many of the company’s Lasers products customers incorporate its products into tools they produce, which are used for manufacturing processes by their customers. For imaging and sensing, the company sells diode lasers to manufacturers of consumer electronics products for mobile, personal computing, gaming, and other applications, including to the automotive industry, who then integrate its devices within their products, for eventual resale to consumers and also into other industrial applications.

The global markets in which Lumentum participates have fundamentally robust, long-term trends that will increase the need for the company’s photonics products and technologies. Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities. The company expects that the accelerating shift to digital and virtual approaches to many aspects of work and life will continue into the future. Virtual meetings, video calls, and hybrid in-person and virtual environments for work and other aspects of life will continue to drive strong needs for bandwidth growth and present dynamic new challenges that its technology addresses. As manufacturers demand higher levels of precision, new materials, and factory and energy efficiency, suppliers of manufacturing tools globally are turning to laser-based approaches, including the types of lasers Lumentum supplies. Laser-based 3D sensing and LiDAR for security, industrial and automotive applications are rapidly developing markets. The technology enables computer vision applications that enhance security, safety, and new functionality in the electronic devices that people rely on every day. The use of LiDAR and in-cabin 3D sensing in automobile and delivery vehicles over time significantly adds to the company’s long-term market opportunity. Frictionless and contactless biometric security and access control is of increasing focus globally given the world’s experience with the COVID-19 pandemic. Additionally, the company expects 3D-enabled machine vision solutions to expand significantly in industrial applications in the coming years. The company has a global footprint that enables it to address global market opportunities for its products.

In August 2022, the company completed its merger with NeoPhotonics Corporation (NeoPhotonics). The addition of NeoPhotonics expands its opportunities in some of the fastest growing markets for optical components used in cloud and telecom network infrastructure. The company expects the integrated company to be better positioned to serve the needs of a global customer base who are increasingly utilizing photonics to accelerate the shift to digital and virtual approaches to work and life, the proliferation of the internet of things (IoT), 5G, and next-generation mobile networks, and the transition to advanced cloud computing architectures.

In August 2022, the company completed a transaction to acquire IPG Photonics’ telecom transmission product lines (IPG telecom transmission product lines) that develop and market products for use in telecommunications and datacenter infrastructure, including Digital Signal Processors (DSPs), application-specific integrated circuits (ASICs) and optical transceivers. This acquisition has expanded the company’s business in the OpComms segment.

Segments

The company operates through two segments, OpComms and Lasers.

OpComms segment

Markets

The company’s OpComms products address the following markets: telecommunications (Telecom), data communications (Datacom) and consumer and industrial (Consumer and Industrial).

The company’s OpComms products include a wide range of components, modules and subsystems to support customers, including carrier networks for access (local), metro (intracity), long-haul (city-to-city and worldwide) and submarine (undersea) applications. Additionally, the company’s products address enterprise, cloud, and data center applications, including storage-access networks (SANs), local-area networks (LANs) and wide-area networks (WANs), as well as artificial intelligence and machine learning (AI/ML). These products enable the transmission and transport of video, audio and data over high-capacity fiber-optic cables. The company maintains leading positions in these fast-growing OpComms markets through its extensive product portfolio, including reconfigurable optical add/drop multiplexers (ROADMs), coherent dense wavelength division multiplexing (DWDM) pluggable transceivers, and tunable small form-factor pluggable transceivers. The company also sells laser chips for use in manufacturing of high-speed Datacom transceivers.

In the Consumer and Industrial market, the company’s OpComms diode laser products include vertical cavity surface emitting lasers (VCSELs) and edge emitting lasers. In the Consumer end-market, its laser light sources are integrated into 3D sensing cameras which are used in applications in mobile devices, gaming, payment kiosks, computers, and other consumer electronics devices. Applications include biometric identification, computational photography, virtual and augmented reality, and natural user interfaces. Emerging applications for the company’s lasers include automotive safety systems, LiDAR for advanced driver assistance systems in automobiles and autonomous vehicles, self-navigating robotics and drones in industrial applications, and 3D capture of objects coupled with 3D imaging or printing. In the industrial end-market, its diode lasers are used primarily as pump sources for pulsed and kilowatt class fiber lasers.

Customers

As of July 1, 2023, the company’s OpComms customers included Apple, Ciena, Huawei, and Nokia.

Offerings

In addition to a full selection of active and passive components, the company offers increasing levels of functionality and integration in modules, circuit packs and subsystems for transmission, amplification, wavelength management and more.

In the Telecom market, the company provides transmission and transport solutions for optical networks that make up the backbone of the Telecom infrastructure, thereby enabling the internet, connections between cloud datacenters, and backhaul of data from wireless mobile networks. Transmission products, such as the company’s tunable transponder, transceiver and transmitter modules, transmit and receive high-speed data signals at the ingress/egress points of networks. These products use dense wavelength division multiplexing (DWDM) technology to maximize the fiber transmission capacity while lowering the cost per bit to meet the needs of increasing internet and cloud demand. The company also offers components, including tunable lasers, receivers and modulators to address the higher end of these same network applications.

The company’s transport products, such as ROADMs, amplifiers and optical channel monitors provide switching, routing and the conditioning of optical signals. It also makes components for transport, including 980nm, multi-mode and Raman pumps for optical amplifiers, and passive components. Passive components include switches, attenuators, photodetectors, gain flattening filters, isolators, wavelength-division multiplexing (WDM) filters, arrayed waveguide gratings (AWGs), multiplex/de-multiplexers and integrated passive modules.

The company’s innovation led to the Super Transport Blade, which integrates all major optical transport functions into a single-slot blade. This all-in-one solution reduces the size, cost and power requirements of optical components, incorporates nano wavelength selective switch technology and enables greater chassis density and a smaller footprint.

In the Datacom market, optical transceivers are used to connect servers, switches, routers and other information technology infrastructure critical for Netherinternet applications, web services, video streaming, enterprise networks, artificial intelligence and machine learning and service provider solutions. The cloud data center market is one of the fastest growing markets in optical communications both in terms of network equipment investments and increasing volumes of higher speed optical transceivers. Additionally, the increased bandwidth needs of 5G wireless applications will drive growth in the volumes of high-speed optical transceivers. Historically, the company has supplied optical transceivers, but it has shifted its strategy to supplying the underlying optical components, high-speed source lasers and receiver photo diodes used in optical transceivers to address these market segments.

For the 100G and higher data rates, the company offers several source laser technologies to balance technical and commercial requirements. For high volume, short distance applications it developed its VCSELs, which are ideal for short reach applications because they enable low power, low-cost optical solutions that are highly scalable. For high-performance, longer distance applications the company has its directly modulated laser (DML) and electro-absorption modulated laser (EML) chips supporting module applications with speeds from 10Gb/s through 800Gb/s. The company also supplies continuous wave (CW) lasers to customers utilizing silicon photonics to design and manufacture high speed datacom transceivers. The company’s individual lasers and compact laser arrays offer an innovative solution for the LANs, SANs, broadband internet, 5G Wireless and metro-area network, as well as hyperscale datacenter applications.

The company’s imaging and sensing technology enables real time depth information to any photo or video image. This represents a fundamental transition for image capture akin to the transition from monochrome to color and gives devices the ability to see the world around them in three dimensions. The immediate applications include full body imaging for gaming, 3D scanning for space mapping, computational photography and facial recognition for security. Emerging applications for this technology include various mobile device applications, autonomous vehicles, self-navigating robotics and drones in industrial applications and 3D capture of objects coupled with 3D printing. 3D sensing can be applied to any device with a camera. The technologies to achieve accurate and stable 3D sensing are converging to laser-based solutions. The company is a leading supplier of the critical laser illumination sources for 3D sensing systems being used in applications for gaming, computing, mobile devices, and home entertainment.

Strategy

In its OpComms segment, the company is focused on technology leadership through innovation with its customers and functional integration. The company endeavors to align the latest technologies with industry leading, scalable manufacturing and operations to drive the next phase of optical communications technologies and products for Telecom, Datacom, and Consumer and Industrial applications that are faster, more energy efficient, more agile and more reliable, making it a valuable business and technology partner for NEMs, network operators, consumer electronic companies, cloud service providers and data center operators.

Lasers segment

Markets

The company’s Lasers products serve its customers in markets and applications, such as sheet metal processing, general manufacturing, solar cell processing, biotechnology, graphics and imaging, remote sensing, and precision machining, such as drilling in printed circuit boards, wafer singulation, glass cutting and solar cell scribing.

The company’s Lasers products are used in a variety of OEM applications, including diode-pumped solid-state, fiber, diode, direct-diode and gas lasers, such as argon-ion and helium-neon lasers. Fiber lasers provide kW-class output powers combined with excellent beam quality and are used in sheet metal processing and metal welding applications.

The company also provides high-powered and ultrafast lasers for the industrial and scientific markets. Manufacturers use high-power, ultrafast lasers to create micro parts for consumer electronics and to process semiconductor, LED, solar cells, and other types of chips. Use of ultrafast lasers for micromachining applications is being driven primarily by the increasing use of renewable energy, consumer electronics and connected devices globally.

The company’s portfolio of Lasers products includes components and subsystems used in a variety of OEM applications that range in output power from milliwatts to kilowatts and include ultraviolet, visible and infrared wavelengths. The company supports customer applications in the biotechnology, graphics and imaging, remote sensing, materials processing and other precision machining areas.

Offerings

The company’s broad range of Lasers products includes diode-pumped solid-state, fiber, diode, direct-diode and gas lasers, such as argon-ion and helium-neon lasers. Diode-pumped solid-state and fiber lasers that provide excellent beam quality, low noise and exceptional reliability are used in biotechnology, graphics and imaging, remote sensing, materials processing and precision machining applications. Diode and direct-diode lasers address a wide variety of applications, including laser pumping, thermal exposure, illumination, ophthalmology, image recording, printing, plastic welding and selective soldering. Gas lasers, such as argon-ion and helium-neon lasers provide a stable, low-cost and reliable solution over a wide range of operating conditions, making them well-suited for complex, high-resolution OEM applications, such as flow cytometry, DNA sequencing, graphics and imaging and semiconductor inspection.

Strategy

In its Lasers segment, the company leverages its long-term relationships with OEM customers to drive commercial laser innovation. Using established manufacturing, engineering, lasers and photonics expertise, it delivers products that meet cost-of-ownership and reliability needs while delivering on volume production demands.

Intellectual Property

As of July 1, 2023, the company owned approximately 1,000 U.S. patents and 1,100 foreign patents with expiration dates through 2043 and had approximately 660 patent applications pending throughout the world.

History

Lumentum Holdings Inc. was incorporated in Delaware in 2015.