Chinese vendors buying up optical assets

Karen Liu/Ovum
10 Dec 2012

Leading Chinese optical component vendor Accelink late last week announced its acquisition of Danish planar lightwave circuit (PLC) company Ignis Photonyx.

While the deal is only on the order of $10 million for a company with annual revenues of $5 million, it is noteworthy as another sign that Chinese vendors have taken a new investment role.

Globally, the optical component industry has long been characterized by a struggle for gross margin and futile calls for consolidation. China’s FTTx deployment has been a major growth driver, but the market has been flat for the past two years after remarkably steady growth for almost a decade.

One barrier to consolidation has been a lack of interested buyers. Look for further deals as Chinese vendors seek to improve their global position by picking up strategic assets during this period of industry reshuffling.

So far the deals have been small. The question is whether Chinese OC vendors will step up to become meaningful industry consolidators.

Accelink’s choice to buy is sound

PLC technology is used in splitters for the very large Chinese FTTx market. This year, Chinese companies advanced from optical module assembly to manufacturing of chips for optical communication in pursuit of competitive advantage. (Reportedly, 85 splitter vendors responded to China Telecom’s request for quote this year.)

However, as has happened before in China, the swing from shortage to overcompetition seemed instantaneous. Several PLC chip companies have suddenly sprung up in China. Wafer prices reportedly have declined 40% in a single year.

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