EUGENE, OR--(Marketwired - May 14, 2015) - “Loss” may be the most often used term in quarterly earnings calls of optical component and module vendors. NeoPhotonics surprised investors last week by reporting a profit of about $100,000 on more than $80 million in sales and the stock went up by 30%. To be fair, the company’s financials looked better on a non-GAAP basis and the investors really liked the significant increase in the gross margin, but can we expect more in terms of profitability?

The average net margin of publicly-traded optical component and module suppliers moved into positive territory in only three out of the last eight years. In contrast, the market growth rate remained positive for seven out of the last eight years. Can these vendors maintain profitability in 2015-2016 if the market’s growth remains steady?

“It seems that an optical component business can be very profitable from time to time, but it is hard to avoid periods of reduced profitability -- commented Dr. Vladimir G. Kozlov, founder and CEO of LightCounting Market Research. “We estimate that manufacturing cost of a new product could fall sharply as production yields improve, leading to a spike in the net margin even if the prices decline gradually. However, if too many suppliers start shipping the same product in volume after reaching high yields, the pricing falls too fast, eroding profitability.”

How can anyone reach sustainable profitability in a market subjected to such rapid erosion of new-product margins? This is one of the questions addressed in the State of the Industry report released by LightCounting.

The report provides a holistic analysis of the global communications industry, and the factors affecting profitability at each level of the value chain. It examines the profitability and long-term strategies of traditional telecom service providers, as well as the newer Internet content providers, and their respective equipment and component suppliers. The success of Chinese equipment and component suppliers is evaluated and a number of Chinese component vendors are profiled. The impact of Web2.0 companies on the optical component market is also discussed.

Many of the leading component vendors shared confidential sales data with LightCounting to support this study, including: Acacia, Applied Optoelectronics, ATOP, Avago, Delta Electronics, Eoptolink, Finisar, HG-Genuine, HiSense Broadband, Hitachi Cable, Innolight, JDSU, Methode, NEC, NeoPhotonics, Oclaro, OE Solutions, Photop, Source Photonics, Sumitomo, Superxone and TE Connectivity.

More information on the report is available at

Contact Information:

Renee Isley
LightCounting Market Research
Phone: +1.408.962.4851