- Corning sees rising optical revenues but manufacturing capacity is tight
- It's expanding its N.C. plant to make Microsoft hollow core fiber
- The optical market has finally made a turnaround, said Dell'Oro VP Jimmy Yu
Optical business is booming for Corning, which saw enterprise sales in the segment jump 58% year-over-year in the third quarter. But the challenge lies in pumping up manufacturing to meet rising customer needs.
“The demand for our products relative to our supply puts us in a situation where we are quite tight,” said Corning CEO Wendell Weeks on today’s Q3 earnings call.
He acknowledged Corning is seeking to improve its lead times and that it’s in talks with customers about how to better meet their demand.
Two big deals
Corning faces capacity constraints after landing two big manufacturing deals in the quarter. The company in September said it will begin making hollow core fiber for Microsoft in its North Carolina factories. Prior to that, Apple announced it’s investing $2.5 billion so that Corning can ramp production for iPhone and Apple Watch glass in Kentucky.
CFO Ed Schlesinger noted Corning over the last several quarters has seen “some ramp costs in our optical business” when increasing its production capacity. And there’s more to come on that front.
Corning announced this month it will invest between $170 million-$267.9 million to expand its Hickory, North Carolina plant. Notably, it’s getting a 33-acre lot for free due to an economic development agreement with the city and county.
But he believes Corning’s U.S. manufacturing presence gives the company a “unique opportunity” to support hyperscalers in their data center builds across the country.
“We also have low-cost, U.S.-based manufacturing platforms for each of the critical components,” Weeks added, referring to components for fiber, cable and multi-fiber connectors.
Everything’s coming up optical
The upside to Corning’s supply challenges is that a lot of demand is due to a revived optical market.
After facing several quarters of post-Covid inventory backlog, vendors are taking on new customers, so “it is safe to say the optical market is growing again,” Dell’Oro VP Jimmy Yu told Fierce.
He noted Ciena, Corning and Nokia all posted “substantial revenue increases from cloud providers buying their products.”
Specifically, Ciena’s optical revenue increased 34.4% YoY to $815.5 million, and Corning similarly saw net optical sales jump 33% to $1.65 billion. Meanwhile Nokia, which recently stepped up its optical game by acquiring Infinera, reported a 19% YoY increase in optical revenue.
Dell’Oro has projected overall cloud purchases of optical gear to grow 35% in 2025. But based on what vendors are reporting, Yu thinks that number could jump even more by year-end.