00:00and he actually controls that entire vertical stack right now here's what he had to say about
00:04the situation in order to connect all of this stuff to connect memory to connect the gpus to
00:11connect the tpus together you need some backbone to make that happen and because of the speeds and
00:18the bandwidths that are occurring in the data center the predominant means to connect things
00:23is now becoming more and more optical right because nothing moves faster than light and so
00:28what you have is connectivity now using light using fiber optics and what we've seen is an
00:34incredible shortfall right we didn't anticipate all this demand the industry was built on the
00:40backbone of the u.s building out internet connectivity and we never imagined demand like
00:46this hitting our industry and and really having to service it on a relatively short time scale
00:53so when we talk about this idea and we don't have to get too in the technicals we talk this
00:57the indium phosphide and the and the all the components all the things that go into the
01:02components that you make right now it seems like nvidia has found a way to snatch all that up as
01:07you would think given they are the 800-pound gorilla in the room but what about the other customers out
01:12there or potential customers i should say whether it's the amazon's the metas etc i mean how much of a
01:18runway can you give them uh to know when and more importantly how much supply they're actually going
01:24to get yeah look at your your question is absolutely on point nvidia made a very smart strategic move
01:31to work with us and our largest competitor and basically corner of the market on indium phosphide
01:38indium phosphide is a specific material that you need to make these lasers and lasers are what transmit
01:45the light ultimately over fiber optic cable so they did that and and that's left very little room for
01:51the rest of the ecosystem to operate uh to build an indium phosphide fab it's the same as some of
01:59the
01:59technology you cover the semiconductor industry are coming out of these wafer fabs we have these very
02:05small specialized indium phosphide fabs and for us to put more capacity online takes three years right
02:13so it's a really long lead time that we need to respond to so for the rest of the ecosystem
02:18uh we're going to have to move relatively quickly to to make sure that they're you are building here
02:24in the us how long is that going to take yeah so we what we did in the united states
02:29we have two fabs
02:31one in san jose one in california one in north carolina we just acquired the one in north carolina
02:35the one in san jose is running so it'd be the initial phase of our our products for nvidia the
02:42north carolina fab is going to take us two years to get it online so what does that do for
02:49potential
02:49customers do they just go elsewhere do you think they're going to wait around uh for momentum for
02:54a couple of years i know there's not really a whole lot of alternatives but they're not going to just
02:57sit by idly are they yeah i mean it's it's it's a problem so i think you're right romaine what
03:02we're
03:03trying to work out two things one we do want to enable the rest of the ecosystem so we've had
03:08a lot
03:08more inquiries since signing that nvidia deal from the rest of the ecosystem and we're fundamentally
03:13interested in making sure that the industry is whole as it possibly can be the challenge is trying
03:20to squeeze them in under the the nvidia envelope and to your point if they can't get the capacity
03:26it's not like they can go elsewhere right we're really the only game in town so it pushes out their
03:33their roadmap and i think that's a deterrent to the industry so we got to try to figure out how
03:38we can squeeze them in with the finite capacity we have well i raised that question because there's
03:43been a lot of uh reporting about at least with some of the larger companies that that at least have
03:47the
03:47financial means that are starting to look for whether they can maybe manufacture some of these
03:52lasers themselves or at least find some sort of alternative there's also the relationship you have
03:57with nvidia and some concerns that given that they are not just a customer but an investor that
04:03they're always going to be at the front of the line as long as the shortage persists
04:07yeah look i mean nvidia did two things with us that were really important they invested in us which
04:12we really really appreciated it it's it's sort of a emblematic of the partnership and it and we're
04:18working on a lot of different strategic initiatives with them but then there was a long-term agreement
04:24that was part of it that really was the vehicle by which they put a big dent in their supply
04:31problem
04:32but have pushed some of that supply problem now downstream to some of the some of the folks that
04:37are their partners right that if you look at a meta a microsoft at amazon they're buying a ton of
04:43uh
04:44nvidia gpus but they also as you know have their own asics that they build that are actually uh very
04:52very
04:52important and it's those asics that are at issue at the moment that are you not worried at all of
04:58this
04:58about the concentration of your revenue around one company i mean given the evolution of lumentum
05:03given the evolution of a lot of these uh optical companies which of course were a lot were around
05:07during the telecom boom and we saw a similar concentration in revenue and we saw what happened
05:12there yeah no the concentration does worry me i think it's uh it's an issue and so what we're trying
05:18to do as fast as we can is bring more capacity online a new fab for us is i said
05:23a two or three year
05:24journey but we can squeeze a lot more out of our existing fabs and what we're trying to do is
05:30now
05:30ramp up yields get more units per wafer out of those fabs and hopefully create enough to give room
05:38to the rest of the ecosystem one more question about nvidia then i'll move on i promise um i am
05:44just
05:44curious uh they took obviously they took a big stake uh in your company they also took a big stake
05:49in
05:49coherent that's raised some speculation as to whether nvidia might one day decide maybe push
05:56you two together has there been any discussion about that there hasn't i mean what's interesting
06:01about coherent coherence a great customer of ours so we really value them as a partner they sort of
06:07approach things as a systems first company component second we're components for a system second so we're
06:15actually relatively complementary they supply goods to us we supply goods to them we actually have a
06:21very symbiotic relationship when we talk about just kind of the validation of your business model and
06:27obviously a lot of investors saw uh nvidia's investment as exactly that i want you to kind of look ahead
06:34i
06:34mean over the next five years and i know this technology ai the over broader technology ecosystem right now
06:40is moving at a rapid pace light speed if you will um where are you going to fit in lumentum
06:46where is
06:46lumentum going to fit into that five years from now look the the most amazing thing is we're obviously in
06:52this ai super cycle but the second headline is an optical super cycle what what you see in the data
06:59centers is more and more optics coming in more and more fiber coming in yesterday there was a deal announced
07:07between amazon and corning and i think that's emblematic of the need for fiber and fiber ultimately
07:15lasers are what has to drive the fiber we think that you're going to see a sort of a slow
07:21progression
07:22if you look at the back of the the racks today there are a lot of copper a lot of
07:28ethernet copper and we
07:30think that over time that ethernet copper is going to be replaced by fiber optics and in that five-year
07:36time frame that you're asking about romaine it's a huge opportunity for the optics industry i think
07:41you can see a world where almost in the entire back plane has moved to fiber optics
Comments