NeoPhotonics said the recent tightening of restriction on Huawei and its affiliates by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) will have an impact on its financial performance.
In an investor update, NeoPhotonics stated that it is on track to achieve to meet the targts provided on August 4, 2020. Shipments to Huawei are contributing approximately $40 million of revenue to NeoPhotonics in the current quarter. Beyond the third quarter, the NeoPhotonics is still assessing the full impact of the current BIS restrictions.
“Despite the near-term revenue impact resulting from the recent BIS restrictions, demand for our products broadly remains strong, driven by expanding high speed capacities, hyper-scale data center interconnects, network edge provisioning for increased cloud service usage and remote working,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “We remain excited about the growth prospects ahead of us. In particular, our highest speed over distance products for 400G and above applications continue to gain traction with leading network equipment manufacturers and are expected to represent more than 20% of total revenue in 2020, after only two years in the market. Of note, revenue from customers beyond Huawei is expected to grow 40-50% over the next year independent of potential customer share shifts. Coupled with the upcoming 400ZR and 400ZR+ high speed module opportunity which is expected to begin volume production in 2H 2021, the end market for these products, as defined by high speed ports, is forecasted to increase at an 80% five-year compounded annual growth rate through 2024,” continued Mr. Jenks.
“Beyond topline growth, we must also ensure our operations remain aligned with the demand outlook and pursue appropriate expense adjustments and structural actions to mitigate the impact of revenue declines. We are fortunate to have entered this period with both a strong financial position and a management team with a demonstrated track record of taking the necessary actions to navigate uncertain times. Through the continued growth of our existing product lines and the ability to pull operational levers as needed, we feel confident in our ability to return to profitability by the end of 2021 with a greater level of diversity across our customer base,” concluded Mr. Jenks.
https://ir.neophotonics.com/news-releases/news-release-details/neophotonics-provides-business-update-following-recent-us
U.S. further restricts Huawei's access to components
Specifically, the Bureau of Industry and Security (BIS) in the Department of Commerce added another 38 Huawei affiliates to the Entity List, which imposes a license requirement for all items subject to the Export Administration Regulations (EAR) and modified four existing Huawei Entity List entries. BIS also imposed license requirements on any transaction involving items subject to Commerce export control jurisdiction where a party on the Entity List is involved, such as when Huawei (or other Entity List entities) acts as a purchaser, intermediate, or end user.
The restrictions have immediate effect. The Department of Commerce said this amendment further restricts Huawei from obtaining foreign made chips developed or produced from U.S. software or technology to the same degree as comparable U.S. chips.
“Huawei and its foreign affiliates have extended their efforts to obtain advanced semiconductors developed or produced from U.S. software and technology in order to fulfill the policy objectives of the Chinese Communist Party,” said Commerce Secretary Wilbur Ross. “As we have restricted its access to U.S. technology, Huawei and its affiliates have worked through third parties to harness U.S. technology in a manner that undermines U.S. national security and foreign policy interests. This multi-pronged action demonstrates our continuing commitment to impede Huawei’s ability to do so.”
https://www.commerce.gov/news/press-releases/2020/08/commerce-department-further-restricts-huawei-access-us-technology-and
