NeoPhotonics to Acquire Optical Unit of Lapis Semiconductor

NeoPhotonics Corp., a maker of photonic integrated circuit (PIC) based modules and subsystems for high-speed communications networks, announced Tuesday that will acquire the Tokyo-based semiconductor optical components business unit (OCU) of Lapis Semiconductor Co. Ltd. for $36.8 million in cash.

Escalating demand for bandwidth is driving increasing needs for capable, scalable telecommunications networks, NeoPhotonics said, and these networks increasingly are relying on technology that couples complex optical devices and analog semiconductor integrated circuits (ICs) in the same platform. OCU was an early innovator in high-speed optoelectronics and today is among the leading producers of both analog electronic ICs and photonic products for the current generation of 100 G modules, the company said.

“Its products and technologies are particularly suited for photonics integration," NeoPhotonics Chairman and CEO Tim Jenks told investors in the conference call Tuesday.

Jenks said the transaction brings to his company key technologies and "more than 150 patents and patent applications in semiconductor devices and photonic integrated circuits for high-speed 100 gigabit and beyond, with two critical materials systems, indium phosphide and gallium arsenide."

The gallium arsenide capability also brings a suite of drivers and trans-impedance amplifiers (TIAs), which are control devices that are used with semiconductor lasers, Jenks said.

NeoPhotonics will add OCU's laser and array products, including high-speed modulators, to the PIC-based tunable lasers it gained from its 2011 acquisition of Santur, he said. (See: NeoPhotonics Acquiring Laser Array Maker)

"The transaction is a natural step in the relationship between NeoPhotonics and Lapis Semiconductor OCU, as the businesses have been collaborating closely on high-speed coherent technology development for the past four years," Jenks said. "We project that this transaction will add approximately $40 million to $50 million in annual revenue to our business, and that can be accretive, on an adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] basis, within the first year."

The purchase, which includes $21.2 million for the business and $15.6 million for its campus and high-speed semiconductor and laser and detector fabrication facility, will be made through its Tokyo-based subsidiary, NeoPhotonics Semiconductor GK. The OCU business, which has 85 employees, will be merged with NeoPhotonics Semiconductor GK after the transaction closes. Payments on the purchase will be made in Japanese yen.

NeoPhotonics CFO J.D. Fay told investors that because OCU is not a stand-alone company, historically it hasn't prepared separate financial statements. But based on preliminary information, OCU had revenue of approximately $45 million for the first nine months ended Sept. 30, 2012. As a customer of OCU, NeoPhotonics accounted for 6 percent of that, he said. About 30 percent was from network equipment manufacturers that are also NeoPhotonics customers, he said, and the rest came from other optical module manufacturers and test and measurement customers.

While NeoPhotonics will provide its financials for the quarter next month, Fay said fourth-quarter 2012 revenue is expected to be "in the high end of our projected range of $58 million to $62 million." He added that full-year revenue would be in the range of $241 million to $245 million, with year-over-year growth rate of 20 percent to 22 percent, and net income is expected to be within the range the company previously provided, break-even to plus or minus 5 cents per share.

The boards of both companies have approved the transaction, which is expected to close in the next quarter or sooner and is subject to various customary closing conditions.

For more information, visit: www.neophotonics.com