Fabrinet Rosenblatt's 6th Annual Technology Summit: The Age of AI (Part II)

Hi, everybody. Good afternoon. I'm Mike Genovese, the cloud and communications infrastructure analyst at Rosenblatt Securities, and this is "The Age of AI" tech conference. I'm super happy today to be joined by the team from Fabrinet. We've got everybody. We have Seamus Grady, the Chairman and CEO, Csaba Sverha, the Chief Financial Officer, and Garo, the IR guy. Hi, nice to see you. Welcome, everybody. Nice to see everybody.

Thank you. especially after reporting earnings last night.

I'm sure you've been busy speaking to the sell side, starting to speak to the buy side. Glad to have you here when we have fresh information to talk about. Let's just start with the telecom business. We'll go through the different segments, and I know you've changed your segment reporting going forward, but we'll talk about it on the segments you've been reporting up until now. The communication infrastructure up 40% year-over-year, that's the new category. But telecom up much more, data center interconnect up 140%, sorry, year-over-year. Billion-dollar run rate in DCI. You had Cisco as a 20% customer, Nokia as a 11% customer. We think that Ciena might be getting close, we don't know. But there's a lot of really strong stuff going on in telecom.

Specifically on DCI scale across 800ZR, OLS, multi-rail, are we just getting started on this? Is this business going to continue to grow and get to much bigger numbers than we're seeing now? What should investors know about this telecom/DCI segment that's been so strong, but what ending are we in, and how sustainable does this look?

Yeah. Thanks, Mike. It looks very strong and quite sustainable from what we see. DCI in particular, 400ZR, 800ZR, it really solves a power problem for the industry in a very elegant way. For a lot of these huge data centers, the limiting factor is often the amount of power that can be physically gotten into the data center from the substation, that you max out your power, and the best way around that is to spread the data centers around and connect them using DCI, like 400ZR, 800ZR, ZR+. It's an industry trend that we've seen coming for some time. For us, the ZR business started off as a couple of million, really, not that long ago. And now, as you said, at the end of the year, we were at a billion-dollar run rate, which is just phenomenal.

Originally, DCI, when there was softness going on in telecom, DCI was offsetting that for us. But now DCI on its own is just phenomenal growth. And the nice thing about that from our point of view is it's across several customers. It's not just one customer, it's several customers, all of whom are the leaders in that space. And we're making, obviously, pluggable modules for those customers, but we also make a lot of the component content that goes into those modules. So the business is quite sticky, and the work we do for the customers is very important to our customers and to their customers. So DCI, we see having a lot of legs. The demand is very strong and looks to be very strong for some considerable time to come.

Certainly, the next several years, as far ahead as we can see, the demand looks to be just increasing dramatically over the next several years.

When do you expect to see multi-rail really start in your production? I imagine it's not so much behind us, but that would be ahead of us.

Yeah. It's a function of what our customers decide to do, and we're always kind of careful of not announcing products on behalf of our customers. So we'll defer to our customers to see what they have to say publicly. But we are working on that with a number of our customers, and that will be an important growth driver as well in the coming years. But not really for us to say at this point.

It's too early. Right. And I just want to remind the audience here, if they want to ask questions, if you type a question into the upper right-hand widget on your Zoom screen, which we don't have, Seamus.

I see you looking up- Okay Right.

We actually don't have that. Only the audience has it. But the questions will come directly to me, and I- Okay will certainly ask the questions that the audience type in.

So we'll get to Datacom, but let's also touch on auto and industrial. You had a very strong quarter for auto. Did something specific happen there, or is that strength that we might repeat?

Yeah, there's a couple of things going on there in auto for us. One is we've had some new program wins and some nice growth in the EV charging part of our auto business. That's going very well for us. And then we are starting to see some growth in lidar. Lidar has been somewhat flat, I would say, for some time. Our strategy in lidar was really to try and win all the customers. In the early days of lidar, it wasn't quite clear to us who the winners would be. So we set out to try and win, really, all of the players. And now we're a few years into lidar now, and it's kind of shaking out. There's a few really good companies there who look to have some good volume, some good demand. So we are starting to see lidar ramp as well.