AI Data Center Demand Explodes: Lumentum (LITE.US) Optical Component Orders Booked Through 2029

Title context: AI Data Center Demand Explodes: Lumentum (LITE.US) Optical Component Orders Booked Through 2029 Text: As tech companies race to build high-speed AI data centers, Lumentum's (LITE.US) optical components are nearly "sold out," with orders booked through early 2029. Lumentum CEO Michael Hurlston said in an interview in Tokyo on Friday that the company will not be able to meet about 70% of demand for some products next year, and will also be unable to meet 30% of demand for other products by 2028. Just six months ago, Hurlston had said Lumentum was on track to sell out its capacity by 2028. Earlier this year, Lumentum and rival Coherent (COHR.US) each received a $2 billion investment from NVIDIA Corporation (NVDA.US). The company supplies advanced indium phosphide devices that help enable high-speed cloud computing and data transmission. Analysts on average expect Lumentum's sales to more than double this year. "We're really trying to catch up, adding capacity as fast as we can, but we're far behind customer demand," Hurlston said. "Our capacity is completely sold out, and we see no signs of relief." Tight Supply and Race to Expand Capacity, Japan's Supply Chain Value Becomes Prominent As the global boom in data centers and other AI infrastructure construction rises, some investors have become increasingly cautious about rising costs and debt. To ease concerns among key suppliers, major tech companies are offering guarantees for long-term agreements. According to reports, the United States is considering banning imports of new Chinese optical transceivers, which could further intensify supply constraints in the industry. Counterpoint Research said Lumentum and Coherent will be unable to fill the gap. To meet surging demand, San Jose, California-based Lumentum has increased capacity at its main factory in the Tokyo metropolitan area 12-fold over the past two years. The company plans to invest at least $350 million in the factory and nearby facilities. In addition, the company has expanded capacity at its Caswell plant in the United Kingdom. Hurlston said that to expand its product line, the company needs to consider acquisitions. "I think possibly within the next year, we'd like to add new capabilities beyond our existing ones," he said. It takes three to five years for companies like Lumentum to build new capacity. But Hurlston said hyperscalers have agreed to bear some of the capital expenditure risk. "These hyperscalers are willing to put money behind this." Silicon photonics technology, which uses light to transmit data, is expected to replace copper interconnect technology in data center clusters to meet the growing demand for faster transmission speeds in AI hardware. Optical networking also helps systems reduce heat generation and lower power consumption. Japan has many companies with expertise in indium phosphide semiconductors, optical fibers, and silicon photonics, including Fujikura, Sumitomo Electric, Furukawa Electric, Hamamatsu Photonics, Mitsubishi Electric, and Hitachi High-Tech. Lumentum acquired some Japan-origin technology through its 2018 acquisition of Oclaro Inc., which inherited Hitachi's optical research achievements. Today, its Sagamihara plant is one of the world's most advanced production bases for indium phosphide devices, capable of delivering stable, high-quality products. Earlier this year, Israel-based silicon photonics foundry operator Tower Semiconductor Ltd. fully took over a 300mm plant in Uozu, Toyama Prefecture, central Japan, and plans to expand shipments of photonic devices.