Nvidia-backed Lumentum sold out of AI server parts till 2029

Lumentum Holdings optical components are “completely sold out” through early 2029 on demand from tech companies clamouring for faster AI data centres, according to its chief executive officer.

Lumentum is unable to meet about 70% of demand for some products through next year, and won’t be able to address 30% of demand for some other products through 2028, Michael Hurlston said in an interview in Tokyo Friday. Just six months ago, Hurlston said Lumentum was on track to sell out its capacity by 2028.

The company, which received an investment of $2 billion from Nvidia Corp earlier this year along with rival Coherent Corp, 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 are really trying to catch up, add capacity as fast as we can, but we are very, very far behind what customers want,” Hurlston told Bloomberg News. “We are completely sold out, so there’s no end in sight.”

That’s as some investors are becoming more cautious about rising costs and debt levels around a global rush to build data centres and other AI infrastructure. To allay concerns from key suppliers, big tech providers have been offering guarantees for long-term agreements.

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The sector is bracing for further supply constraints as the US reportedly considers a ban on new Chinese optical transceiver models. Lumentum and Coherent would not be able to fill the vacuum left by Chinese makers such as Innolight, according to Counterpoint Research.

To meet runaway demand, the San Jose, California-based company has ramped up capacity 12-fold at its key factory in the Tokyo metropolitan area over the past two years. It plans to invest at least $350 million in the site and a neighbouring facility. It’s also expanded capacity at its plant in Caswell, England.

To expand its product lineup, however, the company will need to consider an acquisition, Hurlston said.

“I think probably in the next year, we’d like to add additional capability to what we currently have,” he said.

It takes three to five years for companies like Lumentum to build new production capacity. But hyperscalers have agreed to take on some of the capex risk, Hurlston said. “These hyperscalers are willing to put money behind it.”

Silicon photonics, which uses light to transmit data, is expected to replace copper-based interconnects in data centre clusters as advanced AI hardware demands faster transmission. Optical networking also helps systems generate less heat and consume less power.

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Japan is home to a broad base of companies with expertise spanning indium-phosphide semiconductors, optical fibre and silicon photonics, including Fujikura, Sumitomo Electric Industries, Furukawa Electric Co, Hamamatsu Photonics K.K., Mitsubishi Electric Corp and Hitachi High-Tech Corp.

Lumentum acquired some of its technology via Japan through its 2018 purchase of Oclaro which had inherited Hitachi’s optical research. Today, its Sagamihara facility is one of the world’s most advanced indium phosphide device production sites, capable of delivering stable, high-quality output.

Earlier this year, Israeli silicon-photonics foundry operator Tower Semiconductor took full control of a 300-millimeter factory in Uozu, Toyama Prefecture in central Japan, with plans to expand photonics shipments.

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