Fabrinet flood hits optics manufacturing

25 Oct 2011

Chokchai campus of leading contract manufacturer 'under several feet of water'; production unlikely to resume this year.

Severe flooding at the giant Thailand-based contract manufacturer Fabrinet has impacted at least two major photonics companies, with Opnext and Emcore both saying that their operations are affected.

The flooding, a result of heavy seasonal rains, has infiltrated offices and manufacturing space at Fabrinet’s Chokchai campus in Pathum Thani. “Fabrinet has reported that its manufacturing buildings at Chokchai are currently filled with several feet of water,” said Opnext in a statement released early October 25 (local time in Thailand).

In addition, said Opnext, local transportation and utilities are affecting access to the Fabrinet factory and availability of power.

In a filing to the US Securities and Exchange Commission (SEC) on October 24, Fabrinet said that buildings 1 and 2 in Chokchai were flooded to a depth of 3.5 feet, adding:

"The flooding has not breached the company’s Pinehurst campus, located approximately seven miles north of Chokchai. However, production at the Pinehurst campus buildings, known as buildings 3, 4 and 5, continues to be suspended due to the impacted local transportation and utilities that continue to affect both arterial and access roads to Fabrinet’s factories and some employee residences."

Emcore
Although Opnext says it can’t yet assess the full extent of the damage, production at the site is thought unlikely to resume before the end of the year. “The flooding will have significant impact on the company’s operations and its ability to meet customer demand for its products in the near future,” reported the firm, which makes a wide range of laser diode components, mostly for applications in fiber-optic communications.

Fabrinet is also a contract manufacturer for Emcore, II-VI, JDSU and, following a contract signed just last month, Germany-based high-speed photodetector maker u²t. Of those three, only Emcore has so far confirmed that it has also been impacted.*

“Over the weekend, rising water penetrated the campus's facility, including the areas used to manufacture the company's fiber-optic products and submerging some of [its] manufacturing and test equipment,” Emcore stated. “All Emcore employees in the area remain safe.”

The company, whose solar cell activities are located elsewhere and are not affected, added that the floods will have a significant impact on its operations and ability to meet customer demand for fiber-optic products in the December quarter.

Both Emcore and Opnext are looking at the possibility of increased manufacturing at their own, or other contract facilities. Opnext will provide an update on the impact during its next scheduled earnings report, on November 1.

The Thailand floods represent the second natural disaster to have impacted the unfortunate Opnext this year. In March, the company’s module assembly and chip fabrication facilities in Totsuka, Japan, recovery suffered damage in the magnitude 9.0 earthquake that triggered the tsunami that devastated the north-east coast of the country. Module manufacturing was interrupted for ten days.

* Update 25 October: Oclaro said that it had begun to deploy contingency plans as a result of the floods affecting Fabrinet. Approximately 30% of Oclaro's finished goods are manufactured at the Chokchai and Pinehurst facilities.

Oclaro CEO Alain Couder said that the company would delay its Q1 2012 financial results announcement as a result.

Meanwhile JDSU confirmed that Fabrinet provides contract manufacturing services supporting a portion of its Communication and Commercial Optical Products (CCOP) product portfolio from its Pinehurst facility. JDSU is not supplied from Fabrinet's Chokchai facility.

"JDSU personnel are on site working with Fabrinet. We are closely monitoring the situation and communicating with our customers, taking action to secure equipment and inventory at the site, and developing and preparing to execute contingency plans," JDSU announced.