Coherent’s Strategic Realignment: A Focused Future in AI and Optical Transceivers
Summary
Coherent is streamlining operations by closing its UK fab and focusing on high-growth segments such as AI and next-generation optical transceivers like 800G and 1200G.
In 2023, the 800G transceiver market was valued at $2,200 million, with Cisco, Arista Networks, and Broadcom holding the top positions.
Coherent captured 10% of the 800G market, generating $220 million in revenue and positioning itself for future growth in AI-driven applications.
Coherent's AI transceiver revenue is expected to grow at 37% CAGR through 2026, driven by increasing demand in hyperscale data centers and AI infrastructure, though market share may slightly decline due to increased competition.
Coherent Corp. (COHR) is restructuring to focus on high-growth segments, including AI and optical transceivers. Under new leadership, the company closed its UK fab to streamline operations, allowing resources to be directed toward next-generation 800G and 1200G transceivers.
Portfolio Optimization: UK Fab Closure and Market Focus
Coherent Corp. (COHR), a global leader in photonics and optics, is undergoing a strategic transformation under its new CEO. With the goal of streamlining operations and maximizing growth potential in high-demand markets, the company has made significant moves to prune its portfolio and optimize its business focus. One of the most notable actions taken in this strategic realignment was the closure of Coherent’s fab in the UK. This decision was part of a broader initiative aimed at reducing operational complexities, cutting costs, and ensuring the company is well-positioned to capitalize on emerging high-growth opportunities, particularly in artificial intelligence (AI), cloud computing, and high-performance optical components.
Silicon Carbide: Challenges and Opportunities
I’ve written extensively on Coherent’s Silicon Carbide (SiC) business, mainly because of the potential growth of the EV market because my PhD thesis advisor at Oxford University John Goodenough won the Nobel Prize in Chemistry for inventing the lithium ion battery, and beause Coherent’s ex-CEO was a member of my church. These articles were written for another platform but are available on the internet.
While Coherent has been proactive in its portfolio realignment, the company has faced challenges in the silicon carbide space. SiC is a key material used in high-performance power electronics, particularly in electric vehicles (EVs) and renewable energy applications. However, the market has seen rising competition and supply chain constraints, which have impacted Coherent’s SiC business. Additionally, technical hurdles related to wafer defect rates and yields have slowed down SiC production across the industry, according to my report Power Semiconductors: Markets, Materials and Technologies, and details can be seen on my website at www.theinformationnet.com.
Despite these challenges, Coherent remains optimistic about the long-term potential of silicon carbide. The material offers significant advantages in power efficiency and heat resistance, making it indispensable in high-performance electronics. Coherent continues to invest in improving SiC manufacturing technologies, which could unlock new opportunities in the automotive and industrial sectors.
AI Optical Transceiver Market Overview
With AI adoption rapidly increasing, the demand for high-speed optical transceivers has surged. These transceivers, especially at 400G, 800G, and 1.6T speeds, are vital for handling the massive data requirements of AI applications. In 2023, the global AI optical transceiver market was valued at $1.4 billion, and it is expected to grow at a CAGR of 14% through 2028, reaching $2.39 billion by 2027. The growth is driven by AI’s increasing data bandwidth and low-latency demands, particularly in hyperscale data centers and cloud infrastructure. Table 1 shows my forecast of the Global AI Optical Transceiver Market from 2023-2027.