Fabrinet's Strategic Expansion and Market Positioning at the 53rd Annual JPMorgan Global Technology, Media and Communications Conference

Key Takeaways

TL;DR: Fabrinet (NYSE:FN) emphasized strong demand visibility (no macro slowdown), leadership in 1.6T transceiver ramp for NVIDIA's Blackwell Ultra, AWS partnership (LT rev. via warrants), and oppt'ys in Co-Packaged Optics (CPO). Margins resilient despite tariff risks; telecom recovering w/ DCI/400ZR growth. Temp. headwinds (20bps) from new ramps to reverse in FY26.

1. Demand & Macro Outlook

• No macro slowdown observed: Majority of biz focused on infrastructure apps (not consumer-exposed), driving steady order patterns.
• CEO: "We haven't seen any slowdown... They're not particularly exposed to consumer sentiment."

2. Expansion Beyond Optical

• AWS partnership: Signed warrant agreement tied to rev. commitments (undisclosed size; potential 10% customer).
  • Non-dilutive to shareholders: Fabrinet will buy back shares; alignment of incentives.
• Capability breadth: Expanding into advanced packaging (e.g., in-house components) and system assembly to boost content/margins.

3. Datacom & AI-Driven Growth

• 1.6T transceivers: Key for NVIDIA’s Blackwell Ultra (ramp expected 2H25).
  • Lower ASP uplift vs history (+1.5x typical) due to higher in-house content (25-30% cost savings).
  • Transition from 800G to 1.6T faster, but 800G EML-based demand persists.
• Competitive Moats: Deep Thailand-based expertise (low-cost, complex manufacturing) vs. Jabil/Sanmina.

4. Co-Packaged Optics (CPO)

• 3 active projects: 1 with NVIDIA (public) + 2 unnamed customers.
  • Early-stage focus on silicon photonics packaging; pluggables to dominate near-term.

5. Margins & Capex

• 20bps temp. headwinds in FQ4 (May-Jul 2025): Pre-ramp costs for 1.6T, Ciena, AWS, and telecom.
• Building 10 expansion (2M sq. ft. addition by late 2026): Flexibility to accelerate for incremental wins.

6. Telecom Recovery & DCI Growth