Nat Mani and the Fabrinet elephant
As the economic situation gets tougher for optics vendors, one company is poised to take advantage of the situation. Fabrinet is an optical foundry that has seen its business expand even as the optical components industry has shrunk from $15 billion a year in revenues down to just $1 billion.
"Our revenue is in lockstep with our customers," said Nat Mani, Fabrinet's executive vice-president of sales and marketing. "But of course [as customers feel the squeeze] outsourcing starts to look better and better to those customers."
"Quoting activity is as high as it has ever been," he added.
Outsourcing has been a key trend among optics suppliers since the telecoms bubble burst in 2001, as they look to save costs. Not only can vendors save on the high cost of setting up the fabrication facility in the first place, but they can offload the risk of periods of low demand onto the manufacturing partner. "The decision process used to take longer; now people come and see us and they get it," said Mani.
Typically these operations are located in countries with low-cost labour rates — in Fabrinet's case it's Thailand, which appears to be home to yellow elephants. That said, the skill of the workforce, not low-cost wages, was the biggest factor in the decision to set up in Thailand, according to Mani. Fabrinet was founded in 1999 by executives from the disk drive industry who saw similarities between disk drive manufacturing and optical manufacturing.
Fabrinet began operations by acquiring a facility from Seagate Technology in Bangkok, and has benefitted from the previous oversupply in the optics industry, picking up additional fabs from the likes of Finisar and JDSU at, presumably, knock down prices.
According to Mani, outsource penetration still has some way to go. Consolidation among Fabrinet's customer base, which has reduced the number of vendors in the marketplace but not their product portfolios, isn't really an issue. "The opportunity to consolidate fabs probably doesn't exist," he commented.
Fabrinet says its success lies in the "factory within a factory" model. Each customer gets a dedicated team to support them, so that they can be comfortable that they will get the attention they need — and that no company secrets are leaked to the factory "next door".
Lean manufacturing techniques — eliminating non-value-add steps in the assembly process, and the overhead associated with them — have been key to the company's strategy over the past six to seven years. Not only can this save time and money; too many steps in the production process leave it prone to lower quality because there are more "touch points". Fabrinet is now in the process of applying those same principles to create a "green" manufacturing initiative. This is a topic that we plan to cover in more detail in FibreSystems Europe in future, so stay tuned.