Optical component makers see Huawei ban cloud short-term prospects

The ban on the use of 5G equipment from Huawei by US-led allies and telecom operators on concern of information security is casting shadows on the near-term prospects of Taiwan-based optical component suppliers as orders from Huawei currently account for 10-15% of their annual sales, according to industry sources.

Some sources are worried that the proliferation of the ban will threaten to slow down the construction of 5G infrastructure as Huawei is one of the companies with the most investment in 5G R&D and has a key role in the global communications equipment industry.

Many telecom operators would be forced to replace equipment or increase investments should they be compelled to abandon the use of Huawei equipment, while seeing large-scale implementation and penetration of 5G networks being delayed.

However, some are more optimistic believing that as long as the terminal demand for installation of base stations still exists, other equipment supplier will have the opportunity to fill the vacancy left by Huawei in the 5G market.

As a result, some Taiwan-based makers have seen delivering samples of their 5G components to other equipment suppliers for verification expecting to see the shift of related orders to take effect in the second half of 2019 at the earliest.

GaAs-based epiwafer maker LandMark Optoelectronics reported that its sales to China have not been affected by the ban so far as its clients in that country remain active with respect to the development of 5G base stations.

LandMark said its sales still remain on a growth track, with its revenues for January 2019 edging up 0.49% on year to NT$218 million (US$7.07 million).

The company generates about 45% of its revenues from the US and 35-40% from China.

Another maker TrueLight said it has continued delivering 4G LTE products to Huawei as well as sending 5G devices to the company for verification, although it acknowledged that Huawei has slowed down its purchases from component suppliers.

However, the company believes that the deployment on 5G equipment will accelerate from the second half of the year with other equipment vendors to zero in to seize 5G business opportunities. It expects that 5G application revenues to account for 8-10% of its total sales in 2019.