Lumentum Holdings Inc. (NASDAQ:LITE) Q4 2020 Earnings Conference Call - Final Transcript
Aug 11, 2020 • 08:30 am ET
We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Tom O'Malley of Barclays. Please go ahead.
Good morning, guys, and thanks for taking my question and congratulations on the really nice results. I just wanted to start broadly with your telecom and datacom markets. Clearly, in the quarter, you had some capacity constraints and you overcame those. Can you talk about what trends you're seeing there?
ROADM demand seems to be really strong. And you mentioned some additional investment there. Can you talk about how big you think that market can be and why it's so important that you need to show some additional investment there?
Yes, thanks, Tom. Yes, we saw strong demand from, as I said, the high-end ROADMs across the board, across geographies, datacom chips, and a combination of both hyperscale 400-gig transceiver-type chips to deployment of 5G backhaul and the like. So, I think as we indicated in the script, we have $150 million of datacom chip backlog. And today, we're shipping approximately $50 million and growing that. So you can see it's going to take us some time to catch up with the datacom chip business.
On the telecom transmission business, it was most impacted by COVID through the March through May time frame. That's now back to being able to produce actually more than what we were producing before as we've added capacity. And we saw strong demand on our coherent ACOs, DCOs as well as our high-end coherent components that are going into 400, 600 and even 800 gig coherent transponders. So it's a pretty broad range of strong demand across the board.
Great. And then my follow-up was on Huawei. You've seen some of your peers take Huawei out of guidance as well. Can you talk about what you mean by derisking Huawei? It seems like, you've taken orders to date, and that's included in your guidance and then you basically assumes no additional revenue. Just some clarity there would be helpful in understanding what the derisk actually means? Thanks, guys.
Hey Tom, this is Chris. Thanks for the question. Yes, so our business with Huawei has been declining over the past year or a little more than a year with the U.S. action.
And -- but underneath that decline in revenue, what has been happening at a product level is products that they can get from other non-U.S. suppliers, I think they have generally moved away from us. And what remains in our revenue are products that we're the only guy or the other supplier is, say, another U.S.-based supplier.
And they continue to have business globally, and therefore, we expect we will continue to have business with them on those indispensable products without any visibility into a cliff, if you will, out there. Having said all that, obviously, we're trying to be very conservative and ensure that if there was something out there that did happen during the quarter that we're not in a challenging position.