POET Expects to Enter Production in the Second Half of 2025

By Lisa Thompson

NASDAQ:POET

READ THE FULL POET RESEARCH REPORT

After years of R&D, marketing, and restructuring, POET (NASDAQ:POET) is about to start the production phase. It has production facilities being installed in Malaysia and expects to be fully up and running by the end of June with an announced one million unit annual production capacity. Samples are out to customers who are now in the process of getting their customers to qualify products. When they get the go-ahead, expect a series of purchase orders to be announced between the end of June and the end of the year. In addition to the already announced order from Celestial AI, we expect to hear from Adtran (ADVA), Mitsubishi, Luxshare, FOIT, Lessengers, and all the other companies POET has been working with. It is even possible that a few of the Chinese module makers could come on board for 800G products.

We believe the stock could be worth $7.40 per share based on 2027 revenues at 8.3 times EV to Sales, discounted at 15% back to present value. This is the average multiple of its fabless semiconductor peer group.

At OFC, there was a lot of interest in POET’s Teralight line of 1.6T transmit and receive optical engines. POET also debuted POET BlazarÔ, a groundbreaking external light source (ELS) that promises to shrink costs by an order of magnitude and could disrupt the laser light source ecosystem. Blazar offers an economically superior solution for co-packaged optics (CPO) applications and, more importantly, for chip-to-chip, light-based connectivity in AI clusters.

POET and its Customers Showed Products at the Optical Fiber Communications (OFC) Conference

The Optical Fiber Communications (OFC) Conference was held in San Francisco from April 1st to April 3rd. There, select technology companies had the opportunity to see the POET Blazar prototype. It uses POET’s wafer-level chip-scale packaging technology to create a high-power, multi-channel light source as an alternative to traditional DFB laser-based solutions. Wafer-level chip-scale technology significantly lowers the cost of the light source, provides larger scale and better reliability, and uses far less Indium Phosphide (InP) than conventional solutions. 

In partnership with Mitsubishi Electric, POET unveiled its Teralight product line of 1.6T highly integrated transmit and receive optical engines. The 1.6T transmit engine includes only four externally modulated laser chips, rather than the standard eight lasers, due to Mitsubishi Electric’s unique 2x200G EML laser design, a cost reduction in the most expensive transmit component. It is the most highly integrated system-on-chip available on the market. The system-on-chip architecture allows customers to use the same board design for 1.6T DR8 and 2xFR4 pluggable modules, a feature unique to POET that eliminates the need for separate DR and FR engineering teams. 

POET customers also showed products at OFC. LuxshareTech demonstrated its 400G and 800G DR and FR modules (Booth #4905), and Adtran (formerly ADVA) demoed a highly integrated Quattro 100G LR4. At the show, POET announced a partnership with Lessengers, a South Korean optical solution provider. It plans to offer a differentiated 800G DR8 transceiver. The transceiver will include POET’s transmit and receive optical engines and Lessenger’s “Direct Optical Wiring” (DOW) technology for a cost-effective solution for AI and hyperscale data center applications. Lessengers expects to have transceiver samples ready for its customers to review in the second half of 2025.

POET Buys Out Its JV Partner and Builds Production Facilities

On December 31^st, POET completed its acquisition of all of the outstanding minority equity interests of SPX that were not already owned. By doing this, POET now controls all sales, marketing, and production, and as a result, can book 100% of sales as its own revenue. It has moved all production out of China to Malaysia, enabling sales to all entities unwilling to buy products produced in China as well as to its Chinese customers. As a result of this financial and physical restructuring, we are revising our forecasts for POET and our price target. Expenses increased for a short time as a result of owning 100% of the JV, but the operation has been shut down, with only the legal entity remaining. The expense cuts from closing Allentown more than offset those short-term costs. The company will now be streamlined, with most operations in Singapore, contract manufacturing in Malaysia, and senior management in California.

POET Paid $6.5 Million to End the Joint Venture

According to the terms of the deal, POET paid Sanan $6.5 million for its 24.8% equity position in SPX, which is to be paid annually over five years, beginning in Q1 2025. POET also provided Sanan the option to convert any portion of the purchase price into shares. In addition, POET bought equipment that was used for $3.8 million in cash, less than its book value, to be paid in four equal installments of $950,000, the first of which was paid on December 31, with the remaining three installments due at the end of each of the next three quarters. The majority of the equipment has been shipped to Malaysia, with some going to Singapore and Shenzhen.

POET Brings on a Malaysian Contract Manufacturer to Produce Optical Engines

POET signed a three-year master agreement, an optical engine purchase agreement, and a deed of consignment with Globetronics Manufacturing (GMSB) to manufacture optical engines for POET in Penang, Malaysia. Globetronics will assemble and test POET’s optical engines. The deed of consignment is for a suite of wafer-level process equipment recently purchased by POET and is now being installed at the GMSB facility in Penang. The production capacity of the assembly and test operations will exceed one million optical engines per year, all dedicated to the 800G and higher speed transceivers required for AI clusters.

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