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The Finance Base
electronics manufacturing

How EMS Providers Began Entering the Fiber-Optics Market

In 2001, EMS companies won fiber-optic production, assembly and test work by building optical capabilities and earning OEM confidence, often through limited initial assignments.

By TheFinanceBase Team 3 min read
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In 2001, electronics manufacturing services (EMS) companies began winning more fiber-optic manufacturing work as networking equipment makers sought lower costs and found providers with stronger optical engineering, assembly and test capabilities. The shift was not simply a move to outsource board assembly: it opened higher-value work in optical components, modules and systems, often through a cautious trial before a broader production transfer.

Why did EMS companies enter fiber optics?

Economic pressure was one catalyst. During a weak U.S. economy, networking original equipment manufacturers (OEMs) were cutting costs and reconsidering which operations they needed to keep in-house. Analysts saw optical components and modules as work that could be outsourced, but the transfer depended on providers demonstrating that they could handle specialized processes.

EMS firms invested in dedicated optical facilities, optronics laboratories, optical competency centers and engineering services. That investment helped address OEM concerns about quality, process control and technical expertise. Celestica executive Dan Shea described the challenge as one of confidence: “OEMs needed to gain confidence in EMS companies.”

How did outsourcing expand beyond board assembly?

The opportunity reached beyond conventional board stuffing. EMS providers pursued optical-electronic integration, optical systems, component and module assembly, and testing. Manufacturers’ Services, for example, developed an optronics lab for optical-component manufacturing, testing and board-level assembly. Its optical sites included Chicago, Arden Hills, Valencia and Salt Lake City.

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Some work also involved design or specialized product capability. Plexus entered a strategic design partnership with Applied Micro Circuits for high-speed optical-network interface chips. JDS Uniphase selected Celestica to manufacture optical amplifiers. These examples show the range of activity, from engineering collaboration to production of optical equipment.

How did OEMs manage the risk of outsourcing?

Many OEMs started with prototypes or a regional assignment, using a limited engagement to evaluate a provider before assigning more work. For manufacturers, qualification and audit readiness mattered alongside technical skills and the ability to scale from prototype volumes to larger production.

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This staged approach helps explain why investment in labs and facilities was commercially important: an EMS provider needed to demonstrate repeatable manufacturing and test capabilities before an OEM could confidently move production out of its own operation.

What did Cisco transfer to Solectron?

Cisco sold Solectron the manufacturing assets of its optical-module and subassembly operation in Columbia, South Carolina. Under a two-year contract, Solectron was to produce and test Cisco dense wavelength-division multiplexing (DWDM) equipment. Cisco did not transfer all of its optical work: it retained its optical test and assembly plant in Salem, New Hampshire. Cisco said the Salem capabilities would remain within the company as part of its virtual manufacturing strategy.

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The arrangement illustrates a partial transfer rather than a complete exit from optical manufacturing. Cisco placed a defined production and test operation with an EMS provider while preserving other optical capabilities in-house.

Which providers built optical capabilities?

Provider or company Documented example
Solectron Acquired Cisco’s Columbia, South Carolina optical manufacturing assets and contracted to produce and test Cisco DWDM equipment for two years; Cisco retained its Salem plant.
Celestica Reported 20 fiber-optics customers and expected as many as 30 the following year. It was selected by JDS Uniphase to make optical amplifiers.
Manufacturers’ Services Operated optical sites in Chicago, Arden Hills, Valencia and Salt Lake City and established an optronics lab for component manufacturing, testing and board-level assembly.
Plexus Entered a strategic design partnership with Applied Micro Circuits for high-speed optical-network interface chips.
Flextronics Acquired Wave Optics and Fico Fiber Optics for $100 million to help form a photonics business.
SMTC Acquired Qualtron Teoranta to strengthen its optical-networking capabilities.

How much optical-networking work was outsourced?

The 2001 article cited AMR Research analyst David Cahn, who estimated that the optical-networking market was worth $20 billion, with EMS providers handling 20%, or $4 billion. The article also reported projections of $28 billion in optical-networking revenue with 20% outsourced, and a $34 billion market in 2002 with 25% EMS penetration, or $8.5 billion in EMS revenue. These are historical estimates and forecasts from that period, not current market measurements.

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  • Optical digital audio cable: Perfect for equipment with a TOSLINK interface (OPT In / OPT Out or S/PDIF In / S/PDIF Out). TOSLINK connector to TOSLINK connector (F05 connector)
  • Versatile: Ideal for transmitting crystal-clear digital audio from your TV, video game console (PS3/PS4/Xbox One), DVD/Blu-ray player, or TV streaming box to a soundbar, amplifier/amp, stereo/Hi-Fi system, D/A converter, and more
  • High-End: This metal-free fiber optic audio cable, featuring a fully flexible PVC jacket, is entirely immune to electrical interference. Each cable undergoes multi-stage testing during manufacturing to ensure maximum product quality and durability
  • 24K gold-plated connectors: Corrosion resistant gold plating keeps connectors clean. And because these cables are fiber optic, they provide 100 % signal transmission with 0 % loss
  • No risk: 36 months manufacturer warranty
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What does current evidence say about the market?

Diodes Incorporated’s 2024 annual report lists fiber optics among communications applications, which represented 14% of the company’s 2024 product revenue. The report also says direct sales and EMS customers together accounted for 37% of net sales; it does not break out fiber-optics revenue or the EMS share of that business. It notes that customers may require lengthy qualification and audits. These company-specific figures indicate continued commercial relevance for fiber optics and EMS channels, but they do not establish a current global EMS market-share estimate.

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