Mitsubishi Electric To Triple Output Capacity For Optical Devices

Mitsubishi Electric plans to triple production capacity for optical semiconductor devices used in data centers and communications base stations, stepping up investment as AI-driven demand continues to grow.

The Japanese electronics maker will direct a portion of its planned investment away from power devices used in EVs amid sluggish growth in that market, instead lifting optical device production capacity for fiscal 2028 to three times the fiscal 2024 level.

The company will be increasing production of optical devices, which convert optical signals to electrical signals and vice versa. The plan is to boost capacity for high-frequency optical devices at its high-frequency and optical device works in Hyogo prefecture. Before the change, Mitsubishi Electric had intended to raise fiscal 2026 capacity by half from the fiscal 2024 level.

Optical devices are used in many applications, including home internet connections and 5G high-speed wireless base stations. Demand is also rising in data centers for artificial intelligence. Data centers use large numbers of optical devices to link graphics processing units used for AI.

The global AI data center market totaled roughly $15 billion in 2024 and is expected to reach about $94 billion in 2032, according to Indian research company Fortune Business Insights. Mitsubishi Electric has decided to upgrade its planned capacity increase based on the expectation of long-term global demand for optical devices.

April-September consolidated revenue in Mitsubishi Electric's semiconductor and device segment, which includes optical and power devices, fell about 4% on the year to 140.6 billion yen ($902 million). Operating profit rose 6% to 24.7 billion yen. Highly profitable optical devices saw strong sales, while power devices struggled.

Mitsubishi Electric revealed in May that it would reassess its previous plan of investing 260 billion yen in raising production capacity for power devices over the five years ending March 2026, shifting a portion to optical devices.

The company claims a roughly 50% global market share in optical devices for data centers. Higher profit margins on optical devices will help offset the overall decline in its semiconductor and device segment.

The Tokyo-based Fuji Chimera Research Institute estimates that the market for equipment that includes optical devices will grow to 10.73 trillion yen in 2030 -- about 3.5 times its 2024 size -- as growing numbers of data centers continue to be built.

Mitsubishi Electric's competition is also preparing to increase production capacity for optical devices in light of these forecasts.

Sumitomo Electric Industries will double capacity for optical devices in fiscal 2026 compared with the fiscal 2024 level, aiming to tap the rapidly growing demand.

Lumentum Japan, an affiliate of U.S.-based Lumentum Holdings with roots in Hitachi, intends to raise its production volume of optical devices to six times the 2024 level in 2027.

The company plans to boost production efficiency by using larger-diameter semiconductor wafers for optical devices, mainly at its plant in Sagamihara, west of Tokyo.

Lumentum Japan will also add more personnel. It expects to hire 80 or so new people, especially engineers, by the end of June 2026, amounting to a quintupling from the previous year.

The Sagamihara facility has a 144-meter-long clean room filled with production equipment. The lines run 24 hours a day in two shifts. The production system operates without stopping, even for holidays.

According to Lumentum Japan, optical devices are one of the strongest fields for Japanese manufacturers, with the top three producers in the country controlling roughly 70% of the global market. Japanese companies are also taking the lead in terms of research into higher-performance devices.

Optical device data transmission speeds are measured in terms of how many times per second they can switch on and off to represent zeros and ones. Many used in data centers now have speeds between 100 gigabits per second and 200 Gbps. As chip performance improves and data volumes grow, the commercialization of optical devices capable of 400 Gbps to 800 Gbps second is not far off.

The three Japanese companies will likely continue to lead in meeting AI data center demand and increasing performance.

Source: Asia_Nikkei