Rakon prospers as 5G and cloud demand surges

Rakon prospers as 5G and cloud demand surges

A major fire in a Japanese rival's plant is disrupting global supplies, to Rakon's benefit

Credit: Supplied

Auckland-based component maker is hitting a revenue sweet spot, driven by increased global 5G mobile network rollouts and a major fire that took out a key competitor.

Rakon's board today told shareholders the NZX-listed company expected to achieve underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of between $20 million and $22 million for 2021 compared with $14.8 million in 2020 and also ahead of earlier guidance of $16 million to $18 million.

The announcement saw Rakon's share price surge to highs not seen since 2011, up nearly 7 per cent in the morning to trade at over 80 cents.

Demand from the telecommunications sector has been higher than expected, with 5G network rollouts and cloud computing driving demand.

The company designs and manufactures advanced frequency control and timing technologies, primarily for the telecommunications, GPS and space and defence sectors.

The products create extremely accurate electric signals which are used to generate radio waves and synchronise time in demanding applications. 

Rakon said demand for the technology to synchronise datacentres and enhance optical communications reflected growth in global data volumes and cloud-based applications.

A fire in October last year  at the world’s largest semiconductor manufacturer of TCXO integrated circuits, Asahei Kasei Microdevices (AKM) in Japan, created a world-wide shortage of TCXOs required for a wide variety of applications. 

Rakon said it was meeting some of this shortfall due to good inventory levels, agile manufacturing operations and its proprietary TCXO integrated circuit.

"Factors under-pinning Rakon’s good performance are expected to continue, particularly 5G deployment," the directors said. 

"This guidance is dependent on the management of usual supply chain and operational risks as well as risks arising from the ongoing COVID-19 pandemic and geopolitical issues for Rakon’s operations and those of its customers and suppliers."

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