Using Shenzhen as a base to produce in China through Hong Kong

1. Jim Haynes, Chief Operations Officer Alan Hughes, Management Planning Bookham Technology Plc. Using Shenzhen as a base to produce in China through Hong Kong

2. Bookham: Key Facts • Global supplier of optical components for telecoms & industrial applications • Annual revenues >$200M p.a. • C. 2,000 employees world-wide • Founded in 1988 – the Silicon Optical Chip company • 1998: Intel and Cisco invest; first commercial products (transceivers) • April 2000: IPO, started trading on Nasdaq and London Stock Exchange • 2002: acquisition & consolidation strategy to achieve volume manufacturing scale and reduced cost • acquisition of Marconi and Nortel optical components divisions • 2002 onwards: driving consolidation & cost reduction Number 2 position worldwide in telecom optical components

3. Bookham Worldwide: 16 hours time-zone span 8 am 12 midnight 4 pm • Zurich (Switzerland) • Laser pump chips R&D • Laser pump chip wafer fab • Ottawa (Canada) • R&D: Discrete Laser & Receiver; Sub-Systems • Santa Rosa (Ca) • Thin-Film Filter R&D & Manufacture • UK • Paignton • Discrete Lasers & Receivers, Modules, and Amplifiers R&D • Assembly & Test • Caswell • Discrete Laser & Receiver R&D • InP wafer fab • Shenzhen (China) • Assembly and test • Customer Applications Lab • Hong Kong • Sales Office • San Jose (Ca) • Headquarters • SFP, XFP Opto-electronic Modules: R&D & Manufacture • New Focus Opto Test & Measurement Components: R&D & Manufacture

4. Telecom Market boom & bust- drive for lower operating costs • Telecom market peak c.$23bn in 2000 • Major downturn 2001-2002 • Optical component manufacturers world-wide driven into big operating losses • Bookham applying an acquisition and consolidation strategy to achieve volume manufacturing scale, and reduce cost. • Strategic Operations model redefined: • wafer fabs consolidated into Europe • High labour content Assembly & Test move to low-cost Far-East location

5. Shenzhen / Hong Kong decision Search for suitable locations narrowed to Malaysia or China Final decision to move to China Key factors in our decision were: • Access to skilled and well-educated workforce • Good infrastructure to support high-tech manufacturing operation • Good logistics to avoid shipping delays in- and out-bound • Acceptable environment for ex-pat secondees to live and work • Ability to move fast to get the new factory up and running • Good access for all our Far East customers, and especially China • Existing sales office in Hong Kong • 8 years experience of working in the region

6. Shenzhen / Hong Kong Operating Model • Bookham Shenzhen manufacturing: State-of-the-art facility in Shenzhen Free Trade Zone • Balance between availability of skills and lowest labour cost • Hong-Kong sales office & logistics • Bookham ship all Shenzhen products through Hong Kong Warehouse • Global Logistics Centre • Efficient travel infrastructure • Major Customers have warehouse and finance infrastructure in Hong Kong • Chinese customers handle local import from Shenzhen Free Trade Zone via Hong Kong

7. Shenzhen Facility Acquired by Bookham Q1 2004 • 247k sq ft manufacturing & office space • 70k sq ft clean-room • 40k sq ft labs etc • US$20M invested in facility upgrades by previous owners Being established as Bookham’s low-cost volume manufacturing plant

8. Facility Start-up • Preparation • Engaged HK based consultants to prepare for business licence • Hired key management positions in preparation for start-up • Product transfer management process defined • Transfer Methodology • Transfer “as-is”: replicate in China what we have in UK • Transfer of simple products first (“Phase 1”) • Establish basic skills, pipe-clean logistics • Progression to more complex products later (“Phase 2”) • ‘Push-pull’ team approach with accountability shared between UK & China • Fast transfer of capacity from UK to China – avoid expensive duplication • Involve customers: share the plan, encourage customer visits & audits of new facility

9. Success of Shenzhen • Staff of >700 recruited & trained over 1.5yrs • Revenue growth to $30M /qtr (Q4’05) • Beating plan: better yields & productivity = even lower costs than target Phase 1 Phase 2 • Products fully Qualified to relevant international standards • BSI/ISO Approval: ISO/TL9000 awarded January 2005 • Customer delivery and product quality standards maintained throughout aggressive growth

10. Keys to our success • Intensive preparation and planning, working closely with the Hong Kong and Shenzhen authorities, and with local people experienced in setting up this kind operation • Recruitment of a strong local management team up front • Driving the plan through, despite inevitable skepticism amongst western management team • “Transfer as-is” strategy: get it working then improve later if necessary • Involve the customers up-front, sell the advantages, and demonstrate that the supply risk to them is understood and being tightly controlled • Strong local infrastructure and logistics, with proven gateway to our world-wide customer-base through Hong Kong.