RUSNANO Invests in NeoPhotonics to Establish Photonic Integrated Circuit and Optical Products Design and Production Facilities in Russia

01 May 2012

RUSNANO, a $10 billion Russian technology fund, and NeoPhotonics Corporation (NYSE: NPTN) (the “Company”), a leading designer and manufacturer of photonic integrated circuit, or PIC, based modules and subsystems for bandwidth-intensive, high speed communications networks, today announced they entered an investment agreement to create design and production facilities in Russia to produce optical products based on photonic integrated circuits.

According to the agreement, RUSNANO purchased newly-issued common shares of NeoPhotonics for US$39.8 million in cash, which constitutes approximately 17% of the Company’s outstanding common stock after completion of the transaction.

NeoPhotonics has a broad portfolio of products that enable data transmission rates at 10 Gigabit per second (Gbps), 40Gbps and 100Gbps, the ability to dynamically allocate bandwidth to adjust for volatile traffic patterns, as well as the ability to provide more devices to people with high bandwidth wireline and wireless network connections. These network properties are more commonly referred to as speed, agility and access. The Company’s suite of PICs product integrates multiple discrete optical components into optical integrated circuits, which are packaged into modules and subsystems and allow network equipment manufacturers to produce faster, smaller and more efficient communications systems compared to systems based on discrete components.

The design and production facility being established in Russia is intended to produce a range of PIC products for high speed, agile and fiber-to-the-home networks, including metro area networks, wide area networks and long haul communications. The expansion in Russia is targeted for completion by July 31, 2014.

“One of the unique advantages of NeoPhotonics is its vertically-integrated design and manufacturing processes for photonic integrated circuit-based products,” said Sergey Polikarpov, RUSNANO Managing Director. “The Company’s planned research and production facilities in Russia are intended to be able to perform a wide range of steps from PIC development to processing and fabrication. We believe that with our support in Russia, we can further enhance the Company’s development cycles and shorten the time for broader adoption for NeoPhotonics products in Russia and the global market.”

“We are pleased to receive this strategic investment from RUSNANO,” said Tim Jenks, Chairman, President and CEO of NeoPhotonics. “We welcomed this investment as it aligns with our strategy to accelerate growth globally, with particular emphasis in fast growing and emerging markets, including in Russia and the CIS countries.”

“Not only are these markets deploying high speed, agile and fiber-to-the-home networks but also we are seeing more of our customers target service providers and invest locally in Russia and more broadly in Eastern Europe,” continued Mr. Jenks. “We started to see and investigate this growth opportunity several years ago, and we added sales capability in the region and have since been engaged with and supplying several customers in Russia. With the planned support from RUSNANO, we believe that NeoPhotonics is well-positioned to capitalize on new and greater opportunities in the region.”

NeoPhotonics Technology

NeoPhotonics has developed innovative PIC technology over fifteen years by utilizing a set of proprietary design elements that provide optical functionality on a silicon chip. These proprietary design tools and the NeoPhotonics design-for-manufacturing techniques closely align the Company’s design process with precision nanoscale, vertically integrated manufacturing and testing capabilities. NeoPhotonics technology and manufacturing expertise enable the Company to deliver repeatable, well-characterized products at high yields. PIC devices produced by NeoPhotonics can incorporate many more functional elements than can discrete components, thereby eliminating packaging and interconnection costs, improving reliability and uniformity. In addition, the costs of PIC-based components are driven by silicon economics, such that the incremental costs of producing an incremental chip are much less than that of a discrete component with individual packaging and interconnection.

Additional information

Reference

NeoPhotonics is a leading designer and manufacturer of photonic integrated circuit, or PIC, based modules and subsystems for bandwidth-intensive, high-speed communications networks. The Company's products enable cost-effective, high-speed data transmission and efficient allocation of bandwidth over communications networks. NeoPhotonics maintains headquarters in San Jose, California and ISO 9001:2000 certified engineering and manufacturing facilities in Silicon Valley and Shenzhen, China.

For more information, please visit www.neophotonics.com/russian/about.aspx

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RUSNANO was founded in March 2011 as an open joint stock company through reorganization of state corporation Russian Corporation of Nanotechnologies. RUSNANO’s mission is to develop the Russian nanotechnology industry through co-investment in nanotechnology projects with substantial economic potential or social benefit. The Government of the Russian Federation owns 100 percent of the shares in RUSNANO. Anatoly Chubais is CEO and chairman of the Executive Board of RUSNANO.

Work to establish nanotechnology infrastructure and training for nanotechnology specialists, formerly conducted by the Russian Corporation of Nanotechnologies, has been entrusted to the Fund for Infrastructure and Educational Programs, a non-commercial fund also established through reorganization of the Russian Corporation of Nanotechnologies.

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Notice Regarding Forward Looking Statements for U.S. Securities Law Purposes

The statements from Mr. Polikarpov and Mr. Jenks in this press release regarding the anticipated benefits of the transaction and the opportunities for NeoPhotonics and its products in Russia are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. These forward-looking statements involve risks and uncertainties, as well as assumptions and current expectations. NeoPhotonics’ actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks, uncertainties and assumptions. The risks and uncertainties that could cause NeoPhotonics’ results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to: the acceptance rate and timing by customers in Russia and other countries of new product introductions; general conditions in the telecommunications equipment industry in Russia or worldwide; general conditions in the Russian political and economic environment; unanticipated delays in NeoPhotonics’ manufacturing and expansion plans; and other risks and uncertainties described more fully in NeoPhotonics’ documents filed with or furnished to the Securities and Exchange Commission. More information about risks that may impact NeoPhotonics’ business is set forth in the “Risk Factors” section of the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2012. All forward-looking statements in this press release are based on information available to RUSNANO and NeoPhotonics as of the date hereof and qualified in their entirety by this cautionary statement, and RUSNANO and NeoPhotonics assume no obligation to revise or update these forward-looking statements.