Nokia is buying New York's Elenion Technologies, a developer of silicon photonics technology, which increases network bandwidth and reduces power consumption by encoding optical signals within silicon. Most chips manipulate electrical signals rather than optical ones, but silicon photonics chipsets deal with both types of signals and move light through optical fibers. Elenion has developed proprietary technology that enables it to modify the processes used within existing chip fabs so that these fabs can be used to build silicon photonics chips.

"As a world-class provider of silicon photonics solutions, advanced packaging and custom design services, Elenion provides a strong strategic fit for Nokia," said San Bucci, head of optical networking at Nokia, in a press release. "Its solutions can be readily integrated into Nokia's product offerings and address multiple high growth segments including 5G, cloud and data center networking."

Companies that own and operate data centers often can't build facilities fast enough to keep up with the explosive growth of traffic driven by demand for cloud computing and big data. They need to move more data within their existing footprint, and tools like silicon photonic technology help them do that by reducing the size of transceivers and integrating a large number of optical components onto a single silicon photonic chip.

Nokia became a giant in the optical networking world when it purchased Alcatel-Lucent in 2016. Since then, the company has seen major changes in the IP/optical business as its telecom and wireless customers start to explore new use cases for their fiber assets. Bucci said the Elenion acquisition will help Nokia address new markets, and Elenion's CEO said the deal will accelerate adoption of his company's technology.

"Elenion benefits by having its technology incorporated into an industry-leading portfolio," said Elenion Technologies CEO Larry Schwerin in a release. "Nokia is an industry leader in networking systems, including advanced coherent optical interfaces and hyperscale data centers."

Schwerin has been CEO of Elenion since 2014, the year the startup was founded. He was previously CEO of Capella Photonics and then worked in private equity.

The purchase price for Elenion was not disclosed and the transaction is expected to close before the end of March.

— Martha DeGrasse, special to Light Reading. Follow her @mardegrasse