The federal government appears to be coming to the rescue of the communications industry again.

Vitesse Semiconductor Corp. (Nasdaq: VTSS) has signed a deal with the Defense Advanced Research Projects Agency (DARPA) that helps pay for next-generation indium phosphide (InP) development, helping fuel the next-gen ambitions that the company had put on hold.

The $6 million contract has Vitesse working with defense contractor BAE Systems to design new InP devices, while researchers at the University of Illinois at Urbana-Champaign pitch in to research next-generation transistors. The planned improvements are the usual: "Faster, smaller, more highly integrated -- it's similar to the scaling you see in the silicon industry," says Minh Le, Vitesse's InP foundry manager.

The deal points to the rising importance of deals with the federal government as a safe haven for beaten-down communications companies, as funding for government communications projects has been rising (see DISA Deal D-Day Approaches and And Now: The Optical Arms Race). The contract covers 18 months but could be extended. Vitesse could get as much as $15 million by the time the project ends.

BAE wants to develop chips for direct digital frequency synthesis, a high-speed, low-noise signaling technique. The DDFS chips will be used in applications such as radar, but the technique can be applied to any kind of wired or wireless communications, Le says.

More important, the BAE contract secures Vitesse's spot in the high-end InP game, paying for advanced research that the company might not be otherwise able to justify.

InP has been considered more suitable than silicon for extremely high-speed communications. The drawback is that it's more expensive than silicon and more difficult to handle. Those factors make InP, like silicon germanium and gallium arsenide, a material reserved for high-end applications.

"It's something we probably would have pursued on our own eventually, but the applications have been slow to develop," says Alan Huelsman, director of Vitesse's InP program. The technology developed will be available to Vitesse both for internal use and sale to foundry customers.During the bubble, Vitesse had declared it would use InP for its OC768 (40 Gbit/s) products. Those plans have been stalled, of course, but the InP fab lives on, cranking out 10-Gbit/s parts and occasional one-off 40-Gbit/s devices.

Several InP foundries had likewise targeted high-end parts, and at least one has been compelled to alter its business plan -- Inphi Corp. is expanding its portfolio to include regular silicon devices (see Inphi Moves Beyond InP).

— Craig Matsumoto, Senior Editor, Light Reading