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10-Gbit/s Ethernet Niche Busters

Every generation of Ethernet technology has ended up surprising people by how widely it is deployed. In each case, falling prices have triggered a surge in buying, and what started out as a niche technology becomes another huge market success. This happened with 100-Mbit/s Ethernet, it happened with Gigabit Ethernet, and now it's starting to happen with 10-Gbit/s Ethernet.

This is the conclusion I've reached after spending the past few months analyzing the 10-Gbit/s Ethernet component market for Heavy Reading's latest report, 10-Gbit/s Ethernet Components: A Heavy Reading Competitive Analysis. In compiling the report, I evaluated nearly 200 different components from 44 suppliers – essentially the entire known universe of 10-Gbit/s Ethernet transponder modules and physical layer (PHY) devices – comparing and contrasting components from dozens of different price and performance angles.

That work yielded some valuable lessons about the 10-Gbit/s Ethernet market and how it is likely to develop.

Lesson Number One: The price and power consumption of 10-Gbit/s Ethernet components have fallen considerably in the past year. Component price and power have a big impact on the overall cost of 10-Gbit/s Ethernet systems. The power aspect is important because higher-power components are more expensive and generate more heat, which has to be eliminated through the use of expensive cooling systems. Quake Technologies Inc., a market leader, recently introduced its third generation of PHY products, reducing typical power to 0.9W from 3W in its first-gen devices. As components and system prices continue to drop, we will see volumes begin to ramp up quickly.

Lesson Number Two: There are significant differences between components right now. For example, a 10-kilometer, single-mode fiber system using a 6W 300-pin transponder and existing XSBI system ASIC could be upgraded using either Xenpak or XFP modules. Using a 3.3W 10GBase-LR Xenpak module from Network Elements Inc. and a Mysticom Ltd. XAUI transceiver results in a total power consumption of 4.4W per channel – a 25 percent power reduction. Alternatively, using a 1.1W MergeOptics GmbH XFP module with an XAUI 10-Gbit/s serial PHY from Marvell Technology Group Ltd. (Nasdaq: MRVL) results in a total power consumption of 2.1W – a 65 percent power reduction.

Lesson Number Three: Now is the moment when system vendors can grab the initiative and take advantage of new component developments to get ahead of the competition. Rolling out equipment incorporating the best components now will bring big dividends in the future. As noted above, there are real differences among the components available today, so it's worth spending some time scoping out the pros and cons of all potential products. This Heavy Reading report provides a short cut – I've done the detailed competitive analysis for you!

This is all really a case of history repeating. We're at the bottom of the hockey stick in terms of market growth for 10-Gbit/s Ethernet systems. These systems have already been available for several years. Early adopters, using equipment based on first-generation technology, paid prices as high as $50,000 per port. The introduction of second- and third-generation equipment toward the end of 2003 is now opening the market to the next wave of users: Systems from Cisco Systems Inc. (Nasdaq: CSCO) and Foundry Networks Inc. (Nasdaq: FDRY), for example, are now delivering 10-Gbit/s Ethernet at per-port prices of $5,000 and below.

The introduction of new semiconductor and optical components has played a major part in reducing system and per-port costs. 10-Gbit/s Ethernet systems share many components, such as switching chipsets and packet routing silicon, with other Ethernet switch and router systems. The biggest change for 10-Gbit/s comes in the PHY and optical transponder modules. These are the components that are critical in any 10-Gbit/s Ethernet system.

Of direct interest to system manufacturers, the impact of these PHY and optical transponder components will be felt across the industry from component vendors to end users and investors. The choice of PHY and optical module affects not only the basic system cost, but also the flexibility and future scaleability of the network.

Looking to the future, further reductions in cost for both PHY devices and optical components will continue driving the price of 10-Gbit/s Ethernet systems down toward $1,000 per port. For connections to servers in the data center and between stackable switches, 10-Gbit/s Ethernet over copper is available. Furthermore, the development of 10-Gbit/s Ethernet over twisted-pair cable will bring forward the prospect of 10-Gbit/s connectivity for the desktop, greatly increasing the market for 10-Gbit/s Ethernet components.

The bottom line is that 10-Gbit/s Ethernet technology has come of age. Standard components are readily available from a wide range of vendors. Building a 10-Gbit/s Ethernet system is now no more difficult than building any other high-performance system. Prices are dropping and shipments are rising sharply. For system manufacturers and network managers, the issue is no longer whether to invest in 10-Gbit/s Ethernet, but which 10-Gbit/s Ethernet components and systems to buy and deploy.

— Simon Stanley, Analyst at Large, Heavy Reading

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