An OFC Top Ten
That said, it seems some guidelines on what products to watch out for at the show are in order. On one hand, some products are mature, with innovations that change the rules and favor new entrants being unlikely. On the other hand, the science that goes into making products is complex, with people with different areas of expertise coming into the industry at all times, discovering new ways to make what we already have and inventing functions we don't yet have. There always is more than one point of view on what is possible in function, performance, size, cost, and reliability.
Here are ten product areas in which challenges to the status quo provide reasons to pay attention, in reverse order of significance.
10) Dispersion compensators
This is an intriguing area because it illustrates the choices that face equipment manufacturers deciding between solving a problem optically versus electrically. There have been a variety of companies that have developed different optical solutions for chromatic and polarization mode dispersion compensation. During the Bubble, it looked as if that there would be strong demand for these products, but now, with carriers not desperate to install the highest bit-rate pipes, there has been time for companies developing electronic versions of the same functions to catch up. To the degree that a system designer can use an electronic version that lends itself more to integration and ease of assembly, he will. Will there be reasonably sized niches for each, or is it winner take all?
9) Tunable filters
There are many applications for tunable filters, including use in Tunable Lasers, wavelength division multiplexers, reconfigurable optical add/drop multiplexers, and optical channel monitors. Each application has distinctive requirements, with a subset of these being transmission shape, tuning speed, wavelength range, insertion loss, size, cost, and reliability. Identifying the winners in tunable filters first requires knowing which applications matter most, so that one can identify the critical parameters and then determine the technologies that have the most merit. One could spend all of OFC sorting this out if not careful.
8) Tunable lasers
This has been the hot area for laser makers for several years, with promises each year that they would finally displaced fixed wavelength DWDM lasers. No doubt, they have been making progress, with design-in announcements growing and customer-backed multiple sourcing agreements coming out. At the same time, however, the challenge to tunable lasers has always been to meet the cost of fixed wavelength lasers, since tuning increases costs and, without a huge need for changing wavelengths live, also has performance consequences. Will this finally be the breakout year? (For more on tunable lasers see the Light Reading report: Tunable Lasers Revisited.)
7) Platforms that promise high degrees of integration
These platforms have been promoted for years, especially during the Bubble. We heard of a variety of platforms that make possible the integration of many functions by making use of materials such as silicon and indium phosphide, as well as manufacturing techniques such as MEMS and micro-robotics. These platforms are often undone by their requirement for large investments or by discrete implementations having superior price-performance ratios. Nonetheless, the allure of integration is still out there, and some progress has been made, so companies will continue to pursue this goal. Investigating the latest integration platform is always exciting because one has to be a detective to discern what the platform can do and what the vendor is keeping back.
6) Uncooled pump lasers
At prices of cooled pumps, amplifiers have been too expensive for widespread use in metro applications, so their volumes have been low. Pump suppliers have striven to lower costs by eliminating the cooler, which requires relaxing alignment tolerances and raising pump chip powers. Unfortunately, higher powers stress device reliability. In addition, metro pumps have to be more dynamic than long-haul pumps, so their specifications can be more demanding. Pump vendors have announced progress in uncooled pumps, so learning their approaches and their latest results will be of interest.
5) Lower per-port costs in DWDM filters
In 2000, thin-film filters were selling for close to $1,000 per 100GHz port. Arrayed waveguide grating filters were supposed to unseat thin films as channel counts grew, and scaling advantages of planar lightwave circuits were supposed to reign supreme. Channel counts, however, shrank, and thin-film production was transferred to Asia. Prices have fallen close to 90 percent, to just above $100. Equipment manufacturers will buy from whoever can meet their requirements, so the question becomes which vendors continue to chase this business and drive prices down below $100 a port. At the same time, other approaches have been knocking at the door for a few years, but the willingness of incumbents to keep their accounts, whether or not they make money, has kept these pretenders at bay. Will this be the year they crack the fortress walls?
4) Spurious claims about CWDM components
Metro DWDM is supposed to be hamstrung because the price per wavelength is just too high. Studies have come out showing that CWDM, which permits the use of uncooled lasers and wider band filters, is supposed to lower the cost per wavelength as much as 40 percent. This savings is supposed to be at the equipment level. The logic is a bit hard to follow, because network equipment has to provide quality of service, regardless of the cost of the optics. These service issues, according to some manufacturers, mean that CWDM can be no more than 20 percent lower than their DWDM counterparts. At the same time, new CWDM entrants are said to offer prices 50 percent below those of incumbent DWDM prices. What is the real price difference, and what are the reasons for this? (For more on CWDM see the Light Reading report: CWDM: Low-Cost Capacity.)
3) 1310nm VCSELs
The appeal of long-wavelength Vertical Cavity Surface Emitting Lasers (VCSELs) has attracted many companies to try to make this product, since one can then make a high-speed transmitter that can be used for access and not just intra-office applications. Scientists have been trying to defeat the mirror-gain region tradeoff for years over full operating conditions. Some say the problem is insoluble, but others say there is evidence of success. I am looking forward to seeing what the status is now.
2) Cost cutting in transceivers
The volumes here are the highest, with competition having been perennially the fiercest. Multibillion-dollar corporations and startups have forayed into this area, usually learning the hard way that there is no way to circumvent the commodity nature of this business. At every new distance/bandwidth combination, prices have to fall 30 to 50 percent per year for several years, with new product versions required annually and volume shipment needed within a couple of weeks, if not immediately. Miss a qualification window and you lose a year; miss two windows and you may as well shut down. I am looking forward to seeing who is now bold enough to make a new challenge.
1) The XFP transceiver MSA
This point picks up on the general transceiver point made just above. XFP deserves its own mention because it is supposed to be the unification of Sonet (Synchronous Optical NETwork) and SDH (Synchronous Digital Hierarchy) and Ethernet transceivers, at 10 Gbit/s, in pluggable small form factor. Equipment manufacturers have long complained that Sonet/SDH components should sell at Ethernet prices, since so much of the material is the same. Subtle differences do exist, such as power budgets and extinction ratios, creating justification for some. Still, the standards committee is moving towards creating as much commonality as possible. As well, XFP vendors are rumored to be planning to demonstrate innovative low-cost versions for increasingly greater distances. Which of these will be successful and how soon can they be available in commercial volumes will be exciting to follow.
And one last "Watch-Out-For" – in more of a commercial sense. Watch out for how the industry realignment progresses. Which companies will grow in clout, at whose expense?
JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) still is the market leader, but the downturn came before it could integrate its different companies. The loss in talent during the last two years leaves the leader vulnerable. Intel Corp. (Nasdaq: INTC) has the key ingredients necessary for continuing its challenge: money, customer relations, and operational talent.
Chinese manufacturers have the edge in labor cost, numbers of optical engineers, and a domestic market with great growth potential. Bookham Technology plc (Nasdaq: BKHM; London: BHM) and TriQuint Semiconductor Inc. (Nasdaq: TQNT) are now potential challengers as well, along with several other large suppliers that have traditionally been in the upper ranks of the industry.
With sales still slow, jockeying can go on for a few more years, giving time for different companies to move to the fore and for segments such as broadband access to be the key to dominance.
— Jay Liebowitz is founder and president of Liebowitz Strategies, which helps companies with strategy, business development, and positioning for increasing revenue and achieving corporate financing milestones. Liebowitz, who can be reached at [email protected], has many years of experience providing advisory services, consulting, and market research services in optical and electronic components and subsystems, and has also managed businesses at Lasertron (now Corning Inc.) and Epitaxx (now JDS Uniphase Corp.).
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