Simon Cao, founder and former CTO of Avanex Corp. (Nasdaq: AVNX) and also CEO of his current venture Arasor Corp., has been busy in China pulling together a consortium of components vendors to attract manufacturing business from the West. The new consortium, called Greater China Photonic Solutions (GCPS) will introduce itself to the world at next week's OFC show.

"Exhibiting as a group will give a powerful message," Cao told Light Reading. "We will be perceived as a much bigger player."

Over the past couple years, the majority of components vendors, including the likes of JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU), have been attracted to China as a manufacturing base, because of low labor costs. But Cao wants to take this idea one step further.

"They [components vendors] are only attacking the labor cost in the overhead," says Cao. "We can really provide an extra advantage to the customer, by addressing the materials supply."

The cost of materials makes up the largest part of the overall components cost -- up to 65 percent, he says. Many folk are buying their materials from suppliers all over Asia, and may not be getting the best prices. The GCPS consortium has already negotiated prices with established suppliers, he claims, which means it can help its customers lower costs and make the entire manufacturing process a lot smoother.

So far the consortium has six members:

Two more companies are likely to join the consortium in the near future, and three others are waiting in the wings, according to Cao.

The Chinese government clearly takes Cao and his company seriously. The investment arm of the Guangzhou government, Nansha High Technology Investment Ltd., has just agreed to finance a 200,000 sq. ft. factory for Arasor in the municipality's new Nansha IT Park. The facility, which will become operational in the fourth quarter of this year, will be the largest production facility built in Guangzhou since 2000.

Separately, Arasor plans to announce on Monday that it has acquired Lightbit Corp., a startup developing all-optical wavelength conversion technology (see Interest Grows in Wavelength Conversion).

— Pauline Rigby, Senior Editor, Light Reading