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Comms chips

Teknovus Claims Korea, Too

PON chip vendor Teknovus Inc. says it's far from being shut out of Korea after fierce rival PMC-Sierra Inc. (Nasdaq: PMCS) scored a big win in the influential Southeast Asian market.

PMC announced this week that its telecom equipment customer, DASAN Zhone Solutions Inc. , will supply Ethernet PON gear to KT Corp. for a buildout of at least 800,000 homes around Seoul. (See Korea Goes Big on FTTH.)

But Teknovus sees this as just the start of a see-saw battle during which PMC -- which got into PON last year by acquiring Passave -- and Teknovus both get to announce a series of KT-related wins. (See PMC Preps PON Plans.)

"We expect there will continue to be a large presence from both Passave [PMC] and Teknovus over the next few years," says Rex Naden, Teknovus chairman.

And it's worth noting that Teknovus is well known to the Korean incumbent. In 2005, Teknovus announced what sounded like a win with equipment firm Corecess Inc. for KT business, though that was just a successful field trial, not a volume deployment, according to PMC. (See Teknovus, Corecess Win KT Deal.)

So why is Naden so optimistic about sharing the spoils? The answer lies in KT's vendor selection processes. The Teknovus chairman notes that KT, which has less compunction than most about switching suppliers as new technology becomes available, puts its suppliers through occasional benchmark tests to see how they stack up.

During KT's latest benchmark test in December 2006, equipment from Dongwon Systems Corp. , which Naden says uses Teknovus EPON chips, got qualified.

Dongwon, which has yet to be officially announced as a customer, gives Teknovus three PON equipment vendors in Korea, along with Corecess and Samsung Corp. .

But it's the least well known, especially outside Southeast Asia/Pacific. Multiple sources who track the PON markets had no knowledge of the company, but Jag Bolaria, an analyst with The Linley Group , was the exception. "I've heard of them. They're not going to be as big as Dasan" in terms of chip-company winnings, says Bolaria.

PMC confirms that Dongwon got qualified, but isn't overly concerned, as it's Dasan that secured the first major buildout around Seoul.

"Being qualified is still just one step toward winning a contract, and then it's a matter of which contract you win. Obviously, they didn't win the big one," says Dror Salee, PMC director of marketing.

Teknovus's hope is that the KT benchmarks escalate into higher speeds of operation, a move that would play into Teknovus's "turbo" mode of 2.5 Gbit/s, double the EPON standard of 1.25 Gbit/s. (See Teknovus Goes Turbo.)

Naden doesn't have a view on when that might happen, but Teknovus is banking that KT will want to use EPON for higher speeds.

The alternative would be a switch to GPON, something Naden doesn't think KT would do. "I can tell you from my personal knowledge of executives at KT, they will do whatever it takes not to do that," he says.

Any KT win would be good for bragging rights, but it's worth noting that Korea's population (49 million) is pretty small next to Japan's (127 million). Analysts agree that PMC continues to enjoy the lion's share of PON chip business at Japanese incumbent NTT Communications Corp. (NYSE: NTT), a company that's more conservative when it comes to changing suppliers.

Still, Teknovus, already deployed in Taiwan by Chunghwa Telecom Co. Ltd. (NYSE: CHT), fancies its chances of snapping up more of Asia. (See Chunghwa Plans FTTH Blowout.)

"Teknovus has claimed to have design wins in Korea, and Taiwan as well, and it looks like both are aggressively building out their fiber networks," says Tim Kellis, an analyst with Stanford Financial Group .

— Craig Matsumoto, Senior Editor, Light Reading

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