The semiconductor industry is undergoing a transformative round of mergers and acquisitions, with major names such as Intel, Avago and NXP all taking part in a consolidation process driven by the search for economies of scale and the pursuit of hot opportunities, such as IoT and connected cars, broadband and data center efficiencies. (See More Chips Fall: NXP Buys Freescale, Intel to Acquire Lantiq and Avago Eyes Enterprise Storage With Emulex Buy.)
The semiconductor companies focused on components for optical networking equipment are not to be left out. NeoPhotonics Corp. (NYSE: NPTN), Finisar Corp. (Nasdaq: FNSR) and JDSU (Nasdaq: JDSU; Toronto: JDU) have done their share of acquisitions, and the latter two may even end up with one another before all is said and done. (See JDSU Spin-Offs Look M&A-Ready and NeoPhotonics Closes Emcore Components Buy.)
However, one optical semiconductor company that's less in the spotlight -- M/A-COM Technology Solutions Inc. (MACOM) -- also has made several acquisitions of its own, including five in the past 15 months, and has built an impressively broad arsenal of chip and laser technologies. Some of those will be on display later this month at the Optical Fiber Conference (OFC) in Los Angeles.
OFC is an event that features many optical components manufacturers, many with similar, competing propositions, but MACOM claims to have its own niche as a components vendor focused purely on semiconductors and laser technology, not transceiver modules or other components.
"In the optical value chain, you have the service providers and the system OEMs, and below that the transceiver module manufacturers, [a sector that] is quite fragmented. But when you go the next step down in the component and semiconductor space, many of the merchant providers of semiconductor components have disappeared, so we have a unique market," claims Vivek Rajgarhia, director of strategy at MACOM.
Like some other semiconductor companies, MACOM also serves the increasingly hot automotive sector, but its biggest target is networking: More than 50% of its revenue is expected to come from networking customers this year, generated from a customer list that includes Cisco Systems Inc. (Nasdaq: CSCO), Infinera Corp. (Nasdaq: INFN), Alcatel-Lucent (NYSE: ALU), Oclaro Inc. (Nasdaq: OCLR) and many others.
That solid customer base and enhanced portfolio are helping MACOM's financials, with the Lowell, Mass.-based company expecting to report revenue in the range of $120 to $124 million, up more than 10% from a year ago. (See Bit Parts: 100G Driving Revenue Growth.)
While semiconductors for optical networking were once the domain of the large systems vendors themselves, those businesses in most cases were spun off or sold. Companies such as Huawei and Cisco have made a point recently of pursuing their own module projects, but standalone optical semiconductor firms such as MACOM have become more of an endangered species. (See Can Silicon Photonics Add Spark to Hardware?)
MACOM saw that narrowing chip market as a broadening opportunity. "That is where we focused our investments and capabilities to build a portfolio of technologies so we can pick and choose the right technology to make the right component, whether it's optoelectronics or photonics," Rajgarhia says.
Through acquisition and in-house development, it has created an almost unrivaled pool of chip technologies -- including gallium arsenide (GaaS), gallium nitrate (GaN), silicon photonics (SiPh) and silicon germanium (SiGe).
Heavy Reading contributing analyst Simon Stanley notes: "I don't think there is any company with the same range of technologies and manufacturing capability. The biggest competition is from vertically integrated optical module manufacturers such as Finisar and JDSU that have much of this capability in-house."
Each of MACOM's acquisitions, in a chronology that goes back even longer than its recent buying binge, deepened this pool in different ways. The acquisition strategy took off in 2011 with a major assist from Silicon Valley semiconductor entrepreneur John Ocampo's GaaS Labs, which acquired MACOM from UK firm Cobham in 2009. That move steered the company towards its initial acquisitions of GaaS innovator Mimix (in 2010) and then Optomai (in 2011), the latter of which brought Rajgarhia into the company along with fabless 40G and 100G semiconductor technology for long-haul systems.
The acquisition binge really took off after the company's IPO in March 2012. Once established as a listed company, MACOM acquired Mindspeed's SiGe semiconductor business in December 2013, and throughout 2014 added GaN developer Nitronex, SiPh design services company Photonic Controls and etched facet laser developer BinOptics. (On the non-optical front, it also bought RF and microwave firm IKE Micro in 2014.) (See MACOM to Buy Mindspeed for $272M, Bit Parts: 100G Driving Revenue Growth and Bit Parts: Cisco Funding Up for Grabs.)
The SiGe technology from Mindspeed will be key to data center and metro optical forays, shorter-range applications than those targeted with the solutions derived from the Optomai deal. The Nitronex deal was disruptive, Rajgarhia says, because it contributes GaN on silicon technology, less expensive than putting GaN on silicon carbide. The Photonic Controls deal brought SiPh in house just as the market started to take off.
"The boundary between photonics and the electronics in optical is getting fuzzy and really converging," Rajgarhia says. "In the last year or so, silicon photonics technology has been moving more into the commercial foundries."
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