A dark horse in the optical components industry, Megasense Inc., yesterday announced that it had completed the construction of its MEMS (micro-electro-mechanical system) wafer fabrication facility (see MegaSense Makes Some).

Megasense was founded in late 1999 and has kept a low profile since then, starting off with plans to mass-manufacture MEMS-based sensors (hence its name) and then moving on to the idea of making telecom components instead.

A case of a solution looking for a problem? It's tough to tell, because Megasense won't say what type of components it's making, but there are least a couple of reasons why the company deserves to be taken seriously.

First, the folk running Megasense have some impressive credentials. They include Vladimir Vaganov, CEO, who was chief scientist at IC Sensors, the first company to mass produce MEMS based accelerometers. They also include Jim Northington, COO, a former VP of manufacturing operations at E-TEK Dynamics, now part of JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU); and Derek T. Harrar, VP of business development, formerly a VP with Morgan Stanley Dean Witter & Co.

Vaganov says the secret of success with MEMS components is a "systems approach" to manufacturing. This means designing components so they can be made in large batches using automated equipment, in a way that minimizes any work that has to be carried out on individual components.

Using this approach enabled IC Sensors to churn out millions of MEMS-based accelerometers at a cost of between $5 and $8 each, according to Vaganov, who's brought a bunch of his IC Sensors colleagues with him to Megasense. If anything, the telecom components being made by Megasense are less complex and thus easier to make, Vaganov adds.

Vaganov isn't expecting to make such massive numbers of telecom components but says that he can achieve "more than a tenfold reduction" in prices. Components similar to the ones that Megasense will make currently cost about $5,000, Vaganov says. He expects to bring the price down immediately to $3,000 with low volumes, then get it down to $1,000 with "not very high volumes" and eventually get the price down to $100.

The other reason why Megasense should be taken seriously is that it's got some smart money behind it. It raised $10 million last February from Bay Partners and Texas Pacific Group, and Gordon Stitt, chairman and president of Extreme Networks Inc. (Nasdaq: EXTR), sits on the board.

"We'll probably start looking for a second round later this year," says Vaganov. He says Megasense will break even after that, and won't require a third round.

— Peter Heywood, Founding Editor, Light Reading
http://www.lightreading.com