Big Vendors Acquire MEMS Makers
As the importance of MEMS (micro-electro-mechanical systems) in optical networking becomes clear, big component vendors are buying up specialist companies with intellectual property rights and manufacturing capacity in this field.
JDS Uniphase Corp. http://www.jdsunph.com started the trend on April 4, by agreeing to buy Cronos Integrated Microsystems Inc. http://www.memsrus.com for $750 million in stock (see JDS Uniphase Moves Into MEMS). Cronos has expertise in three MEMS manufacturing processes - bulk machining, surface micro-machining and high aspect ratio machining (for an explanation of these terms see Startup Prepares Secret Switch ).
Last week, on May 22, Corning, Inc. http://www.corning.com followed JDS's lead, buying the 67 percent of Intellisense Corp.http://www.intellisense.com that it didn't already own, for $750 million. Intellisense makes a market-leading software package for designing MEMS, and has a large, brand new MEMS manufacturing plant.
A further acquisition now looks as though it's in the pipeline. This time, the target is BCO Technologies PLC. http://www.bco-technologies.com, a Belfast, Northern Ireland, company . It issued a notice on May 11, alerting the Irish and London stock exchanges to "discussions with a third party which may or may not lead to an offer being made for the company".
Like Cronos and Intelllisence, BCO is a company with patents and expertise in manufacturing the arrays of tiny tilting mirrors used in large scale optical switches. The material (silicon-on-insulator) and manufacturing process (bulk machining) used by BCO is particularly appropriate for this application because the resulting mirrors are thick enough to stay perfectly flat, according to Scott Blackstone, the company's CEO. Blackstone says that several startups building optical switches are using MEMS made by BCO.
Blackstone declines to comment on rumors that Lucent Technologies Inc. http://www.lucent.com is also using BCO to make MEMS for its LambdaRouter optical switch. If it is, then Lucent could be the "third party" negotiating to buy the company.
It's equally possible that Nortel Networks http://www.nortelnetworks.com is the prospective purchaser. It's in the same position as Lucent. It's a big manufacturer of optical components and doesn't have any in-house MEMS manufacturing capacity at present. The MEMS used by Xros Inc. http://www.xros.com , the optical switch startup being acquired by Nortel, are rumored to be manufactured by Cronos, the foundry being bought by JDS Uniphase.
Why all this interest in acquiring MEMS foundries?
The potential of MEMS in optical switches and other components has only become apparent in the past year. As a result, the big vendors haven't developed their own manufacturing capacity and now need to catch up, because demand for MEMS-based components could be about to rocket.
Every foundry has its own particular way of making MEMS, using different materials and different processes, and although there are plenty of foundries, only a small proportion of them can make MEMS that are suitable for telecom applications.
This raises the prospect of big vendors buying up most of the foundries capable of making the right sort of MEMS. Startups developing optical switches, such as Calient Networks Inc http://www.calient.net don't see this as a particularly worrying prospect. They say going with a foundry owned by a big vendor makes problems less likely. All the same, startups need to source MEMS from more than one foundry and get legally binding delivery commitments, according to Charles Corbalis, Calient's president and CEO.
Any shortage of independent MEMS foundries will be temporary anyhow, according to Corbalis. "There's an awful lot of universities with MEMS making expertise," he says. "As the existing foundries get snapped up, these folk will set up new startups to replace them."
-- by Peter Heywood, international editor, Light Reading http://www.lightreading.com