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ClariPhy Raises $24M to Chase 100GClariPhy Raises $24M to Chase 100G

The CoreOptics buy could mean Cisco won't need merchant chips for 100G. But that doesn't deter Oclaro – or ClariPhy, which just got $24 million to pursue that market

Craig Matsumoto

May 26, 2010

4 Min Read
ClariPhy Raises $24M to Chase 100G

How's this for timing: ClariPhy Communications Inc. is getting $24 million to build chips for 40- and 100-Gbit/s Coherent modules, right around the time that a potentially big customer, Cisco Systems Inc. (Nasdaq: CSCO), appears to be saying it will do key 100-Gbit/s chips on its own.

The funding round, announced today, will go towards designing digital signal processors (DSPs) to go into coherent optical modules. ClariPhy expects to produce a chip for 40-Gbit/s designs this year, and a chip for 100 Gbit/s in 2011.

The bet that ClariPhy is making -- and that many chip and optical components companies will almost certainly follow -- is that, as the 100-Gbit/s market matures, vendors that designed their own chips will start considering outside vendors.

Home cooking
Two key elements to a coherent receiver are a DSP fed by a high-speed analog/digital coverter (ADC). Both chips can be made from silicon, using commonly available manufacturing techniques.

Vendors that wanted to build early 100-Gbit/s modules designed those chips themselves -- Huawei Technologies Co. Ltd. and Nortel Networks Ltd. being prime examples. (See 100G Watch: Components Wanted.)

Cisco seems to be going that way, too, having announced last week that it's acquiring CoreOptics Inc. for more than $99 million. (See Cisco Renews Optical Focus With CoreOptics.) Mike Capuano, a Cisco director of marketing, says the company's engineering staff was a huge consideration.

"Certainly the existing technology is important, but the team itself and the ability to continue the innovation at 40 and 100 Gbit/s and beyond is really critical," he says. "If you're going to create unique differentiators, then there are benefits to having it in-house."

Cisco isn't elaborating on that, but it sounds as if the company won't be needing anyone else's DSPs. CoreOptics already has a 40-Gbit/s coherent module based on its own chips and was planning to show a 100-Gbit/s module at OFC/NFOEC 2011.

On the market
Of course, Cisco is just one vendor. It's a big name to remove from the list, but components companies think they'll still find targets for 100-Gbit/s pieces.

Oclaro Inc. (Nasdaq: OCLR), which contributed $7.5 million to ClariPhy's new funding round, certainly feels that way. "We do know some customers do not plan to do their own DSPs," Oclaro CEO Alain Couder tells Light Reading.

Oclaro has signed up to be a reseller for the digital signal processors (DSPs) ClariPhy plans to produce. Oclaro will also use the chips in its own 100-Gbit/s modules, just as it uses ClariPhy's physical-layer chips in 10-Gbit/s modules.

Couder's reasoning is backed by the fact that there aren't that many CoreOptics-like acquisitions to be had, Opnext Inc. (Nasdaq: OPXT) being one of the few companies that's announced chips for 100-Gbit/s modules. (Startup MultiPhy has an ADC, but it's targeting non-coherent designs first.) (See Opnext Makes Its 100G Move and 100G Startup Bags $7.2M.) In other words, systems vendors can't all buy their own DSP startups.

Paul Voois, ClariPhy's CEO, notes that systems vendors might not have the stomach to continue doing their own DSPs as the 100-Gbit/s generation ages. Nortel, for instance needed to build cutting-edge chips to beat the market to 100 Gbit/s, but Ciena Corp. (NYSE: CIEN), which now owns the technology, would have to keep updating those chips.

"Can Ciena afford to go to 45nm and 28nm?" Voois asks, citing the next manufacturing process nodes that the chips would likely go through. "When the systems vendors realize the full cost of maintaining the DSP technology, it's going to be a different story. That's not fully appreciated, I think."

Ciena is an easy example, because Nortel's chips are now three years old, according to Voois. He expects ClariPhy's design to consumer half the power of Nortel's, coming in at possibly one third the cost.

"We have a great business opportunity even among the group who are taking the in-house route. But we certainly recognize the threat," Voois says.

Oclaro, of course can sell its optical components even to the systems vendors that do their own DSPs -- unless, of course, they decide to start building their own optics as well. Hey, it's possible. (See Can Vendors Build Their Optical Components?, OFC/NFOEC: Mergers Haven't Gone Far Enough, and Vertical Integration Takes Its Lumps.)

The funding round, ClariPhy's third, was led by Norwest Venture Partners and also included Allegis Capital , Onset Ventures , and Pacific General Ventures LLC . ClariPhy has now raised $64 million since 2002.

— Craig Matsumoto, West Coast Editor, Light Reading

About the Author(s)

Craig Matsumoto

Editor-in-Chief, Light Reading

Yes, THAT Craig Matsumoto – who used to be at Light Reading from 2002 until 2013 and then went away and did other stuff and now HE'S BACK! As Editor-in-Chief. Go Craig!!

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