You would think the last place an equipment vendor would want to be is in the components biz. And, given what Wavelength Division Multiplexing (WDM) specialist Movaz Networks Inc. announced yesterday, you would be wrong. (See Olympus, Movaz Team.)

Olympus and Movaz said Wednesday that they've started a new company to help boost the volumes and lower the cost of producing MEMS-based technologies for optical networking and communications equipment.

The new joint venture, called Olympus Microsystems America Inc., is using intellectual property and support staff from Movaz, with manufacturing muscle and the corporate support of Olympus. Olympus is also seeding the company with $10 million and it will have between 15 and 20 employees, according to its new president, Larry Wang.

Wang says Movaz and Olympus have been working together for about two and a half years. Movaz CEO Bijan Khosravi says the MEMS (micro-electro-mechanical systems) produced by Olympus for its ROADMs are "field proven technology" but it's also the single most expensive part of a ROADM (reconfigurable add drop multiplexer) system when produced in small volumes. (See ROADMs: Almost Famous and Who Makes What: ROADMs.) "We should make this available to the entire industry -- why not?" says Khosravi.

Wang says the new company will have the capability to develop, make, and market new products this year and it anticipates having gross sales of 6 billion Japanese yen (about $60 million) within 5 years. The new company is based in San Jose with the Olympus Partnership Development Group .

The first product from the new firm is a MEMS-based Wavelength Selective Switch (WSS) for ROADMs -- the same one that Movaz has been using since August in its Multi-Degree RAY ROADM gear.

The new company will also work on variable optical attenuators (VOAs), small switches, optical cross connects (OXCs), aspheric lenses, and tunable filters.

But regarding MEMS for ROADMs, how much volume will Olympus Microsystems America have to hit before the production costs start to fall? "Beyond 10,000 units there is a major reduction in cost," Khosravi says. "At up to 1,000 units, we're still looking at today's prices."

Of course, it seems odd that Movaz would even indirectly get into the components space, especially the MEMS market, which many feel is overcrowded. By doing so, it will likely compete against Lightconnect Inc. , JDSU (Nasdaq: JDSU; Toronto: JDU), Polychromix Inc. , and Capella Photonics Inc. , to name a few.

Another big unknown: will competing systems vendors be comfortable buying from a company that's working closely with Movaz?

That answer will surface soon enough. In the meantime, Khosravi says having a company that develops MEMS specifically targeted at communications will help in landing larger service provider contracts, where carriers want to see system volumes ramp quickly. "Some of the components suppliers today can produce -- at most -- one to two units per week," he says. "That's not good enough."

— Phil Harvey, News Editor, Light Reading