The chips that should have represented Santel Networks Inc.'s first revenues have returned from the foundry flawed, but company officials remain optimistic that they'll sample a working product by the end of the year.

Santel is developing a dispersion compensator, using electronics to correct polarization mode dispersion at 10 Gbit/s (see Santel Unveils 10-Gig EDC and Chromatic Dispersion and Polarization Mode Dispersion (PMD)). The S44501 and S44003 were slated to sample by this month, but that's been delayed as Santel works around the problems with the hardware.

"We had some [silicon] structures that were not there because of some misplacement by the foundry. We've been able to work around it," says John Keating, vice president of sales and marketing. "It's showing good enough promise that we do plan to take that chipset out on evaluation boards as planned.”

The foundry is the manufacturing company contracted to build the chips that Santel is designing -- in this case, Taiwan Semiconductor Manufacturing Company (TSMC) (NYSE: TSM). Nearly all chip companies use foundries these days, due to the high costs of building a fabrication facility and the high level of technical know-how that foundries have developed.

Designs are delivered to the foundry in the form of software files describing the desired layout of the chip, and those instructions translate into a complex manufacturing process that can require hundreds of steps and several stacked layers of silicon circuitry. So it's feasible -- although certainly not desirable -- for mistakes to arise, which apparently happened to Santel.

It's not as though the company used some cut-rate foundry. TSMC is the largest of the pure-play foundries, a well-respected company whose process technologies rival those of IBM Corp. (NYSE: IBM) and Intel Corp. (Nasdaq: INTC). "We've done everything we could do to wring the risks out of this," Keating says.

Santel is working around the problem with some hardware fixes that Keating wouldn't specify. Final verification of the chips might take a few weeks, but Keating remains confident that Santel will ship working reference boards to customers by the end of the year.

That's important because Santel is in a race with fellow startups Big Bear Networks and Phyworks Ltd., both of which are developing similar products expected to sample soon (see Big Bear Promises Picnic and Phyworks Claims Cost-Cutting Chips).

These chips are the third release of Santel's silicon, and they were the first version intended for customer shipments. It's a common strategy: The company started with a basic but bulky chipset to prove that the technology works, then got to work shrinking the design into as few chips as possible.

Santel is getting close to its goal of a single-chip product, as the bulk of the PMD-compensating function is contained on one silicon germanium (SiGe) chip.

It's expensive and time-consuming to "re-spin" a chip, so Santel's probably will be lumped in with a whole set of changes, the nature of which will be determined by the current round of testing and verification. "It'll be sort of 'Release 3A' that will ship to customers," Keating says.

— Craig Matsumoto, Senior Editor, Light ReadingMovers and shakers from more than 100 companies will be speaking at LightSpeed Europe. Check it out at http://www.lightspeedeurope.com.