Optical components

Xtellus Stands Alone

With Corning Inc. (NYSE: GLW) gone from the telecommunications part of the liquid-crystal business, startup Xtellus Inc. gets an unusual claim to fame: It's got the only liquid-crystal fab specially geared for telecom, as opposed to displays.

Whether that's a big deal is debatable, considering Xtellus's target market is small. Then again, so is the fab. Completed a year ago (but not publicly announced until this week), the 5,000-square-foot facility cost $1.5 million and needs a staff of only 10. "Based on the activity we see in the market, it's fully staffed," says Gil Cohen, Xtellus CEO.

Xtellus's device is a "dynamic blocker equalizer," also known as a wavelength blocker. It adjusts the amplitude of several wavelengths simultaneously, either equalizing them or reducing their power to effectively shut them out. The part is aimed at reconfigurable optical add/drop multiplexers (ROADMs) (see Xtellus LC Processors Qualified).

Several competitors are working on similar devices, attacking the problem with different technologies. The list includes Avanex Corp. (Nasdaq: AVNX) and JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) on the liquid crystal side; LightConnect Inc., Polychromix Inc., and Silicon Light Machines in MEMS; and Lambda Crossing Ltd., Optoplex Corp. and a host of others in tunable filters (see Tunable Filters Tune In).

That's a lot of fighting for an awfully small market. Combining all those technologies, optical add/drop components sales totaled $16 million last year, according to research firm ElectroniCast Corp..

Xtellus is hoping its fab -- located in Daejon, South Korea -- can make a difference. Most liquid-crystal plants are geared toward displays, and, while these facilities will take specialty orders for telecom components, the resulting parts aren't ideal, Cohen says.

That may be true of Xtellus specifically, but it doesn't necessarily hold for everyone. ElectroniCast president Stephen Montgomery notes that some liquid-crystal companies seem quite happy with the parts they receive from display-manufacturing houses. Even so, Cohen says Xtellus has sold fab capacity to other components makers since the facility came online.

Fab ownership doesn't guarantee success, either. Components startups Bandwidth9 Inc. and DigiLens Inc. depended on their own fabs -- albeit for products dissimilar to Xtellus's -- and both firms shuttered operations earlier this year (see Bandwidth9 Goes Dark and DigiLens Shrinks Another 50 Percent). In February, Corning closed down the Fountain Valley, Calif., manufacturing facility dedicated to its PurePath and Wavelength Selective Switch products (later referred to as simply "wavelength blocker" and "wavelength switch" -- see Corning Chops Wavelength Blocker).

Corning in 2000 had announced plans to invest more than $20 million in the manufacture of those two products. The company tried selling the Fountain Valley facility to a number of businesses, including Xtellus, apparently to no avail.

Xtellus has lived on a slim budget so far, a point in its favor. The company has kept to 25 employees since its first and only round of $7.5 million (see Xtellus Scores $8M). A second round is pending; Cohen was expecting to get investors' signatures today.

— Craig Matsumoto, Senior Editor, Light Reading
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