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Summary

Inphi's acquisition of Clarify and Macom's acquisition of Applied Micro Circuits (APM) demonstrate that companies need to add value and expand their product lines to maintain a competitive advantage and lead their respective markets. Inphi acquired Clarify and its DSP (digital signal processing) technology to deepen its product offering in the data center interconnect market. Macom acquired Applied Micro Circuits and its FinFET technology to bolster its position in the very intense data center intraconnect market.

Acquisitions to flesh out and enrich product portfolios

Optical component companies have been expanding their product lines through innovation, mergers, and acquisitions. For Inphi and Macom, the acquisitions of Clarify and Applied Micro Circuits, respectively, are one avenue for expanding their product lines.

Inphi competes in the high-profile metro data center interconnect (DCI) market with a focus on amplifiers and modulator drivers. With Clarify's DSP technology and product development team, Inphi will be in a stronger position for further product integration with its next product release. The DSP is an integral element of the overall DCI solution, especially as coherent technology gets closer to the edge of the data center.

Macom has been focusing on serving the data center intraconnect market, which addresses the interconnection between top-of-rack switches within data centers. The essential product requirements for this market are small form factor, low cost, and low power. Macom has been supplying TOSAs (transmitter optical subassemblies) to this market; the acquisition of APM's innovative FinFET technology will provide a path to a more compact, low-power solution for its existing product line and will allow Macom to offer next-generation PAM4 solutions.

Both Inphi and Macom stated that their customers were asking them to provide more complete solutions within their product offerings. The expected benefits to the customer from these acquisitions are fewer suppliers to manage, having one point of contact for a wider range of products, and reduced costs. As margins become tighter and companies look to expand their product offerings, expect more niche companies to be acquired in the future.

Appendix

Further reading

Total OC Forecast Spreadsheet: 2015–21, TE0017-000079 (November 2016)

40G, 100G, and 200G OC Forecast Spreadsheet: 2015–21, TE0017-000080 (November 2016)

Market Share Spreadsheet & Analysis: 3Q16 Optical Components, TE0017-000081 (December 2016)

DCI is reshaping optical networks and fueling component demand, TE0017-000073 (September 2016)

Author

Kevin Lefebvre, Principal Analyst, Components

kevin.lefebvre@ovum.com

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