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Summary

OFC 2017 is under way. While the exhibition floor does not open until March 21st,the Executive Forum and Connected OFCity Challenge have concluded. Numerous short courses have been conducted. In addition, many vendors have issued product and ecosystem press releases. Below are pre-conference highlights from Ovum's Components, Next-Gen Infrastructure, and Transport and Routing teams.

OFCity Challenge – supporting the smart city's "700-year" celebration

Julie Kunstler, Principal Analyst, Components, Next-Gen Infrastructure

This smart city challenge, which provides an opportunity for four multidisciplinary, multinational teams to combine existing optical networking technologies with future technologies, culminates at this year's OFC. In developing use cases for tomorrow's applications, the teams recommend innovative optical communications solutions to support high-bandwidth, low-latency, and high-reliability network solutions, within a specified budget. This year's contest revolves around the city's decidedly forward-looking "700-year" celebration, encompassing cultural and sporting events along with rehearsals and training for these events. For example, seven world-renowned pianists and the OFCity Philharmonic will perform at the Septicentennial Concert, but they must rehearse together from their disparate locations, relying on low latency and the use of AR/VR. Autonomous vehicles will shuttle athletes, performers, city officials, and city residents throughout the celebration. The autonomous vehicle network requires high data security, low latency, and high reliability. In addition to meeting budget requirements, the proposed network solutions must be reusable and useful to the residential, commercial, educational, and industrial needs of OFCity, supporting its ongoing growth and ICT-focused competitive advantages.

Standardization is unlikely to deliver a $0.01/Gbps optical transceiver

Kevin Lefebvre, Principal Analyst, Components, Transport and Routing

The OFC Short Course "Silicon Microphotonics: Technology Elements and the Roadmap to Implementation" outlined the challenges preventing the realization of the $0.01/Gbps optical transceiver. The first challenge is the creation of a standard for the fabrication process, packaging, and material system, namely silicon. The second challenge is to design a transceiver that does not require a laser to eliminate the need for two different material systems. The components industry has discussed standard design packages for years, settling on an approach that follows the one used in the semiconductor industry. Applying this same model to the transceiver, standard design packages that integrate the optics and electronics into one package would result in a more cost-effective product. This would allow transceiver designers to adopt a systems approach and optimize the overall system, which may require sacrificing the performance of one device while compensating with another device. However, this approach requires the ecosystem to agree upon a fabrication process, packaging, and material system. This is highly unlikely in Ovum's opinion. First, there are no standard groups within optics to define the process, packaging, and material system for the integration of optics and electronics into one package. More importantly, many companies have invested considerable time and money in creating a competitive advantage in their creative use of material systems. Consequently, standardization faces a steep, uphill battle, meaning that the industry will likely have to pursue different avenues for lowering costs.

Ciena adopts a brilliant strategy for expansion

Ian Redpath, Practice Leader, Components, Transport and Routing

Ciena announced a new channel for its WaveLogic coherent technology. Ciena will supply its WaveLogic Ai chipset to Lumentum, NeoPhotonics, and Oclaro, who will in turn add their own electro-optics components to build and sell 5x7 coherent modules. Ciena is effectively entering the merchant component market and making a play to expand the addressable market for its WaveLogic Ai chipset.

Ciena has been wrestling with a number of market challenges, including minimal optical network systems sales in China and a growing systems-level threat coming from and enabled by a merchant market competitor. Additionally, R&D cost and development pressures continue to increase with each successive generation of coherent DSP.

Ovum has stated in the past that western vendors that do not sell into the domestic China market cede a major portion of revenues from the global optical network market. The domestic China ON systems market was $4.4bn in 2016. Passing on this one market handicaps a vendor's total addressable market and eliminates a major growth opportunity. Ciena's ecosystem partners were hand-picked based on their exceptional credentials in the China market. All three have strong channels and customer relations in China.

This Ciena ecosystem will also inject a large dose of competition into the merchant module market. And finally, by broadening the total addressable market, Ciena has the opportunity to pull in more volume, thereby funding its R&D efforts.

In one strategic masterstroke, Ciena has addressed three major market challenges.

Appendix

Authors

Julie Kunstler, Principal Analyst, Components, Next-Gen Infrastructure

julie.kunstler@ovum.com

Kevin Lefebvre, Principal Analyst, Components, Transport and Routing

kevin.lefebvre@ovum.com

Ian Redpath, Practice Leader, Components, Transport and Routing

ian.redpath@ovum.com

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