The last session of Monday’s OSA Executive Forum discussed investment opportunities within the optical component industry.
What captures investments in optics? This was a timely theme – after all, optical vendors have been in a tough market for making money, with low operating margins compared to other industries. However, the opportunity created by data centers is attracting more investment these days.
Optical start-ups have the luxury of focusing on the data center market. They are not burdened by legacy product lines for the telco community, where spending is tightly constrained. However, having an exit strategy remains crucial. One option is to hope for acquisition from one of the big Internet content providers (ICPs) such as Google or Facebook, which certainly have the cash for acquisitions. But ICPs need to ask whether their start-up suppliers fill a need that must be brought in-house.
The second exit option is to be acquired by a larger optical component vendor, but there are fewer and fewer potential buyers due to industry consolidation. The third option is an IPO, but this remains a difficult exit path for most start-ups.
It is important to remember that data centers are focusing on scale. Start-ups should not concentrate on a single speed solution: they need to develop platforms that will be able to support future speeds. This approach helps to ensure longevity for the start-up while supporting efficient scaling for customers.
Acacia introduced the first merchant coherent 400G transceiver, a significant achievement because it is a critical step to realizing low-cost transmission above 100G.
The high-speed transmission market is dominated by equipment vendors with a captive supply of critical components, such as the application-specific integrated circuit (ASIC) needed for coherent transmission and receiving. While the equipment vendors are excellent at transmission product definition and bringing new technologies to market, cost and size reduction are driven by the component vendors.
Acacia’s new product brings attractive features that can help lower costs. For example, its transceiver is based on silicon photonics, an approach that has the potential to significantly lower cost due to its large number of integrated optical components.
Another attractive feature of Acacia’s new transceiver is its multiple modulation formats and the adaptive nature of the transmission. The transceiver is a two carrier solution and supports three different modulation formats: PM-QPSK, PM-16QAM, and PM-8QAM. Data rates of 200, 300, and 400G can be transmitted. Also note that Acacia cites the PM-8QAM as an industry first; it should receive good interest due to the improved reach.
Acacia reports sampling the transceiver in 1Q15 and expects to ship products in 2Q15. This early leadership will help drive down cost, spur competition, and accelerate the market to the next data rate, which is critically needed given the continued growth in bandwidth demand.
Finisar introduced new 40 and 100G transceivers for data center applications that reduce cost by working on installed base fiber.
The majority of data center fiber is at risk when data rates increase above 10G. That’s because these links are duplex, two fibers, and support distances up to 300m. But the IEEE specifications for 40 and 100G require new fiber, a ribbon with eight fibers where four are used for transmission and four used for receive. Moreover, the specification is for a maximum of 100m at 100G, limiting the utility of this link in many data centers.
Finisar’s new transceivers use wavelength division multiplexing (WDM) technology to increase the per-fiber bandwidth in data centers. For 40G, for example, it uses four wavelengths, each at 10G on one fiber for transmission and one for receive. Similar technology is used for the 100G link with each wavelength at 25G. This week at OFC, Finisar will demonstrate 100m for the 100G link, and the company has a roadmap to 300m.
Wavelength division multiplexing technology is most commonly used in single-mode fiber. WDM has attracted great interest for multi-mode applications due to some recent proprietary 40G products that use the technology. Finisar is pushing for standardization as part of its roadmap, a key step that improves its chance of success.
Huawei, the leading PON equipment vendor, announced a successful demonstration of its point-to-point WDM PON solution at OFC 2015.
While WDM PON has not been a successful technology for FTTH, Huawei believes that WDM PON will support fronthaul, particularly fronthaul for future 5G wireless networks. Huawei’s WDM PON solution can be deployed as a standalone network or added on top of an existing PON or next-gen PON network.
Huawei’s WDM PON system includes two innovative technologies to solve some common issues concerning WDM PON:
Automatic wavelength locking aimed to cost-effectively and efficiently solve service provisioning and module inventory issues
Quad small-form-factor pluggable (QSFP), a high-density integration and packaging technology that increases density while making installation easier.
Today’s PON networks are reaching beyond residential subscribers; they are also supporting small and medium businesses (SMB) and mobile backhaul traffic. These non-FTTH applications provide operators with additional revenue streams. TWDM PON (Next-gen PON 2) was standardized with the ability to support different types of subscribers and applications by using different wavelengths and different bit rates on those wavelengths. The standard includes the ability to add point-to-point (e.g. WDM PON) over the TWDM PON network for specific applications such as fronthaul. Huawei’s announcement is following the next-gen PON2 approach, not a surprise given Huawei’s support of the standard.
TWDM PON has the opportunity to become the FMC (fixed–mobile convergence) access platform of the future, supporting wireline and wireless-related services. As Verizon stated at OSA’s Executive Forum on Monday, the goal is to use its FTTx network for as many services as possible.
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