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FEATURE OPTICAL COMPONENTS


proven too high for many companies to surmount. Tose initial R&D costs make it difficult for companies to compete with suppliers who can service the market today ,simply by churning out standard parts, as evidenced by the demise of OneChip, a start-up developing an indium- phosphide materials platform for fibre-to-the-home transceivers.


New relationships Although smart choices will help a company to maximise its investments, what’s really needed is more money. Julie Eng doesn’t think that governments or venture capitalists can be relied upon to save the day. ‘Venture capitalists do make spot investments still in our industry. Te US government has invested a little with their photonics manufacturing initiative, that’s helpful. But for this really advanced technology work, largely the companies are bearing that effort themselves,’ she said. A new business model that is


starting to emerge is that the end users, whether the Web 2.0 companies or equipment manufacturers, will consider paying NRE or non- recurring engineering fees towards the one-time cost of developing a component to suit their specific needs. Tis helps the optics company defray the cost of developing those new technologies, while giving the end customer access to the expertise of the optics community. Although NRE is not a significant


part of Finisar’s business, it is valuable, says Eng. ‘Tere is some value in the dollars for sure. We’ve had some cases where we sped up our development programme because somebody was able to help us with the R&D.’ Finisar says it largely funds all of its


own internal R&D; Oclaro says likewise. But both see a place for the NRE model and think it is now quite common in the industry, especially for smaller companies. ‘It can be the difference between having a company and not having a company,’ said Eng. She added: ‘Te other piece about customer NRE is that it actually


validates your direction. If someone’s willing to collaboratively invest with you, that means they think the solution you’re proposing is the right one too. Tere’s some value in that justification.’ Carter thinks there is a flip side to


these arrangements, however. ‘It doesn’t mean necessarily you’re going


You pick the things you’re going to do, and you hope you choose wisely


to scale because everything is dependent on the relationship with the person who’s giving you the money. Ten they tend to want exclusively for a certain period of time, so you can’t sell it to anyone else anyway,’ he said. He notes that there is an


alternative. Instead of paying for product development up front, customers can enter into long-term supply agreements with vendors of key technologies. Tey do this for security of supply, to make sure that the products they need are going to be available in the timeframe that they need them. ‘We are seeing that coming more and more into play for future products,’ he said. ‘What you’ve got to understand


from the system house point of view is, particularly if they’re using ASICs [application specific integrated circuits], the ASIC development starts way ahead of the optics development. Tey’re already investing millions of dollars in the ASIC design process, especially for a new architecture or a new system, so they want everything buttoned down. So as we go up in speed with all these different form factors floating around, I think you’re going to see more and more of those types of [supply] agreements being put together.’ In fact, sometimes systems houses


will go further and buy optics companies to ensure the necessary


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technology is available to them. ‘You’re starting to see a little bit of what I call re-verticalisation at the systems houses,’ said Carter. For example, recently Ciena acquired Teraxion for its photonic integration expertise. ‘Ciena has got some pretty cool


technology, which will enable them potentially to do a different business model,’ he explained. ‘Ciena could give key components to a supplier like Oclaro, or they might even do the design themselves and take it to a contract manufacturer. Tat’s something that we’re keeping a very close eye on.’ Cisco’s purchase of CoreOptics and


Lightwire were also to bring key technology pieces in-house, according to Carter, who was at Cisco when these acquisitions took place. ‘Te CoreOptics [acquisition] was basically to get the DSP skill and knowledge, it wasn’t to buy a company that was making transponders. Lightwire was the same thing; it was a technology where we could see that our


customers were requiring lower power consumption, higher density and lower cost, and Lightwire’s technology was a path forward to enable that to happen.’ As relationships evolve, equipment


manufacturers may start to view optical components players as symbiotic partners rather than merely suppliers. One can hope that perhaps, in the not too distant future, this could lead to a more equitable distribution of profits. Carter commented: ‘I think if people want the latest technology quickly and they also want to enable [their suppliers] to become more efficient and scale their operations, I do think there has to be more of a sharing of the wealth.’ Although things are starting to


change, change is taking a lot longer than anyone anticipated. Te upshot is that competing in the optical components sector will remain exciting, challenging and scary for the foreseeable future. ‘It’s not an industry for the faint hearted,’ Julie Eng concluded.l


European manufacturer introducing new fi ber-optic hardware MTTH series and underground chambers MUC


MTTH Series


Underground chamber MUC 315


Visit us on: OFC booth no. 3644 AngaCom booth no. M30


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