The pressure is on in the optical sector. As telecom carriers turn down their spending tap, the emphasis throughout the optical supply chain is on reducing costs and maintaining margins amid plummeting prices.
Projections of 30% growth in the fiber optics market this year hardly portend a gloomy outlook, but the Optical Fiber Communications Conference here last week saw suppliers trying to prove to their customers that they have the necessary designs and production capacity to deliver components to equip increasingly complex high-speed networks.
The main focus for equipment, component, and IC suppliers alike was a move toward technologies that will power 10Gbit/s-and-faster optical networks to feed the world's insatiable appetite for bandwidth.
"Many of the optical equipment suppliers have their problems because a lot of what they sell is legacy gear, and the carriers have learned that they can't deploy that stuff and make any money at it," said Stephen Alexander, senior vice president and chief technology officer at Ciena Corp., Linthicum, Md.
"The carriers need a fundamental change in the way they build the network. The combination of high-capacity transport and intelligent optical switching is what is really needed to change the game in the telecom space."
The current outlay of OC-192 (10Gbit/s) networks has not been without its share of hitches and is still a maturing technology, according to Richard Barcus, president and chief operating officer of Tellium Inc., Oceanport, N.J. "Even the people who have delivered stuff for a while don't always get it right," he said. "It's a difficult technology and there are burps of quality and performance."
For many networking equipment makers, such as optical equipment leader Nortel Networks Corp., cutting-edge silicon-IC technologies remain in-house. Nortel, for example, designs its own devices for router, framer, and other optoelectronic applications.
"[IC suppliers] are not necessarily at the level where they can do the things we want them to do," said Doug Alteen, vice president of sales and marketing at Nortel, Nepean, Ontario.
Indeed, Nortel is already pushing suppliers for 40Gbit/s components to support the company's move to higher-speed networks, according to Michael Scott, Nortel's vice president of technology and product development.
"We plan to start shipping 40Gbit/s [equipment] this year," Scott said. "The main market now is 10Gbit/s, but that is an established market for us. We started shipping our first 10Gbit/s products in 1996."
While it's generally agreed that OC-192 silicon and module components have yet to reach commodity status, a number of companies-from Broadcom to Philips Semiconductor and PMC-Sierra-rolled out 10Gbit/s transceiver products at the OFC conference, indicating that a more evolved market is emerging.
Broadcom Corp., Irvine, Calif., even tried to show it could address high-end applications with a device produced on a conventional low-cost, CMOS manufacturing process.
However, despite the appeal CMOS-based optical transceivers may hold in terms of cost, they may not offer the right fit in certain areas of the network, according to Stan Lumish, vice president of optical network research at JDS Uniphase Corp., San Jose.
"In the network, just after the receiver functionality, you need the highest-performance circuits, so generally they're not CMOS," Lumish said. "Once you talk about the demultiplexing and digital functions, then you can do that with CMOS. CMOS, however, is not for the laser or modulator driver, nor for the transceiver right after the photodiode."
In addition to new technology demands, equipment makers called on IC and module suppliers to deliver OC-192 optical components in adequate volume.
"It's a spotty market. There are some suppliers that are very reliable, and there are others that are just trying to crack into the marketplace," Ciena's Alexander said. "Consequently, volumes are low and they have less-dependable supply chains. A lot of our supply decisions are based on people who can scale up production rates."