We develop, manufacture and sell optoelectronic products that transmit, receive
and switch high speed digital optical signals for communications networks. Our
products address the highest speed over distance applications and are designed
for 100G and beyond data rates, such as at 200G, 400G, 600G and, in the near
future, 1.2 Terabits per second, for telecom and hyper-scale data center or
content provider networks.
Our High Speed Products for data rates of 100G and beyond. These Products use
our Advanced Hybrid photonic Integration technology and are the core focus of
our strategy. We believe that they are an important competitive differentiator.
Our High Speed Products include transceiver modules, optical components and
high speed chip-level optical devices. Our 100G and beyond transceiver module
products incorporate our vertically integrated, high performance components,
including ultra-narrow linewidth tunable lasers (NLW-TLs), high speed electro-absorbtively
modulated lasers (EMLs), high bandwidth coherent receivers (ICRs), high bandwidth
micro-modulators (micro-MOD), high bandwidth trans-impedance amplifiers (TIAs)
and high bandwidth laser and modulator drivers. We integrate several of these
components into a Coherent Optical Subassembly (COSA) which when combined with
our NLW Laser, provides all of the optical functions necessary for coherent
communications in an ultra-compact package suitable for next generation pluggable
modules. Furthermore, in addition to integrating these components into our own
modules, we sell these components to other industry leaders who use them in
their highest performance products. We believe that our strength in these and
other high performance components places us in a strong competitive position
as we add new variants to our module product line.
100G and beyond networks have adopted coherent transmission technology to increase
speeds and lower costs. These high speed networks are one of the highest growth
segments of the optical communications market, and support the rapid expansion
of telecom backbone, hyper-scale data center and content provider networks,
accommodating increased mobile traffic. Prior to 2016, revenue growth from our
high speed products was mainly driven by the adoption of our 100G coherent products
in the Long Haul market sector. We expect our future growth in the 100G and
beyond segment to be driven primarily by the increased adoption of our high
speed products in the much larger Metro market sector and in the high-speed
data center interconnect market as well as the large hyper-scale data center
market.
Coherent transmission uses not only amplitude but also phase and polarization
properties of light to increase data rates ten-fold or more over conventional
“on-off” transmission protocols. Coherent transmission does not
require complete isolation of each channel by optical filters and therefore
can flexibly and efficiently switch the signal on an individual wavelength without
conflict or contention between wavelengths, a feature that is required for Software
Defined Optical Networks, or SDON. Software Defined Optical Networks markedly
increase the flexibility and efficiency of Metro networks and, combined with
the ten-fold increase in data-rates achievable with coherent transmission, mark
a very large improvement in cost performance for metro scale networks. In addition,
the necessary equipment to implement a metro scale network is significantly
reduced, especially using flex-coherent transceivers and CDC Switches.
The benefits of coherent transmission have made it a preferred technology for
advanced high speed telecommunications networks for distances of 80 kilometers
to 2000 kilometers. We believe that our Advanced Hybrid Photonic Integration
technology enables us to effectively address the challenges inherent in precision
and high volume manufacturing of optical components for coherent transmission.
Digital Optical Communications Market Structure
The digital optical communications market has two main sectors, telecom (which
is sub divided into Long Haul, Metro and access applications) and Datacom (which
includes data center). The telecom sector includes the global backbone of Long
Haul and Metro communications. It also includes local access links to end users.
The Datacom and data center sector includes connections in hyper-scale data
centers as well as traditional “enterprise” networks. As data centers
proliferate within metropolitan sized geographies, a very rapidly growing Data
center Interconnect market has emerged which resembles the metro market in its
bandwidth and distance needs and utilizes similar optical technologies and products.
While the Metro market is the largest volume, it most often follows the Long
Haul telecom sector in technology deployment, notably of coherent 100G and beyond
technologies. The Long Haul telecom sector is the first adopter of the highest
speed and most advanced communication links, and typically migrates over time
into the Metro sector as costs are reduced such that they are economical in
the shorter but more numerous Metro network links, with its commensurate lower
traffic densities prior to aggregation for Long Haul transport.
The Datacom market includes hyper-scale data centers and infrastructure for
cloud based services as well as traditional enterprise networks. Companies such
as Amazon, Apple, Facebook, Google and Microsoft are steadily increasing investments
in very large data centers as they implement cloud-based “big data”
services that can be crowd-sourced and crowd-distributed, and that utilize machine-to-machine
and inter-data center transactions to power the mobile web. Connections between
such very large data centers over a metro-sized area are an emerging high growth
market for “big pipes” using dedicated 100G and beyond digital optical
connections from data center to data center (inter-data center or DCI). Connections
within data centers (intra-data center) and from data center to a telecommunications
carrier are also moving to 100G and beyond speeds, although somewhat behind
Metro, DCI and long haul.
The Datacom market is often the most cost sensitive sector of digital optical
communications due to high volumes and to shorter lifetime requirements, and
therefore it typically begins to adopt leading edge speeds after those speeds
penetrate the Metro sector of the telecom market segment.
From this market structure, we believe that a technology leader must achieve
a leadership position in the Long Haul telecom sector as the basis for commercializing
the most advanced technology and then extending that technology to the Metro
and DCI sectors and to additional applications within data centers and other
Datacom applications.
Digital Optical Communications Network Equipment
The structure of the industry that supplies the network equipment for telecom
digital optical communications networks has largely concentrated down to leading
vendors which include: Nokia (formerly Alcatel-Lucent, which was acquired by
Nokia in January 2016), Ciena, Cisco, Coriant, Fujitsu Limited, Fiberhome, Huawei,
Infinera Corporation, NEC Corporation and ZTE Corporation.
Major suppliers of network equipment to the Datacom and data center market include
Arista Networks, Nokia, Brocade Communications Systems, Cisco, Huawei and Juniper
Networks. At the optical module and component level, Broadcom Limited, or Broadcom
(resulting from the acquisition of Broadcom Corporation by Avago Technologies
Ltd., or Avago), Finisar and Sumitomo Electric Device Innovations, Inc., or
Sumitomo, are leading merchant suppliers and some larger network equipment companies
like Huawei and Cisco have divisions or affiliates (such as HiSilicon in the
case of Huawei) that are captive suppliers. Furthermore, some of the larger
hyper-scale content providers, such as Google, Microsoft and Facebook, are beginning
to design and source their own optical network systems equipment from contract
manufacturing partners. These moves drive “disaggregation” in the
data center network separating software and hardware elements, as well as different
hardware functions, so that multiple vendors can supply different interacting
products.
Recent changes in switch architectures are rapidly moving new installations
to higher speed 25G dataflows (such that four such signal paths provide 100G
comprised of four 25G signals, or “4x25G”), resulting in a fast
growing 100G module market for connections inside the data center and “big
pipes” for data connections between data centers, or data center interconnects
(DCI), at 100G and 200G, and moving to 400G and 600G, data rates.
The main photonic operational blocks or modules required for digital optical
communications are transmitters, receivers and, where the network is branched,
optical switches. Transmitters and receivers are often combined into single
modules which are called transceivers and can be configured into line cards,
daughter cards and transponders, or digital or analog modules. At the high end,
such as Long Haul, a transmitter and receiver can be paired and combined with
signal processing electronics to error correct and restore degradation which
affects the signal after traveling long distances, in which case the unit is
referred to as a transponder. For high speeds and high bandwidth each of these
product types requires photonic integration at the most advanced and complete
level to deliver the required performance and functionality while being manufacturable
at scale and competitive in cost.
Switching products, which switch different colors, or signal channels, down
different branches of the network, have thus far been Reconfigurable Optical
Add/Drop Multiplexers (ROADMs) consisting of Wavelength Selective Switches (WSSs).
For 100G coherent networks, a new type of optical switch, the Multi-Cast Switch
(MCS), has been developed and introduced to eliminate contention in 100G coherent
switching. The need to eliminate contention is being driven by the move to SDON,
which is important to both telecom network requirements and content provider
networks. A “contentionless” architecture uses both traditional
“Wavelength Selective Switches” and the new MCS, which we supply.
One or more MCSs are deployed initially with each ROADM node, and then additional
multicast switches are deployed over time as traffic growth demands with as
many as eight MCS devices for each node, allowing networks to efficiently expand
as needed. This type of switch is CDC, and its function is optimized for 100G
and beyond coherent networks.
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