daryl innis - ovum - the next phase for high bandwidth components
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© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.1
The Next Phase for Passive
Optical Components and High
Bandwidth Optical Components
Daryl Inniss
Daryl.Inniss@ovum.com
29 September 2011
Same as other
phases: it’s about
cost reduction for the
network operator
And growing a
profitable business for
the vendor
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.2
Outline
Network operator requirements and demand
The next phase in access technologies for passive optical
components
High bandwidth opportunities for emerging optical components
Risks and challenges with delivering high bandwidth products
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.3
Service providers (SPs)
System vendors
Subcomponent and
material
Optical components
Avago, Finisar, JDSU,
Sumitomo, Oclaro, Opnext,
Source Photonics...
Alcatel-Lucent, Brocade, Cisco, ECI, Ericsson, Huawei,
Juniper, Motorola, NEC, Nokia/NSN, Nortel, Tellabs,
ZTE...
2Q11 annualized
revenues $1.86
trillion, up 5%
2Q11 vs. 2Q10
America Movil, AT&T, BT, China Mobile, China
Telecom, FT, DT, NTT, Saudi Telecom, Sprint,
Telefónica, TI, Verizon, Vodafone, Zain...
Source: Ovum
* Includes only optical and datacom components
Infrastructure vendors’
2Q11 annualized
revenues $43.42billion,
up 17%
2Q11 vs. 2Q10
Optical Component
2Q11 annualized
revenues* of $6.20
billion, up 30%
2Q11 vs. 2Q10 Ovum does not track
subcomponents quarterly
and does not track
materials.
Growing telecommunications industry
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.4
Carriers usually manage annual capital expenditures
(Capex) to 15 to 16% of revenue
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Fixed Mobile
Opportunity: Network operators faced with managing single digit
revenue growth per annum while traffic grows at double digit rate
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.5
The market reality:
Network operators
want to spend less ($)
while supporting more
(traffic, subscribers)
COST REDUCTIONExactly the purpose of optics in telecommunications
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.6
Cost depends on segment requirements
Metro core
MR WDM (ROADM)
ADM
Multi-degree ROADM (WSX)
ONT
Metro WDM ROADM (OTP)
OED access ring
OCS (OXC)
OLT
DSLAM
EoW
EoS
EoF
DSL
PL
Ethernet
Switch
Metro access Long-haul core
ROADM IOF ring
WDM access ring
Premises
3000-4000 Km
reach without regeneration
FTTP
Source: Verizon and Ovum-RHK Inc.
EoF = Ethernet over Fiber; OTP = Optical Transport Platform; WSX = Wavelength Selective Cross-connect; EoS = Ethernet over SONET;
EoW = Ethernet over WDM; ONU = Optical Network Unit; ONT = Optical Network Terminal; IOF = Interoffice Facility; OED = Optical Edge Device (MSPP)
FTTP = Fiber to the Premises; PL = Private Line
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.7
Focus on Long-haul core and “Access”
Two ends of the spectrum
Metro coreADMMetro access Long-haul corePremises
Long distances
Highest bandwidth
Highest reliability
Today 10G
Tomorrow 100G
Metric: $/G/km
Short distances
Many connections
High bandwidth
Today Megabits
Tomorrow 1G
Metric $/subscriber
Modest distances
High bandwidth
High reliability
Grooming
Aggregation
Today 10G
$/G/km
Access
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.8
0
200,000
400,000
600,000
800,000
2010 2011 2012 2013 2014 2015 2016
Sub
scri
be
rs (0
00
)
DSL CMTS FTTB/FTTH
Perspective on cost in access: FTTH/B leads the growth in
wireline broadband relative to other access technologies
22% CAGR for FTTH/B compared to 2% for DSL and 5% for cable modem
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.9
Most of the FTTx growth comes from AP led by China
China’s consumer FTTx subscriber base will grow to over 110 million
in 2016 from under 10 million in 2009
FTTx consumer subscribers by country or region
0
50,000
100,000
150,000
200,000
250,000
2009 2010 2011 2012 2013 2014 2015 2016
Year-end
FT
Tx c
on
su
mer
su
bscri
bers
(000)
China Japan & Korea Rest of AP Europe NA Rest of World
China represents 50%
of worldwide FTTx
subscribers in 2016
Source: Ovum
Japan and Korea
represent 19% of
worldwide FTTx
subscribers in 2016
Remainder represents
31% of FTTx subscribers
in 2016
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.10
Resulting in enormous pressure on supply chain to
lower cost
A cost sensitive market segment—residential access
Delivering into a low cost market—China
With outlook for tens of millions of units per year
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.11
Network Core Perspective: Lightening 100G progress
Verizon tested
Alcatel-Lucent
100G with live
traffic (504km)
network Tampa –
Miami, FL
NTT demo’d 134
wavelengths @ 111Gbps
each over 3600km
(7208km in 2009)
AT&T and NEC demo’d
61 wavelengths @
114Gbps each
Verizon tested NSN
100G over 1040km
distance
Comcast tested Nortel
100G prototype – 300km
span of live network
VZ tested Nortel 100G
on high PMD fiber
Nortel completes live trials of its 100G with
Banverket ICT, Neos Networks, JANET
and SURFnet
Nortel/Telstra completed 2,038 km 100G
trial on existing fiber link
Qwest announced 2010 deployment of
ALU 100G network
Alcatel-Lucent announced
100G interfaces for 7750
SR, 7450 ESS and 1625
LambdaExtreme
Ciena and NYSE Euronext announce
2010 deployment of 100G
DT and Ericsson complete 100G field trial
Verizon deploys 1st
commercially available
100G from Nortel
AT&T, Cisco and Opnext
demonstrate single 100G
wavelength using
coherent PM-QPSK on a
live AT&T ULH link
between Louisiana and
Florida
Verizon, Juniper, NEC
and Finisar complete
100G field trial testing
interoperability between
ON system, router and
CFP MSA vendor
equipment
IEEE 100GE standard
approval in June 2010
NYSE Euronext
deployment scheduled
Qwest network-wide
deployment scheduled
2007
R&D
2008
Demos
2009
Trials & first products
2010
Standards, Early
adopters
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.12
Because 100G reduces the cost of transport
40 and 100G rules—they must coexist with 10G on the same line
Hence reuse all common equipment (amplifiers, dispersion
compensators, and filters)
Even if cost is more than 4 times 10 G for 40 G or 10 times 10G for 100G, it is still
cheaper to install on a line containing 10 G as compared to lighting a new fiber. Stated
differently, capacity upgrade with 40 and 100G is a winning solution
And coherent receivers provides added benefits for greenfield
Eliminate use of dispersion compensators
Reduce amplification requirements
Reduce cost
Low latency operation
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.13
Outline
Network operator requirements and demand
The next phase in access technologies for passive optical
components
High bandwidth opportunities for emerging optical components
Risks and challenges with delivering high bandwidth products
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.14
Optics is one of the most expensive part of equipment
OLT Splitter
ONT
.
.
.
ONT
ONT
Central Office Customer Premise
% Optics
OLT
Data rate (G) Distance
(km)
Splits % Optics
ONTDown Up
EPON 5 1 1 10/20 16/32 20
GPON 10 1.24/2.5 0.62/1.24 20 64 40
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.15
Traditional PON component ecosystem:
Transceiver vendor role as assemblers/packagers
PIN dieAPD die
TO-can packaging
BOSAassembly
TIAchip
Transceiverassembly
Limitingamplifier
chip
Laserdriver chip
Laser die
Optical chip
vendor
Optical interface chip vendor
BOSA (bidirectional opticalsubassembly)
Transceiver
ASIC vendor
Equipment
OLT & ONUequipment
OLT + ONUASIC
PIN dieAPD die
TO-can packaging
BOSAassembly
TIAchip
Transceiverassembly
Limitingamplifier
chip
Laserdriver chip
Laser die
Optical chip
vendor
Optical interface chip vendor
BOSA (bidirectional opticalsubassembly)
Transceiver
ASIC vendor
Equipment
OLT & ONUequipment
OLT + ONUASIC
Source: Accton
Packaging is about 70% the cost of transceivers
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.16
EVERYONE (transceiver vendors) sources lasers,
photodiodes and integrated circuits
CyOptics and Mitsubishi are the major merchant optics suppliers
Lasers
PIN die
APD die
Gennum, Vitesse, and Maxim supplies TIA, LA and laser driver
Mindspeed supplies TIA and laser drivers
Micrel suppliers laser drivers
Sumitomo supplies TIAs
Near commodity market for transceivers suppliers
Suggests assembly/packaging, delivery, price as critical factors
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.17
Market driving 25-30% ONT transceiver price decline
per year
Transceiver suppliers are mostly in low cost manufacturing regions
Notably absent are the leading OC transceiver vendors
Finisar announced entering with GPON but have not reported significant
revenues to date
Transceiver and bidirectional optical sub assembly (BOSA) suppliers
NeoPhotonics HG Genuine Hisense Accelink
Source Photonics APAC Opto
Electronics Inc
Coretek Opto
Corp.
Ligent Photonics
Inc
WTD Furukawa Delta Electronics CyOptics
OneChip
Photonics Inc.
Shenzhen
FiberTower
Communications
Hymax
Optoelectronics
Many others in
China
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.18
But market can’t beat suppliers endlessly. Fundamental
changes are needed to meet price decline demand
Photonics integration—but cautious optimism
Integrated circuits integration
Flatten food chain
From transceivers to bidirectional optical sub assemblies (BOSAs) on
board
Vertical integration
BOSA
System vendor
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.19
Photonic integration promises a cost reduction path
OneChip approachPhotonic Integrated Circuit
(passive & active)
• no discretes
• all functions in one part
Free-Space Opticsoptics assemblies from off-the-
shelf discrete components
• discrete actives and passives
• up to 20 parts to assemble
Planar Lightwave Circuithybrid SiO2-Si based PLC
(only passive)
• discrete actives
• up to 10 parts to assemble
Source: OneChip Photonics
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.20
OneChip Photonics approach promises
Monolithic photonic integration circuit (PIC) in Indium Phosphide
Integrates three discrete components
Replaces optical chips, TO Can and possibly BOSA assembly
Suited for automated assembly
No active fiber alignment
MPD
SSC
1310nm
1490nm PD
WDM
Splitter
OneChip Diplexer PIC
DFB Laser
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.21
But the market is cautious because
Marginal success for high volume, low cost products which is the
promise of photonic integration
Success with passive components
Splitters, arrayed wave guides, and variable optical attenuator multiplexers are the main
high volume examples
No example of high volume, low cost active components where photonics
integration is key to delivering to the market demand to date
Active components incumbent supply chain s very strong
current food chain using TO Can has long history of high volume, low cost
manufacturing
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.22
Another cost reduction approach is to integrate the
PMD with the MAC
Integrate physical media dependent (PMD) with the MAC
Advantages
Cost reduction
Size reduction
Lower power consumption
Disadvantages
Combining digital and analog functions puts design constraints
Limits upgrade timing
Some vendors have to design in a new MAC
Who is doing this
Lantiq and PMC-Sierra have announced
Savings
$1-$2 per ONT
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.23
Flatten the food chain by using BOSAs
Laser die
PIN die
APD die
Optical chip vendor
TO-can
packaging
TIA chip
Limiting
amplifier
chip
Laser
driver
chip
Optical interface chip vendor
BOSA
assembly
ONU MAC
SoC
ONU/ONT CPE
equipment
vendor
e.g. ODM
ASIC vendor
EquipmentBOSA
Laser die
PIN die
APD die
Optical chip vendor
TO-can
packaging
TIA chip
Limiting
amplifier
chip
Laser
driver
chip
Optical interface chip vendor
BOSA
assembly
ONU MAC
SoC
ONU/ONT CPE
equipment
vendor
e.g. ODM
ASIC vendor
EquipmentBOSA
Source: Ovum
Eliminate transceiver to equipment vendor margin
BOSA assembly can be done by ONU/ONT CPE vendors (ODMs)
or remain with transceiver vendors
Today, several large ODMs are assembling BOSAs themselves
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.24
Flatten further by integrating the PMD into the MAC
Laser die
PIN die
APD die
Optical chip vendor
TO-can
packaging
TIA chip
BOSA
assembly
ONU MAC
SoC
containing
LIA and
laser driver
ONU/ONT CPE
equipment
vendor
e.g. ODM
ASIC vendor
EquipmentBOSA
Laser die
PIN die
APD die
Optical chip vendor
TO-can
packaging
TIA chip
BOSA
assembly
ONU MAC
SoC
containing
LIA and
laser driver
ONU/ONT CPE
equipment
vendor
e.g. ODM
ASIC vendor
EquipmentBOSA
Source: Ovum
Attractive to large ODMs as may lead to better margins as fewer
component suppliers are needed to build CPE
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.25
Attractive cost reduction estimates
BOSA on Board save about $6.0 in GPON ONT, but not without risks
And new SoC with integrated Laser Diode Driver and Limiting Amplifier will further improve BOSA on Board cost
PON CPE Supply Analysis
BOSA
Transceiver
BOSA On Board Total Cost
BOSA On Board Saving
ONT Price (4)FE+(2)POTS
EPON $7.5 $13.0 $10.0 $3.0 $52.6
GPON $16.0 $25.5 $19.5 $6.0 $55.3
Source: Accton
Risks
Calibration
Testing
Qualification
Acceptance
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.26
CPE device manufacturers or ODMs who we should pay
attention to as the balance of power may shift to them
Cambridge (CIG) T&W (Shenzhen
Gongjin
Electronics Co.)
DareGlobal
Technologies
Hisense(?)
Superxon
Technology(?)
Furukawa(?) Accton Technology
Corp.
CyberTAN
Arcadia MitraStar Askey Computer XAVi Technologies
Corp.
the Alpha Group Comtrend (?) means unclear
of ODM status
And many more
Note that system houses use a mix of in-house CPE and outsourced
(ODM) solutions
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.27
Other structural changes in supply chain to reduce
cost
CPE Vendors
Sell directly to network operator, bypassing system vendor
Assemble own BOSA
Plug-and-play for network operator
Plug and play for consumer
System Vendor
Vertical integration (Huawei as example)
Captive IC supply (HiSilicon)
Assemble own CPE
Build or assemble own optics if necessary
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.28
Fundamental technology to reduce cost and increase
capacity
10G PON
WDM PON
Coherent PON
OFDM PON
etc
Standardization
Reuse of installed base
Develop ecosystem
Low cost
Path to lower cost
Customer pull
Integration of optics and electronics to likely play a role
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.29
Summary of cost reduction approaches for PON ONT
Photonics integration
Integrated circuits integration
Flatten food chain
From transceivers to bidirectional optical sub assemblies (BOSAs) on
board
Network operators bypassing OEMs to purchase ONTs
Vertical integration
BOSA suppliers
System vendor
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.30
Outline
Network operator requirements and demand
The next phase in access technologies for passive optical
components
High bandwidth opportunities for emerging optical components
Risks and challenges with delivering high bandwidth products
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.31
Focus on Long-haul core
Metro coreADMMetro access Long-haul corePremises
Long distances
Highest bandwidth
Highest reliability
Today 10G
Tomorrow 100G
Metric: $/G/km
Short distances
Many connections
High bandwidth
Today Megabits
Tomorrow 1G
Metric $/subscriber
Modest distances
High bandwidth
High reliability
Grooming
Aggregation
Today 10G
$/G/km
Access
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.32
High bandwidth opportunities
100 G—the near-term goal for mainstream bandwidth
Settled on modulation format and coherent receivers to accelerate
development and reduce cost
Cost reduction due to multiple suppliers in alignment
Cost reduction due to use of electronics to clean-up signal
40 G—has ramped and continues to grow
Modulation format zoo still playing out
10 G –today’s leader, yesterday’s technology but not dead
Demand is higher than supply for most 40 and 100G
Yet market is still looking for best solution
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.33
Components and modules needed for DWDM transport
Switch router Switch router
DWDM transport
(80–1000+ km)“Client” optics
(100m–40km)
Switch router with IPoDWDM
Line-side optics
Aggregation,
DSLAM, etc.Multiple lower-speed
clients in muxponder
Optical
transport
Optical
transport
We’re talking about
this connection
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.34
Two markets with different suppliers and dynamics
Components
Lasers
Receivers
Modulators
Modules
300 pin MSA
transponder
XFP transceiver
Components are sold to OEMs and module makers
Modules typically sold to OEMs
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.35
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014 2015 2016
modules discrete ports
100 G DWDM initially led by discrete ports (OEM purchase
components and makes transponder due to expediency)
~1000 total ports shipped in 2010, approaching 100K by 2016
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.36
Expect modules to grow at expense of discrete ports
Historical trend
OEMs want to win the first slots so they invest ahead of component
suppliers
Component vendors focus on cost reduction
Power consumption improvements too
All OEMs not interested in developing 100 G
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.37
And component opportunities for coherent receivers
Tunable
CW laser
4 modulatorsTxOptional
modulator
Mux 4 drivers
Dem
ux
PBSRx
90-deg
optical
hybrid
2 T
IAs
4 P
Ds
90-deg
optical
hybrid
2 T
IAs
4 P
Ds
A/D
A/D
A/D
A/D
DS
P
BSLocal
oscillator
Integrated 100G Coherent
Receiver as defined by
OIF
New ProductNew Product
Optical IntegrationCMOS
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.38
Overcrowding already in some areas, one supplier in
others
Modulator Integrated
receiver
TIA A/D and DSP Mux/Demux
•JDSU
•Sumitomo
Osaka
Cement
•Oclaro
•Fujitsu
Optical
Components
•NEL
•JDSU
•Finisar
•Picometrix
•Neophotonics
•U2t
•Optoplex
•Fujitsu
Optical
Components
•InPhi •Clariphy
•Fujitsu
Microelectroni
cs Europe
•Semtech
Stable Competitive Profitable Don’t know Profitable
Stop-gap until module is ready
And others
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.39
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016
> 10G 10G 40G 100G
CAGR
137%
27%
6%
1%
10 G leads DWDM transceiver market in revenue and
40 G goes ahead by 2013
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.40
40G transitioning to modules—a sign of maturity
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 2013 2014 2015 2016
Merchant ports Captive ports
But the story is modulation format dependent
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.41
Brief modulation format review
ODB DPSK DQPSK DP-QPSK
Bits per
symbol
1 1 2 4
Distance (km) ~500 >500 >500 >500
Relative
Module cost
today
Low High Higher Highest
Commercial
comment
Opnext
(Stratalight)
introduced for
first major
deployment.
Volumes has
declined since
Oclaro
(Mintera)
introduced
module
Huawei
responsible for
most ports
shipped. It
uses
components.
Modules exist.
Ciena (Nortel)
is main
supplier.
Oclaro
recently
introduced 1st
module
ODB is Optical Duo-binary DPSK is Differential Phase Shift Keying
DQPSK is differential quadrature phase shift keying DP-QPSK is duo polarization quadrature phase shift keying
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.42
DQPSK is mostly components while DP-QPSK is
transitioning to modules
0%
20%
40%
60%
80%
100%
120%
2010 2011 2012 2013 2014 2015 2016
ODB DPSK DQPSK DP-QPSK
% m
od
ule
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.43
Opportunity for DQPSK discrete component
Tunable
CW laser2 modulators
Tx
DemuxPhotodiode
TIARx
2 balanced receivers
Integrated balanced receiver
Photodiode
Optional
modulator
2 driversMux
TDC Amp2 DLIs
Tunable dispersion compensator and integrated balance receiver
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.44
Stable supply space
Tunable dispersion
Compensators (TDC)
Delay line
interferometers (DLI)
Integrated balanced
receivers
•Oclaro
•Teraxion
•NEL
•Etc.
•ITF
•Kylia
•NEL
•Furukawa
•NeoPhotonics
•Optoplex
•U2t
•Fujitsu Optical
Components
•Optoplex
And others
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.45
But long term the market is for the DP-QPSK with the
coherent receiver
Due to its synergy with the 100 G
And this will be mostly a Modules market
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.46
DWDM transceiver at 10 G and below is far from dead
Commands more that 50% of the market revenues for next few years
New products are being introduced
Tunable XFP is shipping for revenue
Tunable SFP+ has been announced
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.47
Outline
Network operator requirements and demand
The next phase in access technologies for passive optical
components
High bandwidth opportunities for emerging optical components
Risks and challenges with delivering high bandwidth products
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.48
-20%
-10%
0%
10%
20%
30%
40%
50%
1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11
Pe
rce
nta
ge
Operating margin Gross margin
Industry aggregate gross and operating margins topped out in late 2010.
Despite recent decline, gross and operating margins are still near historic highs.
Revenue decline but also increased R&D cited as causes
OC is challenged to hold onto margin improvements
Source: Financial statements from AFOP, Avago, Avanex, Emcore, Finisar, JDSU,
NeoPhotonics, Oclaro, Oplink, Opnext, and Source Photonics.
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.49
Low cost PON demand does not mean low
performance
Use avalanche photodiodes in receivers
Used to be a high-end photodiode for telecom core applications
Use distributed feedback lasers in transmitters
Used to be a high-end laser for telecom core applications
Use burst mode integrated circuits drivers at the ONU/ONT and burst
mode receivers at the OLT
Developed for the PON market
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.50
Component vendors may fear that lessons learned in
PON migrates back to metro and core
Metro and core demand the same access cost reduction schedule
Distributed feedback lasers
Avalanche photodiodes
Cost reduction practices developed in access are implemented in core
and access
Limit use of isolators
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.51
Spending R&D budget in the “right” areas
Which modulation format was the constant 40G question asked by
module developers
Multiple modulation formats were deployed
First deployed also first to vanish
Still waiting for coherent 40G modules
Still no metro 40G solution (optimized for 80 to 500 km)
OIF helped stabilize 100G DWDM solution, but client and metro are
battle ground for competing approaches
See 10x10 MSA vs IEEE for client
See direct detect vs coherent for metro
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.52
Timing is an important element
First to market does not necessarily mean market leadership
Market laggards can win substantial market share
See Oclaro and its tunable laser business
Revenues and profits can be made with short-lived solutions
Opnext and Stratalight on ODB
High development activity does not lead to fast revenue
See 10G PON as example
© Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.53
Pay attention to the competitive landscape
New technical advances can displace market leaders
See Finisar overtaking JDSU in the wavelength selective switch market
because market wanted 50 GHz
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Summary
Network operators want to spend less while supporting more traffic and end-customers
PON ONT is a challenging cost reduction battleground
Photonic and IC integration approaches are emerging
Flattening the supply chain and vertical integration are attractive
Network core needs higher bandwidth (40 and 100G)
Market delivering modules and components
Sustaining profitability is challenging in this market, notwithstanding the demand
Keep innovating technology, business models, etc.
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