Photonic integration: Big money in small packages?

Optical components vendors have talked a lot about photonic integration over the years, but now the technology is about to go mainstream and is expected to account for roughly 50% of the entire optical components market in five years time. That’s the view of Daryl Inniss, vice president and practice leader at market research firm Ovum, who presented at the Market Focus forum at ECOC 2012 in Amsterdam.

“When Cisco announced that it was going to purchase Lightwire, it was a transformational moment,” said Inniss (see "Cisco to acquire CMOS silicon photonics firm Lightwire"). When a vendor like Cisco – the world’s leading consumer of optical transceivers – shells out a substantial sum of money to acquire a technology, then clearly something has changed.

Although there are some photonic integrated circuit (PIC) components available today, so far the market has only delivered really complex, high-cost products, says Inniss. Optical equipment vendor Infinera is the primary example – they didn’t just build a complex product, they built an entire system around it. Another example would be the planar lightwave circuit (PLC) reconfigurable optical add-drop multiplexer (ROADM) chip, a highly complex – and therefore expensive – component.

The lure of photonic integration has always been that it would bring the manufacturing efficiency and economics associated with electronics to the optical space. Highly complex, customized optical components don’t play to those potential strengths. Optical components developers need to be mindful of “the end game” in photonic integration, namely products that are delivered in high volumes at low cost, Inniss points out.

Market trends are pushing things in the right direction, however. The need for 100G optical modules in a data center environment has resulted in a module specification that cannot be satisfied by discrete components. Integration is needed for CFP2 and beyond. Indeed, at the ECOC exhibition Finisar Corp. has launched 100 Gigabit Ethernet LR4 module in the CFP2 form factor, which replaces four laser packages and four coolers inside the package with a four-DFB-laser array and single cooler. Datacom is a very cost-sensitive market where photonic integration will make a significant impact.

There is also an embryonic opportunity in optical interconnect on a much shorter scale, such as between and even inside electronic ICs in a high-performance computing or storage environment.

At this point, a familiar problem rears its head: There appears to be an over-supply of companies pursuing those opportunities. The established optical components players, such as Avago, Fujitsu, Finisar, and Oclaro, have been joined by a raft of startups. A few, like Luxtera and Kotura, have been pursuing photonic integration for about a decade, and have products shipping. Others, like Aurrion and Skorpios, were founded more recently. In addition, the big computing and switch vendors, like IBM, Intel, Oracle, and HP, have internal development teams working on photonic integration, as do some of the optical equipment vendors, such as Alcatel-Lucent.

Not all vendors are pursing the same applications. Some are looking at datacom, some are interested in telecom and others have their eye on the potentially huge but more distant interconnect market. Vendors in different markets will develop different expertise; optical interconnects will typically use lower speeds than datacom modules, but with a higher degree of parallelism, for example. The jury is still out on whether it’s a good idea to integrate electronics with optical functions and potentially take a hit on performance, or whether two materials are better than one.

The biggest question is who’s going to drive these products through the commercialization phase? Ovum is betting that companies like IBM or Cisco will really push the market early, but in the long term, the merchant suppliers will take over. And the prize promises to be substantial: Ovum forecasts that the market for photonic integration could be worth $11.2 billion by 2017.