Mergers hit fiber-optic IC market

March 1, 2000

By Stephen Hardy

The mergers and acquisitions frenzy that has swept the fiber-optic systems space has spread to the circuit level. As is often the case with the joining of systems manufacturers, the acquisition of Microcosm Communications Ltd. (Bristol, UK) by Conexant Systems Inc. (Newport Beach, CA) represents an effort to provide a single source for a wide variety of products.

Conexant paid an initial $128 million in stock for Microcosm Communications, which specializes in complementary metal-oxide semiconductor (CMOS) chips for fiber-optic systems applications at speeds of 2.5 Gbits/sec and below. Conexant could add as much as $52 million more to the deal if Microcosm meets certain performance thresholds. Microcosm will become part of Conexant's Network Access Div.

Both companies are "fabless" houses that contract with third-party fabrication plants for mass production of their designs. According to Raouf Halim, senior vice president and general manager at Conexant and head of the Network Access Div., Microcosm Communications' expertise in designs for low-speed applications complements Conexant's work at higher speeds such as 10 Gbits/sec. The addition of the Microcosm product line, which includes laser drivers, transimpedance amplifiers, and other chips for transceiver applications, as well as a range of mixed-signal de vices such as multiplexers/ de multiplexers, will further Conexant's drive to become a "one-stop shop" for communications equipment manufacturers seeking integrated circuits.

The appearance of large-scale chip manufacturers such as Conexant in the marketplace appears to have influenced Microcosm Communications' decision to give up its independence. Gary Steele, Microcosm president and CEO, reports that while his firm has successfully carved a niche for itself by focusing on CMOS-based chips for fiber optics, the explosion in fiber-optic networking means that the competition now underway at the systems level is about to be repeated in the chip space. With the chip market becoming a land of the giants, it seemed prudent not to buck the trend. Steele also says that the merger will benefit his company by providing access to other wafer process technology as well as the marketing and sales resources inherent in a larger company.

Additional expertise, particularly in SiGe, will be necessary as the Microcosm Communications end of Conexant's Network Access Division attempts to provide higher-speed products, say sources at the company. According to Alixtair Blaxill, vice president of worldwide marketing, and Chris Dyson, Microcosm has focused on differentiating itself with its CMOS and bi-CMOS approaches to chips for Synchronous Optical Network/Synchronous Digital Hierarchy, Asynchronous Transfer Mode, and Gigabit Ethernet applications.

The company has been particularly successful with transceiver manufacturers, they report, due to the benefits of CMOS design. These advantages include the requirement for smaller die sizes and the provision of higher yields than such competing technologies as GaAs. These advantages contribute to what the Microcosm sources estimate is a 10 times cost savings for CMOS over GaAs.

The company is on the verge of producing bi-CMOS chips for 2.5-Gbit/sec applications, with CMOS chips at that speed the next rung up the product ladder. A move to higher speeds, however, will necessitate a change in processes, likely to SiGe, say Blaxill and Dyson. The merger with Conexant will provide access to such expertise, they report.