OFC 2019: Debates continue on industry profitability, the end of pluggables, and integrated optics

LightCounting releases a research note on OFC 2019


The optical transceiver market welcomes new entrants

Suppliers of optical transceivers rarely generate profits, yet so many companies are entering this tough business. Comprised of a variety of products, the transceiver market seems to offer different value for different types of vendors:

  • High-volume mature products are attractive for contract manufacturers and other vendors willing to operate on slim margins.
  • High-performance new products offer an opportunity for companies with strong R&D teams and expertise in chip design and manufacturing.
  • Searching for a sweet spot of high volumes and decent margins seems to be the preferred strategy for all.

CIG announced acquisition of the optical transceiver business of Oclaro from Lumentum on the first day of OFC 2019. Jabil exhibited 100G DCO and ACO modules and probably has plans to do a lot more in the future. Foxconn Interconnect Technology acquired Avago’s transceiver business a few years ago and the company is ready to reclaim its leadership in high performance Ethernet modules.

Suppliers of optical networking equipment, which can generate very high margins in the software business, plan to get their hands and feet dirty in the muddy waters of the optical transceiver market. Juniper announced 100GbE and 400GbE modules manufactured internally using the Silicon Photonics technology of Aurrion, acquired by Juniper in 2016. Ciena, Huawei and Infinera announced plans ahead of OFC to offer 400ZR modules and highlighted their growing investments into optical technologies at the show.
There’s fresh money for optics too. Source Photonics announced a $100 million equity investment as it opens a new laser fab in China and upgrades its facilities in Taiwan to meet the demand for optical transceivers for datacenter and mobile fronthaul applications. Chinese manufacturer Shanghai Hengtong Optic-Electric announced an additional $30 million investment in Rockley Photonics, a developer of silicon photonic optical engines – as the partners prepare to address the 400G DR4 market.

2x2=4, but 4x100GbE and 2x200GbE do not equal 400GbE

Live demos of 400G modules were scattered across the OFC show floor.  Network equipment with 400G QSFP-DD or OSFP ports were also plentiful. More significant interoperability demonstrations were a welcome sight to affirm that PAM4 optical modules up to 100Gb/s per lambda will actually communicate. The Ethernet Alliance had a huge and complex interoperability demonstration that included a live 400GbE network spanning a half-dozen booths (part of the demo is shown in the figure below).

Figure: Ethernet Alliance Interoperability Demonstration at OFC 2019


Photo by LightCounting

All this might suggest that serious 400GbE deployment is ready to happen, but that isn't actually the case. Chris Cole of Finisar is on a mission to keep clear the distinction between 400GbE ports on switches, and optical 400GbE ports or transceivers plugged into the switches. For example: Broadcom’s Tomahawk 3 switch chip is designed to support 32 400GbE ports and it can be used with 128 100GbE, 64 200GbE, 32 2x200GbE or 32 4x100GbE optical transceivers. However, none of these are true 400GbE optical ports with a 400GbE MAC. These are really higher density 100GbE or 200GbE optical ports, co-packaged into a single module.

When Arista and Cisco show forecasts for millions of 400GbE ports in 2019-2020, optical transceiver vendors should not assume they are talking about 400GbE optics. Most 400GbE switch ports will actually be supporting 100GbE or 200GbE interfaces for some time. Google is the only customer using 2x200GbE optics now and Amazon plans to deploy 4x100GbE optics in a break-out configuration in 2019, but none of these optical connections will be carrying 400GbE traffic.

400GbE SR4.2 FR4 and LR4 optical transceivers, supporting the use of a 400GbE MAC, are shipping in very low volumes now for testing 400GbE core routers and switches. Combined shipments of these products are projected to reach 1 million units in 2022-2023 – 3 years later than the 400GbE ports on the switches. This is important for optical transceiver makers to keep in mind.




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