The Gilder Telecosm 2006 conference was punctuated by sponsor company presentations. One session had the CEOs of Luxtera and Finisar (NASDAQ:FNSR) presenting, followed by moderator and audience Q&A. I was really looking forward to this discussion given the work I’ve done on SFPs and Cisco.
Conference Title: On the road to 100G Ethernet
Most readers of this blog are familiar with Finisar, the largest provider of low-end optical modules for enterprise applications. I’ve written about them extensively. You may not be familiar with Luxtera. They are building integrated electrical/optical chips in silicon and flip bonding laser sources to the top of the die. The result is a single die with all of the electronics and optical components resulting in a highly compact solution. I would be interested in what readers have to say about the pros and cons of their solution.
It was also interesting to see how many people were familiar with the Cisco Monopsony, though most people I spoke with seemed to attribute the work to Lightreading.
Jerry Rawls (CEO of Finisar) didn’t offer anything spectacular in terms of technology. His presentation and discussions on various panels throughout the day left the impression that Finisar realizes what it should be- a low cost producer of commodity product. There isn’t a lot of flash in what he presents, and that’s fine by me.
Here are my notes from the conference. Italics are my comments. Plain Text is my transcription
Jerry Rawls- Finisar Chairman and CEO
Optics are back. Standard fare here, bandwidth and storage explosion, nothing revolutionary. Cites Parkinson’s Law. Never heard the law used in this context before, interesting stuff.
How do we get to 100G? Direct Modulation, WDM. Phase Shift Keying. IEEE starting to meet with volume production capability in 2011. He thought WDM would be the first path. Note I think Luxtera’s technology is ideal for such a solution (long wavelength, high integration) - what do you think?
Alex Dickinson - Luxtera CEO
CMOS always wins. Ah, that’s always a no lose throwaway argument. Some good charts on optical vs. electrical power requirements for transmission over equivalent distance.
Not really presenting exactly what Luxtera does. “Transition of optics to CMOS”. Not doing the technology justice here guys… too dumbed down. Let’s get hardcore.
Problem: Electronics are printed, optics are assembled. OK, getting better, I like that a lot! Playing pretty fast and loose, claims they have a chip that integrates 2 full 10G XFP’s into a single chip… that is not really true - they can’t integrate the light source - that still needs to be assembled. They also don’t highlight that this thing only works in the 1310nm lambda range.
Lots of tangential applications, very stable oscillators for wireless applications, medical applications, consumer optical interconnect. HDMI replacement? They should be targeting consumer applications if this is so low cost.
Q&A From Moderator
Question: Finisar spending a lot on 10G. How will you compete with Luxtera technology? Rawls: Thinks Luxtera is a neat technology, but there are some problems. Not a near term issue. Translation: Build 1M of these things with decent yield then ask me that question. He handled a tough question with tact.
Question: When does Luxtera go into production? Dickinson: First product will be a quad (I didn’t hear a date). Challenging when Cisco is the largest customer.. a .. uh … searching for the word (MONOPSONY - You heard it from me).
Question: What about SFP’s? How does Luxtera succeed without addressing SFP’s? Dickinson: Address markets with faster turnover, more sensitivity to cost. Possible that cost benefits of this solution would eliminate the SFP and 10GE boards ship with optics integrated? This makes sense if 50% of applications are short reach only.
Question: How do you make money given that Cisco makes so much more reselling modules than you do selling modules to Cisco (Uh, clearly this guy reads Lightreading or my blog) Rawls: Indicates that margins are going up and yes, while Cisco does make a lot of money off reselling modules it is not as high as what the author of that article claims.
Question: I identify myself as the author of “The Optical Illusion” and ask the question “I will not ask Jerry because as a major supplier to Cisco, I don’t want to put him in a tough position. But how could Luxtera break the Cisco Monopsony? Answer: Need to stop using identical technology and deliver a unique component with an advantage over the state of the art. Disrupt. De-commoditize. Jerry adds in - Finisar gross margins have gone from 20% to 40%. Vertical integration works too and we are a big player (I Agree, good answers from both).
Full Disclosure: I hold positions in Finisar