Chinese vendors picking up optical assets

Karen Liu, Principal Analyst, Components, Ovum

AUSTRALIA: PLC technology is used in splitters for the very large Chinese FTTx market. This year has seen Chinese companies advancing from optical module assembly to manufacturing of chips for optical communication in pursuit of competitive advantage. (Reportedly, 85 splitter vendors responded to China Telecom’s request for quote this year.)

However, as has happened before in China, the swing from shortage to over competition seemed instantaneous.  Several PLC chip companies have suddenly sprung up in China. Wafer prices reportedly have declined 40 percent in a single year. Accelink has the size and public company status to stand above the crowd, but the PLC market is tough.

We like that Accelink chose to reuse existing industry assets rather than add to the global glut of PLC wafers by jumping in like the other new entrants.

An established history of successful process can be a valuable differentiator for chip fabs. By buying Ignis Photonyx, Accelink has entered the fray with a proven global supplier that has had relationships with global leaders Oclaro (which was formed by the merger of Bookham and Avanex – Ignis Photonyx’s parent company Ignis ASA was formed from a Bookham subsidiary), NeoPhotonics (which previously had supply agreements and an ownership stake in Ignis ASA), and Finisar (which acquired parent Ignis ASA in 2011 and whose relationship to this deal is unclear.)”

Advanced lasers are still missing a piece
Historically, China has been fast to pick up passives technology. This pattern continues. Recently, II-VI picked up Oclaro’s US-based thin-film filter business to put into its Chinese OC subsidiary Photop.

We are particularly interested to see if Chinese vendors will also acquire actives technology.   There will be a shake-out in market share as technology transitions create openings at 100G.  Component vendors must invest if they want to be competitive in the future.

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