Silicon photonics: concerns but viable and still evolving
Blaine Bateman set himself an ambitious goal when he started researching the topic of silicon photonics. The president of the management consultancy, EAF LLC, wanted to answer some key questions for a broad audience, not just academics and researchers developing silicon photonics but executives working in data centres, telecom and IT.
The result is a 192-page report entitled Silicon Photonics: Business Situation Report, 59 pages alone being references. In contrast to traditional market research reports, there is also no forecast or company profiles.
Blaine Bateman's risk meter for silicon photonics. Eleven key elements needed to deploy a silicon photonics solution were considered. And these were assessed from the perspective of various communities involved or impacted by the technology, from silicon providers to cloud-computing users. Source: EAF LLC.
“I thought it would be helpful to give people a business view,” says Bateman.
Bateman works with companies on strategy in such areas as antennas, wireless technologies and more recently analytics and machine learning. But a growing awareness of photonics made him want to research the topic. “I could see a convergence between the evolution of telecom switching centres to become more like data centres, and data centres starting to look more like telecoms,” he says.
The attraction of silicon photonics is that it is an emerging technology with wide applicability in communications.
Just watching entirely new technologies emerge and become commercially viable in the span of ten years; it is astonishing
“Silicon Photonics is a good topic to research and publish to help a broader community because it is highly technical,” says Bateman. “It is also a great case study, just watching entirely new technologies emerge and become commercially viable in the span of ten years; it is astonishing.”
Bateman spent two years conducting interviews and reading a vast number of academic papers and trade-press articles before publishing the report earlier this year.
Blaine BatemanThe main near-term opportunity for silicon photonics he investigated is the data centre. Moreover, not just large-scale data centre players with an obvious need for cheaper optics to interconnect servers but also enterprises facing important decisions regarding their cloud-computing strategy.
“The view that I developed is that it is still very early,” he says. “The price points for a given performance [of optics] are significantly higher than a Facebook thinks they need to meet their long-term business perspectives.”
The price-performance figure commonly floated is one dollar per gigabit but current 100-gigabit pluggable modules, whether using indium phosphide or silicon photonics, are several times more costly than that.
This is an important issue for cloud providers and for enterprises determining their cloud strategy.
Do cloud provider invest money in silicon photonics technologies for their data centres or do they let others be early adopters and come in later when prices have dropped? Equally, an enterprise considering moving their business operations to the cloud is in a precarious position, says Bateman. “If you pick the wrong horse, you could be boxed into a level of price and performance, while you will have competitors starting with cloud providers that have a 30 to 50 percent price-performance advantage,” he says. “In my view, it will trickle all the way to the large consumers of cloud resources.”
Longer term, the market will resolve the relative success of silicon photonics versus traditional optics but, near term, companies have some expensive decisions to make. “The price curve is still in the early phase,” says Bateman. “It just hasn’t come down enough that it is an easy decision.”
Bateman’s advice to enterprises considering a potential cloud provider is to ask about its roadmap plans regarding the deployment of photonics.
Findings
To help understand the technology and business risks associated with silicon photonics, Bateman has created risk meters. These are intuitive graphics that show the status of the different elements making up silicon photonics and the issues involved when making silicon phonics devices. These include the light source, modulation method, formation of the waveguides, fibering the chip and fabrication plants.
“The reason the fab is such a high risk is that even though the idea was to leverage existing foundries, in truth it is very much new processes,” says Bateman. “There is also a limited number of fabs that can build these things.”
The report also includes a risk meter summarising the overall status of silicon photonics (see above).
Bateman says there are concerns regarding silicon photonics which people need to be aware of but stresses that it is a viable technology.
This is one of two main conclusions he highlights. Silicon photonics is not mature enough to be at a commodity price. Accordingly, taking a non-commodity or early adopter technology could damage a company’s business plan in terms of cost and performance.
The second takeaway is that for every single aspect of silicon photonics, much is still open. “One of the reasons I made all these lists in the report - and I studied research from all over the globe - is that I wanted to show the management level that silicon photonics is still emerging,” says Bateman.
China is focused on innovation now, and has formidable resources
This surprised him. When a new technology comes to market, it typically uses R&D developed decades earlier. “In this area, I was shocked by the huge amount of basic research this is still ongoing and more and more is being done every day,” says Bateman. “It is daunting; it is moving so fast.”
Another aspect that surprised him was the amount of research coming out of Asia and in particular China. “This is also something new, seeing original work in China and other parts of the world,” he says.
The stereotypical view that China is a source of cheap manufacturing but little in terms of innovation must change, he says. In the US, in particular, there is still a large body of people that think this way, says Bateman: “I feel they have their head in the sand - China is focused on innovation now, and has formidable resources.”
China and the global PON market
China has become the world's biggest market for passive optical network (PON) technology even though deployments there have barely begun. That is because China, with approximately a quarter of a billion households, dwarfs all other markets. Yet according to market research firm Ovum, only 7% of Chinese homes were connected by year end 2011.
"In 2012, BOSAs [board-based PON optical sub-assemblies] will represent the majority versus optical transceivers for PON ONTs and ONUs"
Julie Kunstler, Ovum
Until recently Japan and South Korea were the dominant markets. And while PON deployments continue in these two markets, the rate of deployments has slowed as these optical access markets mature.
According to Ovum, slightly more than 4 million PON optical line terminals (OLTs) ports, located in the central office, were shipped in Asia Pacific in 2011, of which China accounted for the majority. Worldwide OLT shipments for the same period totaled close to 4.5 million. The fact that in China the ratio of OLT to optical network terminal (ONT), the end terminal at the home or building, deployed is relatively low highlights that in the Chinese market the significant growth in PON end terminals is still to come.
The strength of the Chinese market has helped local system vendors Huawei, ZTE and Fiberhome become leading global PON players, accounting for over 85% of the OLTs sold globally in 2011, says Julie Kunstler, principal analayst, optical components at Ovum. Moreover, around 60% of fibre-to-the-x deployments in Europe, Middle East and Africa were supplied by the Chinese vendors. The strongest non-Chinese vendor is Alcatel-Lucent.
Ovum says that the State Grid China Corporation, the largest electric utility company in China, has begun to deploy EPON for their smart grid trial deployments. PON is preferred to wireless technology because of its perceived ability to secure the data. This raises the prospect of two separate PON lines going to each home. But it remains to be seen, says Kunstler, whether this happens or whether the telcos and utilities share the access network.
"After China the next region that will have meaningful numbers is Eastern Europe, followed by South and Central America and we have already seen it in places like Russia,” says Kunstler. Indeed FTTx deployments in Eastern Europe already exceed those in Western Europe.
EPON and GPON
In China both Ethernet PON (EPON) and Gigabit PON (GPON) are being deployed. Ovum estimates that in 2011, 65% of equipment shipments were EPON while GPON represented 35% GPON in China.
China Telecom was the first of the large operators in China to deploy PON and began with EPON. Ovum is now seeing deployments of GPON and in the 3rd quarter of 2012, GPON OLT deployments have overtaken EPON.
China Mobile, not a landline operator, started deployments later and chose GPON. But these GPON deployments are on top of EPON, says Kunstler: "EPON is still heavily deployed by China Telecom, while China Mobile is doing GPON but it is a much smaller player." Moreover, Chinese PON vendors also supplying OLTs that support EPON and GPON, allowing local decisions to be made as to which PON technology is used.
One trend that is impacting the traditional PON optical transceiver market is the growing use of board-based PON optical sub-assemblies (BOSAs). Such PON optics dispenses with the traditional traditional optical module form factor in the interest of trimming costs.
“A number of the larger, established ODMs [original design manufacturers] have begun to ship BOSA-based PON CPEs,” says Kunstler. In 2012, BOSAs will represent the majority versus optical transceivers for PON ONTs/ONUs.” says Kunstler.
10 Gigabit PON
Ovum says that there has been very few deployments of next generation 10G EPON and XG-PON, the 10 Gigabit version of GPON.
"There have been small amounts of 10G [EPON] in China," says Kunstler. "We are talking hundreds or thousands, not the tens of thousands [of units]."
One reason for this is the relative high cost of 10 Gigabit PON which is still in its infancy. Another is the growing shift to deploy fibre-to-the-home (FTTh) versus fibre-to-the-building deployments in China. 10 Gigabit PON makes more sense in multi-dwelling units where the incoming signal is split between apartments. Moving to 10G EPON boosts the incoming bandwidth by 10x while XG-PON would increase the bandwidth by 4x. "The need for 10 Gig for multi-dwelling units is not as strong as originally thought," says Kunstler.
It is a chicken-and-egg issue with 10G PON, says Kunstler. The price of 10G optics would go down if there was more demand, and if there was more demand, the optical vendors would work on bringing down cost. "10G GPON will happen but will take longer," says Kunstler, with volumes starting to ramp from 2014.
However, Ovum thinks that a stronger market application for 10G PON will be for supporting wireless backhaul. The market research company is seeing early deployments of PON for wireless backhaul especially for small cell sites (e.g. picocells). Small cells are typically deployed in urban areas which is where FTTx is deployed. It is too early to know the market forecast for this application but PON will join the list of communications technologies supporting wireless backhaul.
Challenges
Despite the huge expected growth in deployments, driven by China, challenges remain for PON optical transceiver and chip vendors.
The margins on optics and PON silicon continue to be squeezed. ODMs using BOSAs are putting pricing pressure on PON transceiver costs while the vertical integration strategy of system vendors such as Huawei, which also develops some of its own components squeezes, out various independent players. Huawei has its own silicon arm called HiSilicon and its activities in PON has impacted the chip opportunity of the PON merchant suppliers.
"Depending upon who the customer is, depending upon the pricing, depending on the features and the functions, Huawei will make the decision whether they are using HiSilicon or whether they are using merchant silicon from an independent vendor, for example," says Kunstler.
There has been consolidation in the PON chip space as well as several new players. For example, Broadcom acquired Teknouvs and Broadlight while Atheros acquired Opulan and Atheros was then acquired by Qualcomm. Marvell acquired a very small start-up and is now competing with Atheros and Broadcom. Most recently, Realtek is rumored to have a very low-cost PON chip.