Oclaro points its laser diodes at new markets
“To succeed in any market ... you need to be the best at something, to have that sustainable differentiator”
Yves LeMaitre, Oclaro
Now LeMaitre is executive vice president at Oclaro, managing the company’s advanced photonics solutions (APS) arm. The APS division is tasked with developing non-telecom opportunities based on Oclaro’s high-power laser diode portfolio, and accounts for 10%-15% of the company’s revenues.
“The goal is not to create a separate business,” says LeMaitre. “Our goal is to use the infrastructure and the technologies we have, find those niche markets that need these technologies and grow off them.”
Recently Oclaro opened a design centre in Tucson, Arizona that adds packing expertise to its existing high-power laser diode chip business. The company bolstered its laser diode product line in June 2009 when Oclaro gained the Newport Spectra Physics division in a business swap. “We became the largest merchant vendor for high-power laser diodes,” says LeMaitre.
The products include single laser chips, laser arrays and stacked arrays that deliver hundred of watts of output power. “We had all that fundamental chip technology,” says LeMaitre. “What we have been less good at is packaging those chips - managing the thermals as well as coupling that raw chip output power into fibre.”
The new design centre is focussed on packaging which typically must be tailored for each product.
Laser diodes
There are three laser types that use laser diodes, either directly or as ‘pumps’:
- Solid-state laser, known as diode-pumped solid-state (DPSS) lasers.
- Fibre laser, where the fibre is the medium that amplifies light.
- Direct diode laser - here the semiconductor diode itself generates the light.
All three types use laser diodes that operate in the 800-980nm range. Oclaro has much experience in gallium arsenide pump-diode designs for telecom that operate at 920nm wavelengths and above.
Laser diode designs for non-telecom applications are also gallium arsenide-based but operate at 800nm and above. They are also scaled-up designs, says LeMaitre: “If you can get 1W on a single mode fibre for telecom, you can get 10W on a multi-mode fibre.” Combining the lasers in an array allows 100-200W outputs. And by stacking the arrays while inserting cooling between the layers, several hundreds of watts of output power are possible.
The lasers are typically sold as packaged and cooled designs, rather than as raw chips. The laser beam can be collimated to precisely deliver the light, or the beam may be coupled when fibre is the preferred delivery medium.
“The laser beam is used to heat, to weld, to burn, to mark and to engrave,” says LeMaitre. “That beam may be coming directly from the laser [diode], or from another medium that is pumped by the laser [diode].” Such designs require specialist packaging, says LeMaitre, and this is what Oclaro secured when it acquired the Spectra Physics division.
Applications
Laser diodes are used in four main markets which Oclaro values at US$800 million a year.
One is the mature, industrial market. Here lasers are used for manufacturing tasks such as metal welding and metal cutting, marking and welding of plastics, and scribing semiconductor wafers.
Another is high-quality printing where the lasers are used to mark large printing plates. This, says LeMaitre, is a small specialist market.
Health care is a growing market for lasers which are used for surgery, although the largest segment is now skin and hair treatment.
The final main market is consumer where vertical-cavity surface-emitting lasers (VCSELs) are used. The VCSELs have output powers in the tens or hundreds of milliwatts only and are used in computer mouse interfaces and for cursor navigation in smartphones.
“These are simple applications that use lasers because they provide reliable, high-quality optical control of the device,” says LeMaitre. “We are talking tens of millions of [VCSEL] devices [a year] that we are shipping right now for these types of applications.”
Oclaro is a supplier of VCSELs for Light Peak, Intel’s high-speed optical cable technology to link electronic devices. “There will be adoptions of the initial Light Peak starting the end of this year or early next year, and we are starting to ramp up production for that,” says LeMaitre. “In the meantime, there are many alternative [designs] happening – the market is extremely active – and we are talking to a lot of players.” Oclaro sells the laser chips for such interface designs; it does not sell optical engines or the cables.
Is Oclaro pursuing optical engines for datacom applications, linking large switch and IP router systems? “We are actively looking at that but we haven’t made any public announcements,” he says.
Market status
LeMaitre has been at Oclaro since 2008 when Avanex merged with Bookham (to become Oclaro). Before that, he was CEO at optical component start-up, LightConnect.
How does the industry now compare with that of a decade ago?
“At that time [of the downturn] the feeling was that it was going to be tough for maybe a year or two but that by 2002 or 2003 the market would be back to normal,” says LeMaitre. “Certainly no-one expected the downturn would last five years.” Since then, nearly all of the start-ups have been acquired or have exited; Oclaro itself is the result of the merger of some 15 companies.
“People were talking about the need for consolidation, well, it has happened,” he says. Oclaro’s main market – optical components for metro and long haul transmission – now has some four main players. “The consolidation has allowed these companies, including Oclaro, to reach a level of profitability which has not been possible until the last two years,” says LeMaitre.
Demand for bandwidth has continued even with the recent economic downturn, and this has helped the financial performance of the optical component companies.
“The need for bandwidth has still sustained some reasonable level of investment even in the dark times,” he says. “The market is not as sexy as it was in those [boom] days but it is much more healthy; a sign of the industry maturing.”
Industry maturity also brings corporate stability which LeMaitre says provides a healthy backdrop when developing new business opportunities.
The industrial, healthcare and printing markets require greater customisation than optical components for telecom, he says, whereas the consumer market is the opposite, being characterised by vastly greater unit volumes.
“To succeed in any market – this is true for this market and for the telecom market – you need to be the best at something, to have that sustainable differentiator,” says LeMaitre. For Oclaro, its differentiator is its semiconductor laser chip expertise. “If you don’t have a sustainable differentiator, it just doesn’t work.”
Oclaro: R&D key for growth
“We didn’t sell to Intel,” explains Alain Couder, the boss of Oclaro. “Intel looked for a fab[rication plant] that has good VCSEL technology and that could scale and they found us.”
Couder was talking about how Oclaro became a supplier of vertical-cavity surface-emitting lasers (VCSELs) for Intel’s Light Peak optical cable interface technology. VCSELs are part of Oclaro’s Advanced Photonics Solutions, a division addressing non-telecom markets accounting for between 10 and 15 percent of the company’s revenues.
“I believe very clearly that if a component is available on the market, even if you are a module builder, you are much better off selling to your competition rather than having others do so.”
Alain Couder, Oclaro
Couder joined Bookham in August 2007 and oversaw its merger with Avanex in 2009, resulting in Oclaro. The restructuring has been intensive, with unprofitable product lines discontinued, facilities closed and jobs cut.
“During all this restructuring we never cut R&D,” says Couder. “We have been able to increase our [R&D] people as a third are now in Asia,” he says. “Even in Europe – the UK and Italy – [the cost of] engineers are two-thirds that of the US or Japan.” Indeed Couder says the company is increasing R&D spending from 11 to 13 percent of its revenues. “With growth that we have had - on average 10 percent quarter-on-quarter - we are hiring R&D staff as quickly as we can.”
Vertical integration
Oclaro’s CEO believes being a vertically integrated company – making optical components and modules – is an important differentiator. By designing optical components, Oclaro can drive down cost and tailor designs that it can sell to system vendors and module makers. Such a capability also benefits Oclaro’s own modules.
Couder stresses that there is no conflict of interest selling optical components to module firms that Oclaro competes with. “I believe very clearly that if a component is available on the market, even if you are a module builder, you are much better off selling to your competition rather than having others do so.”
Oclaro supplies components to the likes of Finisar and Opnext, he says, and it has not stopped Oclaro being successful with its 10 Gigabit small form factor (SFF) transponder. Being vertically integrated benefits Oclaro’s modules, growing its market share, says Couder: “Like this year with the SFF and as we expect to be doing next year with our tunable XFPs.” Selling 10 Gigabit-per-second (Gbps) modules also means telecom vendors are buying more modules and less optical components.
“We are going to pursue the same strategy at 40 and 100 Gig,” says Couder. System vendors such as Alcatel-Lucent and Ciena may design their line side optics but as designs become cheaper and performance optimised, Oclaro will be better able to compete. “Our own module solution, or at least our gold box, becomes more competitive than their own design,” he says.
Another important technology aiding vertical integration is photonic integration. “As you put more functions on one chip you get better value,” says Couder. Oclaro has integrated a laser and modulator in indium phosphide that replaces two optical functions that until now have been sold separately. The integrated design takes a third less space yet Oclaro can sell it at a better margin.
40 and 100Gbps markets
Oclaro supplies optical components for 40Gbps differential phase-shift keying (DPSK) modulation and offers its own components and module for 40Gbps differential quadrature phase-shift keying (DQPSK) for the metro/ regional market. Indeed Oclaro is a DQPSK reference design provider for Huawei, the Chinese system vendor with more than 30 percent market share at 40Gbps.
Oclaro is also developing a 100Gbps coherent detection module based on polarisation multiplexing quadrature phase-shift keying (PM-QPSK) modulation, the industry defacto standard. “We think for the very long haul there might be a small market for PM-QPSK at 40Gbps but most of the coherent modulation will be at 100Gbps,” says Couder. “But at the [40Gbps] module level we are continue to be focused on DQPSK.”
Given the recent flurry of 100Gbps coherent announcements, is Oclaro seeing signs of 40Gbps being squeezed and becoming a stop-gap market? “
The only thing I can tell you is that I got this morning again an escalation from one top customer because we can’t supply optical components fast enough for their 40Gbps deployment,” says Couder. “This is all the noise around coherent - 100Gbps will be deployed but even at 100Gbps people are looking at shorter distance solution that are cheaper than coherent. I have not seen any slowing down of 40Gbps.”
He expects 40Gbps to mirror the 10Gbps market which is set for healthy sales over the coming two to three years. Prices continue to come down at 10Gbps and the same is happening at 40Gbps. Ten gigabit modules range from $1,500 to $1,800 depending on their specification while 40Gbps modules are around $6,000. Meanwhile 100Gbps modules will at least be twice the cost of 40Gbps. “There are many sub-networks deployed with [40Gbps] DPSK and DQPSK and I don’t see how operators are going to change everything to 100Gbps on those sub-networks,” says Couder.
Clariphy investment
Oclaro recently announced it had invested US $7.5 million in chip firm Clariphy Communications. Oclaro will develop with Clariphy coherent receiver chip technology for 100Gbps optical transmission and co-market Clariphy's ICs. “We will train our sales force on Clariphy products so we can present to our customers a combination of optical and high-speed components,” says Couder. “We will go as far as giving reference designs.”
In addition to the emerging 100Gbps, there will be marketing of Oclaro’s tunable XFP+ with Clariphy’s ICs and also co-marketing of 40Gbps technology, for example Oclaro’s balanced receiver working with Clariphy’s 40Gbps coherent IC.
Choosing Clariphy was straightforward, says Couder. There were only three “serious” component suppliers: CoreOptics, Opnext and Clariphy. Cisco Systems has announced its plan to acquire CoreOptics while Opnext is a competitor. But Couder stresses that the investment in Clariphy also follows two years of working together.
Couder agrees that the 100Gbps coherent application-specific integrated circuit (ASIC) market is heating up and that there are many potential entrants. That said, he is unaware of many other players that can present a combination of optical components and the ASIC. He also thinks Clariphy has an elegant ASIC that combines the analogue and digital circuitry on one chip.
Meanwhile the Cisco acquisition of CoreOptics is good news for Oclaro. “It took one of the suppliers out of the market; one that was well positioned.” Oclaro is also a supplier of optical components to CoreOptics and to Cisco. “We expect to continue to supply and for us this will be a plus as it [Cisco/ CoreOptics’s solutions] will scale much faster,” he says.
Growth
In other product areas, Oclaro is focussing on its tunable XFP after first launching a extended XFP tunable laser design. “We’re sampling this quarter the regular tunable XFP,” says Couder. “We have been selling a few extended XFPs – the X2 – but the big market is the tunable XFP.”
Oclaro has two offerings – a replacement for the 80km fixed-wavelength XFP that will ship at the end of the end of the year, and a higher specification tunable XFP aimed at replacing 10Gbps 300-pin tunable modules. Couder admits JDS Uniphase dominates tunable XFPs having been first to market. “But we are coming very close behind and what customers are telling me is our performance is better.”
The market for optical amplifiers is also experiencing growth. “We are back to the level before the downturn, back to the level of September 2008,” he says.
The drivers? More optical networking links in the core are being deployed to accommodate growth in wireless traffic, video servers and FTTx, he says. Oclaro is also starting to see demand for lower latency networks. “Some financial applications are looking for lower latency,” he says. “They need gain blocks for 40Gig now and 100Gig tomorrow.” Another telecom segment Oclaro claims it is doing well is tunable optical dispersion compensation modules.
Outside telecom Oclaro's next generation pump products are finding use in cosmetic products while its VCSELs are being used for a future disk drive design. Then there is Light Peak, Intel’s high-speed optical cable technology to link electronic devices. “Intel’s Light Peak will be big; when exactly it will deployed I'm not in a position to say but it will be calendar year 2011.”