Source: Communications Industry Researchers, Inc.
Charlottesville, VA. Several decades of research by the optical components industry on how to build integrated optical circuits similar to those manufactured by the microelectronics industry are at last beginning to bear fruit, according to a new report from Communications Industry Researchers, Inc., an optical networking and components consulting firm based here. According to The Market for Integrated Optical Products: 2001-2005, the worldwide market for integrated optical components will grow from $13.4 million in 2001 to $2.6 billion by 2005. (See Exhibit I at the end of the release.)
Why Now?
CIR believes there are two key reasons why the integrated optics market is poised to take off:
The strongest demand in the optical components industry is increasingly for access and metro products and these require low cost and a small footprint. These characteristics are exactly what integrated optical components can potentially offer. A major barrier to creating integrated optical circuits is disappearing because the optical components industry is abandoning the "pure," but hard-to-achieve, vision of monolithic optical integrated circuits on a single chip. Instead, the industry is adopting a more pragmatic vision of hybrid optical circuits in which single function chips will be bonded together within one package. What Opportunities?
The new CIR report is based on dozens of interviews with leading equipment vendors who have shared their need for integrated optics with CIR. Based on an analysis of these interviews, CIR believes that opportunities in the integrated optical components market will include the following:
Integrated Transmitters and Transceivers. CIR believes such products will have a value of $1.6 billion by 2005. Although the integration of modulators and lasers is nothing new, CIR expects to see more complex products such as the integrated laser and wavelength locker recently introduced by Alcatel and it also expects to see more integration of optics and electronics in transmitters and transceivers. This is an area where CIR believes Agere will shine. Integrated Passive DWDM Products. This segment will account for $103 million in sales by 2005, and will mostly be made up of Arrayed Waveguide (AWG) and Variable Optical Attenuator (VOA) combos, such as those manufactured by JDS Uniphase, Lightwave Microsystems, and Zenastra. Embedded Optical Monitoring Devices. CIR forecasts that by 2005 a $150 million market for integrated optical monitors will emerge to meet the needs of service providers for enhanced optical performance monitoring. Already companies such as AXSUN and Bookham are producing products of this kind. Novel Products. CIR notes that optical integration has the ability to create entirely new types of products. For example, Telephotonics is using optical integration to manufacture a combination tunable Optical Add-Drop Multiplexer (OADM) and Integrated Optical Channel Monitor. CIR projects that by 2005, the market for new components products that could not be created without optical integration will reach almost $500 million. Indium Phosphide Products. Although no one believes that optical integration will ever be based on one material in the way that microelectronics is based on silicon, CIR discovered that both equipment vendors and components manufacturers see great hope for Indium Phosphide (InP), which is really the only material being worked with today from which optical circuitry with many different kinds of optical functionality can be built. Among the companies that are working with this material now are Agere, Gemfire, Genoa and ThreeFive Photonics. CIR predicts that revenues from InP based products could reach $1.1 billion by 2005. But CIR warns that InP is not a "sure thing." The new report points out that missteps with InP products a few years ago was one of the factors that ultimately led to the recent bankruptcy of Nanovation. Why Early Entry?
The Market for Integrated Optical Products: 2001-2005 says that although the value of the integrated optics market may be small today, seizing the opportunities that it will offer in a few years may require early entry for two reasons: Yields. The CIR research team discovered that the manufacturing yields for integrated optical components are extremely low, as much as 20 percent in some cases. This means that the unit cost of producing integrated optical components is quite high. CIR predicts that achieving better yields will become a key way to gain a competitive advantage in the optical integration business, but as the microelectronics industry has demonstrated, significant yield improvements come only from lengthy manufacturing experience. This implies that better yields are achieved by firms who have been around for a while and this favors earlier entrants. Lead Times. While revenues from integrated optics products will not be significant until 2003, the manufacturers that will share in those revenues will be those that are working now to achieve design wins from major equipment vendors. The lead time from when an integrated components manufacturer targets an equipment vendor as a likely customer through to when the equipment vendor ships a product containing the integrated components can be as long as two years. The Market for Integrated Optical Products: 2001-2005 reviews the many different kinds of emerging technologies associated with optical integration and provides five-year forecasts of integrated optical components broken down by product type and the materials/technology used to produce them. The report also contains case studies of 14 equipment vendors setting out their views on optical integration and what would cause them to buy or reject integrated optical components. In addition, it includes profiles and assessments of all the movers and shakers in the world of optical integration, along with profiles of some of the more interesting optical integration start-ups. CIR s new report is available to interested buyers at a cost of $4,500 for hard copy and may also be purchased in electronic formats. For a table of contents and ordering information, contact Robert Nolan at CIR s main office at 804-984-0245 ext. 15 or robert.nolan@cir-inc.com. Members of the accredited trade press may receive a full Executive Summary as well as schedule interviews with the analysts of this report by contacting Lisa Rogers at 804-984-0245 ext. 13 or lisa.rogers@cir-inc.com. A description and table of contents for the report is also available on the CIR Web site, http://www.cir-inc.com.
CIR is a leading industry analyst firm specializing in the areas of optical networking systems, software and components. Through its reports, market advisory services, and custom client engagements, CIR provides insightful research, analysis, and consulting services for the optical market. CIR relies upon service provider activities and "demand side" research as the basis for its opinions and forecasts, so as to provide realistic and credible analysis and insights for both its clients and the industry at large.
Exhibit I Market Summary of Integrated Optical Components ($ Millions)
2001 2005
Transmitters and Transceivers 5.4 1617.8 Passive DWDM Products 0.8 102.9 Switches 0.8 77.2 Amplifiers 3.5 128.6 Monitors 1.2 150.0 Backplane Applications 1 50 Other 0.7 498.8 GRAND TOTAL 3.4 2625.3
Source: CIR
Contact: Robert Nolan Tel: 804-984-0245, ext. 15 robert.nolan@cir-inc.com or Lisa Rogers Tel: 804-984-0245, ext. 13 lisa.rogers@cir-inc.com, both of Communications Industry Researchers, Inc.
Robert Nolan
Tel: 804-984-0245, ext. 15
robert.nolan@cir-inc.com
or
Lisa Rogers
Tel: 804-984-0245, ext. 13
lisa.rogers@cir-inc.com, both of Communications Industry Researchers, Inc.
E-mail: lisa.rogers@cir-inc.com
Web site: http://www.cir-inc.com 
