Digital Vision Threatens Incumbent Telcos
Infinera only started shipping systems featuring its 100 Gbit/s receivers and transmitters 15 months ago, but it has already brushed aside the likes of Alcatel and Nortel and grabbed the top spot for 10 Gbit/s long-haul market wavelength deployments.
It s a meteoric rise that company founder and CEO Jagdeep Singh puts down to a focus on digital networks and a skepticism for the all-optical networks that were seen as the holy grail when the firm was founded in 2001. According to Singh, the all-optical vision had a major flaw - it meant that the carriers no longer had access to the bits that they were carrying. To Singh that approach made as much sense as selling airplanes that could fly all day but couldn t land. "It doesn t help the airlines to fly planes - it helps them to pick up and drop off passengers."
It s the same with network operators who make their money by adding, dropping and manipulating traffic, says Singh. With all-optical networks it is only possible to add and drop at the endpoints, but this restriction can be overcome by turning to digital networks featuring components that deliver optical-electrical-optical (OEO) conversions. "We took on a blasphemous position of saying that OEOs are good, and we ve been vindicated by the all-optical network never taking off," remarked Singh.
After several years of development, Infinera had built an InP wafer fab in Sunnyvale, CA, along with the products it needed for its digital networks, but it still had to convince potential customers to go with a start-up company offering a new technology. "The way we overcame this was pure economics," said Singh. Customers could immediately see the cost savings that our technology made possible, and were frightened of being priced out of the market if they stood still while their rivals went digital.
According to Singh, the company s system costs are lower than those of the incumbent analog networks because they use fewer components and are easier to upgrade and maintain. With Infinera s approach, its InP-based OEO chips are inserted in the network at points up to 100 km apart, and information is transferred digitally, which aids fault-finding because the bits can be seen directly.
Infinera s vertical integration has also been instrumental in converting the company s vision for digital networks into system sales. "It all comes down to the specifications of the performance of each device," explained Singh. "What is the right specification for those hundreds of parameters? It has to simultaneously meet two needs. One is that it is manufacturable, and
the second is that you can build a real network with it." Part of the solution was to get the chip engineers to work side-by-side with the system specialists.
Infinera s disruptive technology has shaken up the pecking order in the long-haul market, but no other firm has responded by launching it own photonic integrated technology. This does not surprise Singh, who argues that many of the telecom chip makers such as Bookham have been focused on cost cutting, and cannot afford to pursue a technology that requires $200 million of investment.
Infinera s growth has actually had a mixed effect on optical component manufacturers. It buys some optical components such as filters to put into its systems, but the deployment of its own receiver and transmitter chips eats into sales of lasers and detectors. "In the long term we re killing their business model, but in the short term we re their customers," quipped Singh, who added that Infinera s low system costs are now having a knock-on effect of pushing down component prices.
It looks like Infinera will have a rosy future as it wins an increasing market share in long-haul, regional and metro networks. Its current excess fab capacity will be able to accommodate this growth, and Singh predicts that an upgrade will not be needed for several years. The success could even drive Infinera s annual sales towards the $1 billion mark, which would fuel the case for a launch onto the stock market.
In fact, Singh believes that an IPO over the next couple of years is a distinct possibility, with the timing dependent on market conditions. And if that does take place, it would represent both a massive pay back for Singh and a vindication of his digital vision.