Juniper Networks probably had very good reasons for becoming more vertically integrated in the optical space including perhaps the need to internally control its supply of transceivers as well as maybe strengthen its competitive position by acquiring intellectual property. Yet, its purchase of Aurrion and its complex set of moving parts at what seems to be a rather handsome price for the componentry company’s investors appears even more questionable than the router firm's previous pickup of BTI Systems. Aurrion’s focus is on wafer integration, the same type of technology that Intel has struggled to commercialize in the past.
Although once again, following the industry in moving away from the original vision of silicon photonics, in our opinion, this particular adoption of a hybrid platform is truly challenging in placing tiny layers of Indium Phosphide onto the Si wafer. Putting aside the apparent difficulties involved with the lack of CMOS-compatible tools and processes, the aligning and packaging of the two components together seems too expensive, and does not make sense to us.
In order to produce high-end gear, achieving the optimal performance out of all of the components is a necessity. With integration, there are tradeoffs and so one cannot get the best results. For example, the final shakeout in the market may turn out to be using InP for dumb light sources as well as detectors, while employing silicon for everything else.
In addition, silicon devices are only inexpensive with very high volumes – millions of units. Mask costs, big wafer lots, etc. are not really compatible in our optical industry, which tends to put out only tens of thousands of parts per quarter.
Regarding Juniper’s spending on optical components, it has been on the rise. In contrast, we understand that Cisco Systems’ expenditures of this type have generally been flat.
Evidently, with price erosion occurring so quickly, Cisco is positioned internally (including with its in-house transceivers) to not have to raise its spending to produce more widgets. So, as the volume of optical elements significantly increased at Juniper, it apparently decided to try to catch up to its archrival concerning lowering its development cost with its latest buyout.
We are also wondering whether Juniper took a hard look at possibly acquiring Skorpios Technologies. Certainly, in terms of proximity of the operations, Aurrion would have had a decisive edge.
Moreover, although Skorpios has somewhat similar core technology to Aurrion, we would say that the approach of the former is even more daunting to pull off. Obtensively, Skorpios digs fairly deep holes into the silicon and places relatively big chunks of InP. So, instead of just a little bit of light needed to leak into the InP resulting in optical gain (in the case of Aurrion’s solution), the light has to transition fully from the Si into the InP with the Skorpios design.
[written by Mark Lutkowitz]