Intel moves deeper into optics market

Intel Corp. isn't the first name most people think of when it comes to components for fiber optic networks, but the Santa Clara, California vendor best known for its microprocessor technology is seeking to become a real player in this growing market.

This week, Intel announced that it would acquire Cognet Microsystems Inc., nSerial Corp. and LightLogic Inc, three fiber optic component makers, and add them to its Optical Products Group. Intel has been in the broader networking business for about 10 years, but the company did not make a serious optical component push until about two years ago, Intel spokesman William Giles said.

Now, Intel hopes to push into a market led by fiber optic component makers like Corning Inc. and JDS Uniphase Corp., which have benefited from growing demand for Internet bandwidth. Fiber optic networks can carry more data than conventional networks built using copper, and can also move data more quickly.

"They have been dabbling in the optical space since about 1999," said Sterling Perrin, a research analyst with International Data Corp. (IDC). "The company made a couple of acquisitions in 1999, and then early in 2000, they acquired Giga (AS), which really launched them into optical. What they really are trying to do is build themselves into being an optical components supplier, a major one."

Intel hopes to sell chips and modules to networking equipment makers, although the company has yet to divulge its customer list, Perrin said. The target audience would be companies such as Nortel Networks Corp., Lucent Technologies Inc., Ciena Corp., Sycamore Networks Inc. and Alcatel SA. Those vendors sell networking equipment to carriers such as AT&T Corp. and Qwest Communications International Inc., which give customers network access.

Intel's purchase of Skovlunde, Denmark-based Giga for US$1.25 billion was a foundation play for Intel, according to Giles, Giga is a semiconductor design company specializing in chips for optical networking products. Giga's technology provided the necessary chipset to pull light waves off of fiber optics cables and translate them into electrical impulses, which are then translated into transfer protocols such like IP (Internet Protocol) or ATM (Asynchronous Transfer Mode).

This week's three acquisitions gives Intel greater flexibility in what types of optical components it provides equipment makers. NSerial and Cognet both provide opto-electronic chips that are used in 10G-bps (bit-per-second) Ethernet products, Giles said. The two companies use CMOS (Complimentary Metal Oxide Semiconductor) transistor technology, which uses less power, costs less to manufacture and can be produced in high volumes, he said.

This will allow the Giga technology to be used for specialized, more advanced components, while Nserial and Cognet technology can be used for more mainstream, high-volume fiber optic components, Giles said. Giga's chips use silicon-germanium technology, which is a bit more costly and uses more power.

LightLogic, meanwhile, develops transponders that assist with the transition of light signals from the fiber optic wire to the electrical signal and back again, Giles said. LightLogic has developed an opto-electronic assembly platform that integrates micro-optics, lasers and high-speed electronic components into miniaturized modules.

Intel has made approximately a dozen acquisitions in about three years to develop its fiber optic component portfolio that assists in enterprise, metropolitan, long-haul and ultra long haul fiber optic networks. The different markets represent varying physical distances, such as from office to office or, with ultra long haul networks, distances of about 2000 kilometers (1,240 miles).

Nserial, Cognet and Lightlogic fit nicely with the company's overall 10G bps Ethernet plans, Perrin at IDC said.

Tackling the market won't be a walk in the park for the PC chip specialist. Intel is still pretty new at fiber optics components and is still fleshing out its overall strategy, Perrin said. It's tough to gauge how much success the company is having because Intel hasn't said much about its customer base, he said.

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