Ciena to sell its own coherent modules

The systems vendor is expanding its offerings to include WaveLogic modem chips and coherent optical modules.

Ciena is developing its own coherent modules to sell to the telecom and datacom markets. 

The system vendor has set up the Optical Microsystems Division business unit to promote its WaveLogic coherent modem technology to the marketplace. Until now it has licensed its WaveLogic Ai digital signal processor (DSP) to module makers Lumentum, NeoPhotonics and Oclaro. But now it is planning to sell its own coherent modules.

In a job advert for a head of sales channel development, Ciena says the Optical Microsystems Division's goal is ‘to develop and productize electro-optic components and modules for sale to global systems integrator customers to be incorporated in their products for sale to telecom and data network customers’.

And at the recent European Conference on Optical Communication (ECOC) held in Rome, a network equipment manufacturer said it was approached by Ciena enquiring if it was interested in buying coherent modules from the company.   

Ciena would not comment when asked if it will sell its own coherent modules. Instead, the company pointed to statements it made during its fourth quarter 2017 earnings call that outlined the creation of the Optical Microsystems Division with the stated goal of generating $50 million annual revenues by year-end 2020. 

[At ECOC], a network equipment manufacturer said it was approached by Ciena enquiring if it was interested in buying coherent modules from the company   

Optical Microsystems Division 

Until Ciena announced in early 2017 the licensing of its 400-gigabit WaveLogic Ai to Lumentum, NeoPhotonics and Oclaro, systems vendors kept their coherent DSPs in-house. And with good reason. These are the chips that power their leading optical platforms and enable product differentiation. 

Ciena’s announcement at the time showed a willingness to pursue a different business model. By licensing its DSP to optical module makers, Ciena could break into important new markets such as China even though the move would benefit its competitors using its advanced DSP for their platforms. 

But the market has changed since Ciena made the announcement and now the company is deciding how best to proceed, says Mike Genovese, managing director and senior equity research analyst at MKM Partners.

“At the time of the announcement it seemed there was a big opportunity selling the [coherent] modem into Chinese OEMs,” says Genovese. “But that seems less likely now because Chinese OEMs want to assemble their own modules out of components they buy and make.”

The result is that the opportunity has shifted to data centre interconnect. “But there are decisions that need to be made,” says Genovese. “For example, does Ciena want to make its modem product a [pluggable] 400ZR solution?”

It is a view shared by Sterling Perrin, principal analyst, optical networking and transport at Heavy Reading.

“It [the licensing of its DSP] was originally built around breaking into the China market. That strategy now looks must riskier than it did originally, so I’m certain they are looking at every alternative,” says Perrin. ”The main goal is to get the most return-on-investment on the money they put into building a WaveLogic generation, and using that money to fund the next generation of DSP investment.”

At the time of the announcement it seemed there was a big opportunity selling the [coherent] modem into Chinese OEMs. But that seems less likely now. 

Pluggables are going to become an important opportunity for coherent technology, says Andrew Schmitt, founder and directing analyst at Cignal AI. Schmitt says the next stage of coherent’s development - what he calls the fourth generation of coherent - will be pluggable from the start and more standards-based than any wavelength-division multiplexing (WDM) pluggable that has preceded it. 

“It will address a large portion of the overall market - not just cloud operator data centreinterconnect,” says Schmitt. “Equipment vendors will need to adjust their strategies as many standalone optical hardware applications will be displaced by pluggable coherent.”

Ciena also has all the required technologies. As well as its WaveLogic modem technology, it has high-speed optical component expertise that it gained with the 2016 acquisition of Teraxion’s photonics division. The Teraxion group had indium phosphide and silicon photonics technologies.

All change 

The agreement between Ciena and the three optical module makers also included an option where future WaveLogic DSPs would be made available to the three for applications such as 400-gigabit pluggables. 

NeoPhotonics says that Ciena’s general strategy of bringing its WaveLogic Ai technology to a larger market and application space has not changed. 

Equipment vendors will need to adjust their strategies as many standalone optical hardware applications will be displaced by pluggable coherent

Is Ciena going straight to market with future WaveLogic-based modules?

“How the modules are marketed may follow different models in the future; there is always an evolution in business models as the market shifts,” says Ferris Lipscomb, NeoPhotonics’ vice president of marketing. “Our intention is to continue to be a partner and bring value to the Ciena Microsystems business wherever possible.”

Lumentum would not comment on what the status was regarding using future coherent DSPs, nor would it say whether Ciena is to sell its own modules. Lumentum did say that it has a close relationship with Ciena and that it continues to support partnership opportunities.  

But the possibility of Ciena selling modules to the marketplace is not ruled out by Ciena’s third optical module partner, Oclaro. 

Yves LeMaitre, chief strategy officer at Oclaro says that Ciena’s recent announcements could point to a new strategic direction. “At this point, it is unclear how they are going to do this,” he says. Oclaro also does not know yet if it will gain access to new WaveLogic designs.

LeMaitre views the options with Ciena’s coherent technology as part of a broader debate as to how systems vendors should adapt their business models in an environment of change brought about by software-defined networks and open design frameworks.   

The fact that internet content providers purchase optics directly, as do certain service providers, creates a dilemma for the systems vendors. “How are they going to go to the market to address this?” says LeMaitre. “Are they going to rely on a partnership with module makers or are they going to address the market on their own?”      

Oclaro says it remains ‘very interested’ in working with Ciena if it is willing to give the module maker access to future DSP designs for pluggables.