The mists of Avalon

17 Jun 2002

Avalon Photonics was launched last summer with almost USD 14 million of venture capital - this was just in time to avoid the downturn in investment. Phillip Hill visits the VCSEL manufacturer's Swiss headquarters.

From Opto & Laser Europe June 2001

Avalon Photonics' founders

At the end of a quiet side street in the suburbs of Zurich are the research laboratories of the CSEM - the Swiss Centre for Electronics and Microtechnology - and now the home of CSEM spin-off Avalon Photonics.

This firm is the third spin-off of the CSEM and its main product is a 850 nm VCSEL-array chip that operates at 3.125 Gbit/s per channel for multichannel datacom interfaces. The oxide-confined MESA structure means that the VCSEL has a low current requirement (typically 3 mA) and a low operating power (typically 7 mW).

Four of the founders, including CEO Karlheinz Gulden, are former German CSEM researchers, and they were joined by John Humphries, a Briton and veteran of Honeywell's optoelectronics group in Europe on the sales and marketing side.

The immediate aim of the start-up is to develop a 10 Gbit/s VCSEL at 850 nm for Ethernet and backbone applications and become one of the first companies to manufacture a 1550 nm VCSEL.

This is a long way from CSEM's roots. CSEM was set up by the Swiss government and major Swiss watch makers to ensure that the industry would never be taken by surprise again technologically. "When Texas Instruments brought out the first digital watch, Swiss watch manufacturers missed a heart beat," said Humphries.

He sees no disadvantage in setting up Avalon in Switzerland, outside the European Union. "It is the only country that I know that is run like a business. The government and regional authorities encourage start-ups. If the start-up is in a hi-tech area, doors open to recruit skilled people from abroad."

Avalon was formed last June by the CSEM, which is the majority shareholder. However, funding had to wait until September when Avalon succeeded in raising USD 14 million of venture capital from Intel, Vision Capital of California and Viventures of France.

"A year ago it was 10 times easier to get venture capital than it is now," said Humphries. "We were in the right place at the right time when VCSELs were the hot topic."

However, the telecoms downturn has hit the industry. Although Avalon sees itself as a second source to the likes of Agilent and Infineon, it believes that its niche is the 3.125 Gbit/s market - Honeywell being the VCSEL pioneer and market leader at 1.25 Gbit/s. Avalon only makes the basic laser arrays to sell to Agilent and Infineon, among others. The downturn has made customers more choosey, says Humphries, because the overall demand from network customers has decreased.

The 1550 nm VCSEL development is still at an early stage, says head of R&D Michael Moser. However, the 10 Gbit/s 850 nm device will be in production next summer.

Avalon has just taken delivery of an Aixtron epireactor to replace an older, slower machine in the Class 10 cleanrooms. Karlheinz Gulden says that the new reactor will allow the company to increase epiproductivity by 20 times in the next year. "Ramping up of the 850 nm 3.125 Gbit/s VCSEL array will happen in the fourth quarter," he said. "We could produce 20,000 wafers a year with three shifts."

A sign of serious marketing ambitions is the recent appointment of Laser Components of Munich, Germany, as the worldwide distributor of the CSEM's record breaking 760 nm singlemode VCSEL for sensing applications. Gulden says that this will leave Avalon free to concentrate its marketing effort on telecoms VCSELs.

The next goal is an IPO, but not this year because of the difficult market. Avalon will look for a second round of funding in the next 12 months followed by an IPO.

And where did the name Avalon come from? "We wanted to make the VCSELs look flashy for a photo session," said Gulden. "We produced fog so that the the laser beam was visible, and it reminded us of the Arthurian legend The Mists of Avalon by Marion Bradley."