Tunable laser competition hots up

07 Mar 2008

A deluge of tunable laser releases at last week's OFC will drive down selling prices, but 100 Gbit/s communications promise another round of innovation.

The recent raft of announcements about the latest tunable lasers should come with a health warning, according to Daryl Inniss, market analyst for communications components at Ovum RHK. Inniss believes that excessive competition in this market will cause prices to fall, which will limit the future growth rate for tunable lasers to that of the overall component industry - currently predicted by Ovum-RHK to be 11% through to 2012.

According to Inniss, there is already evidence that the high prices of tunables are now in decline. "When Bookham introduced their tunable lasers the prices started to fall," he said. "Just one new entrant had a significant impact on pricing."

As a result, said Inniss, the market for tunable lasers will expand from $85 million in 2006 to $154 million in 2012. If tunable lasers are successfully integrated into the XFP form factor, as JDSU and others are currently striving to do, the market could grow still further.

Inniss applauded the inaugural demonstrations of 100 Gbit/s technologies at OFC in San Diego, and explained how they could provide a new opportunity for chip makers. "The same tunable lasers could go into 100 Gbit/s products, but on the shorter reach, say 40 km or less, there is substantial development needed for transmitters," he said.

"For 10 and 40 km, IEEE is talking about multiplexing four lasers at 25 Gbit/s into a singlemode fiber," said Inniss. This will begin by combining four lasers built on separate chips, but that will prove too expensive in the long term.

"What suppliers are going to have to do is integrate four lasers onto one InP chip," commented Innes, noting that companies like Santur do this already in 10 Gbit/s tunable devices.

Inniss sees the market for tunable lasers expanding from $85 million in 2006 to $154 million in 2012. If tunable lasers are successfully integrated into the XFP form factor, as JDSU and others are currently striving to do, the market could grow still further.

"It's a weird market," Inniss concedes, "because where does a company make its money? At the beginning of a new product or at its end? There's so much competition that the prices just fall off. At the beginning you have maybe a year or two before there's this intense competition. It's a very difficult market to make profitable."