30 Jul 2008
Integration with other companies is now Pirelli's strategy for growth in optoelectronics.
Five months after Pirelli formed PGT Photonics by merging its photonics business unit with the optical innovation division of Pirelli Labs, the company has announced a strategic alliance with InP chip manufacturer CyOptics and indicated that such mergers will be its future tactic for expansion.
"This investment is coherent with Pirelli's strategy to grow in photonics through integration with other companies in similar businesses," said Pirelli chairman Marco Tronchetti Provera. "We strongly believe in the potential of this transaction, which allows for joining two advanced and complementary technologies and creating a leading-edge company in the optical sector."
$20 million from Pirelli will see the Italian giant take a 30% share in CyOptics, with the two companies set to work together on photonic integrated circuits (PICs) and tunable transmitter sub-assemblies. Pirelli will bring "substantial and broad investment in silicon-based photonics" to the table, according to the company.
Pirelli's decision marks the return of the Italian company to the sector, eight years after it sold its optical components business to Corning. In September 2000, at the height of the fibre-optic technology boom, Pirelli's optical components division was a key supplier of the 980 nm GaAs-based pump lasers that power the erbium-doped fibre amplifiers (EDFAs) used in long-haul submarine networks. Then, in a deal that epitomized the freakish nature of the technology bubble, US-based optical fibre manufacturer Corning bought the Pirelli business for a cool $3.6 billion. In cash.
At the time, Corning's own Lasertron subsidiary also produced 980 nm pump lasers, although it was focused on terrestrial applications. Corning, which saw the Pirelli division as a complementary fit to its existing operation, then planned a huge expansion of the Lasertron business.
That expansion never happened, and three years later Corning sold off much of its optical components division to Avanex at a huge loss, before the latter then passed them on to 3S Photonics in 2007.
Although telecommunications is the focus again, Pirelli's return to the compounds industry does not revolve around 980 nm pump lasers, which are now the preserve of only a handful of companies and dominated by JDSU.
This time Pirelli is investing in much more complex optical component technology under development at CyOptics, a company that itself benefited from the burst telecoms bubble when it inherited high-quality InP expertise honed at Bell Labs and developed further at Lucent Technologies and TriQuint Semiconductor.
Pirelli's business strategy was proved comprehensively right in 2000; perhaps the company's re-emergence in compounds is a sign of things to come in 2008.