Broadcom to Take Aim at Fiber-Optics Market
Broadcom Corp., the fastest-growing chip maker ever, is expected to unveil a circuit today that will launch the Irvine manufacturer into the competitive fiber-optics market, the only segment of broadband communications that the company has yet to enter.
Broadcom, which has made millionaires out of hundreds of employees with its surging stock price over the last two years, hopes to translate its dominance of the high-speed market over standard copper wires to fiber-optic networks.
The market for products that speed data along fiber-optic lines, which are capable of carrying more data than any other lines, already is crowded with such companies as Conexant Systems Inc. in Newport Beach, Lucent Technology Inc. in Sunnyvale and Vitesse Semiconductor Corp. in Camarillo.
“This is the last market that involves broadband communications that Broadcom was not involved in,” said Henry T. Nicholas III, Broadcom’s chief executive.
The company’s entry into the fiber-optics market also puts it squarely in competition with nearby rival Conexant not only for market share but also for top talent and visibility.
The new chip, called a transceiver, will extend Broadcom’s product line beyond local-area networks, which unite computers near one another, such as those within a company, into existing fiber-optic networks that cover wider areas.
The company’s new chip can transmit data over fiber-optic networks at 10 gigabits a second over distances up to 50 kilometers, or 31 miles. It is not only faster but also significantly cheaper than comparable products, which operate at 9.6 gigabits a second and cost as much as $1,300. Broadcom’s will cost $88.
“It’s a great market for Broadcom,” said industry analyst Greg Collins, director at the Dell’Oro Group market research firm in Portola Valley.
The market for wide-area network equipment will amount to $32 billion this year and could reach $49 billion next year, Collins estimates.
“Many players are getting into this space because it is attractive,” said Achim Hill, a vice president at Conexant, long a player in the optical networking market. “I think there’s going to be a shake-up in this market. The winners will be those that have a solid know-how in the market.”
Nicholas declined to predict the sales of the new product. He said the company has been focused on piercing this market for two years.
“It is definitely strategic for us,” he said. “It will allow us to bridge the home computer with the business enterprise, and you will see a distribution of broadband throughout.”
While copper lines are still being laid within individual buildings, the fiber-optics market typically used in wide-area networks is one that Broadcom couldn’t afford to ignore, Collins said.
“Certainly fiber optics is new to them . . . so to that degree, they’re playing catch-up,” he said. “It really complements and extends their product line. The explosion in the wide-area networks and optical networking market is so compelling that they’d be nuts to ignore it. All the new wide-area backbones are fiber optics.”
What’s unclear is the extent to which Broadcom will be able to capture a significant market share, said Kimberly Funasaki, a research analyst at IDC in Mountain View.
“I think they will probably have a challenge trying to usurp market share from the incumbents of the marketplace,” she said. “This is a new area for them.”
The company’s strategy has been to identify rapidly growing broadband markets and develop products to improve performance within those markets. Its broadband efforts are aimed at bringing high-speed communications to more and more network users, from Internet surfers to corporate networks to television sets.
Broadcom’s initial products were designed for digital cable set-top boxes, cable modems and high-speed networking markets. More recent products have moved the company into home networking, satellite and terrestrial digital broadcast, broadband wireless and digital subscriber line markets.
Nicholas said the company’s new family of fiber-optics-related products will be introduced over the next year through a new division of Broadcom, the company’s seventh.
The new 10-gigabit speed marks a milestone for fiber-optical networks, significant because the various kinds of small and large networks will communicate with one another more smoothly and require less expensive switching equipment if they all operate at the same speed.
The 10-gigabits speed is emerging as an industry standard, Funasaki said. Broadcom is the first to offer a chip at this speed based on the Ethernet standard, which is the most common protocol for corporate networks.
Conexant’s Hill estimates that the number of 10-gigabit transceivers sold will increase 100% a year over the next few years.
Broadcom shares inched up $1.88 to $174.25 on Nasdaq on Monday.
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Compressing the Signal
Broadcom Corp.’s new “transceiver” increases the amount of information that can be transmitted over fiberoptic lines by compressing light waves. How it works:
1. Voice, video or images from building A enter transceiver as electrical signal.
2. Optical module converts electric signal into four light waves.
3. Prism compresses four light waves into one beam.
4. Single beam split back into four at destination by optical module.
5. Transceiver sends data out to building B as electrical signal.
Source: Broadcom
