From Jay Daehna in a comment on his own must read article
Questions on Silicon Photonics (SiP). Sometimes I get flack for not discussing Applied Opto's competition enough although sometimes I do to the best of my ability. With hat said, I have some analyst and industry contacts but they not pervasive and I do not cover the optical industry full time. So I am soliciting feedback here from anyone who is "in the know" or technically savvy or in particular works in the industry and can help. No Bull/Bear tug of war here. Let me start with my understanding: My understanding is that as of late last year or earlier this year in the PSM4 (150m - 500M) segment of the intra data center optical transceiver market, Applied Opto was the number one supplier, InnoLight was #2, and Luxtera was #3. Subsequently as 2017 has unfolded, Luxtera has made substantial share gains with a very low price. In the mean time, Applied Opto utilized its somewhat constrained capacity to focus on CWDM, where the pricing was higher, margins better, and less competition.
My understanding is as of late last year or earlier this year in the CWDM market segment, Applied Opto was a clear #1, followed by InnoLight (30% higher cost is my understanding), with Finisar #3. However, Finisar said in a recent call that their CWDM revenue was a pretty small minority of their overall QSFP28 revenue, so I assumed at the time they were a pretty distant #3. So with this knowledge, I have assumed that Applied Opto is in pretty good shape in CWDM, at least for a while. I know that Lumentum and Finisar have cost down versions of CWDM transceivers that they are trying to market in this segment that are pretty fresh and may not be shipping in much volume yet if at all and Oclaro has said they see potential opportunities here, but they are quite small thus far. I also hear that Source Photonics and Color Chip are on the scene on some level. I am told that Color Chip has had a hard time scaling costs down. Not hearing much about Kaiam if they are even still there. Several months ago, the news broke that Fabrinet and MACOM were working with Amazon to develop a "white box" CWDM transceiver for Amazon.
Given the competitive landscape as it is known to me as described above, and considering it is a large and growing segment within the intra data center market, it makes perfect sense as to why Amazon and likely MSFT and FB among others would like to cultivate more high volume sources in CWDM. A while back I was told by an industry analyst who heard from an industry executive close to the laser space that Fabrinet/MACOM were having technical difficulties and the initiative was pushed out six months. An industry consultant confirmed this to me after checking around. It's never been officially announced and I haven't heard much news on it lately. If I assume for a moment that perhaps Amazon isn't totally psyched about how this is going, I ask myself who would be next on deck for them to turn to, which brings me to Intel, which has gotten a lot of press of late. As a side note, Luxtera, the other SiP player, announced a CWDM product at OFC in March, but no one can confirm to me that any have shipped in volume thus far. I have spoken to analysts that have spoken to the company. So. Intel. Industry analysts (sell side people) tell me that they believe Intel has shipped cumulatively 10s of thousands of units - based on 15+ years of work - and most of what they have shipped is PSM4, possibly almost all. Please correct me if I am wrong.
See next post for the second half