10-18-2017, 04:08 AM
Part 2:
To put this into perspective, my understanding is the intra data center optical transceiver market is roughly 3 million units this year, which includes PSM4 and CWDM. I'm not sure if it includes short reach (<150m). According to Applied Opto, they were looking to ramp capacity to 1 million lasers per month by the end of 4Q this year. At 3 million lasers per quarter, that would be 750K transceivers per quarter (four lasers per transceiver), which I would assume could equate to about $200 million per quarter in revenue at $266 per unit (blended ASP).
LightCounting predicts total UNIT market growth of 100% - 200% in 2018 to 6 million to 9 million units. We know that the 150m to 2km intra data center market is cut into two technology driven segments, PSM4 at 150m-500m and CWDM at 500m-2km. We also know that Luxtera and Intel to a much less degree from a volume shipment perspective have had almost all of their success thus far in the PSM4 150m-500m segment. For CWDM, Luxtera has announced a product but no volume as of yet. Intel has a product announced, and according to posts in comment sections and some analyst reports (BWS/Hallum that I know of) suggest some level of volume CWDM shipments may have started and are poised to ramp sharply essentially now, crushing Applied Opto at Amazon and Facebook, at a minimum, starting in 4Q and maybe 3Q if that impacted the precipitous drop in sales to Amazon.
Now here is the heart of the question, has Intel cracked the code to deliver high performance and 99.9% plus reliability in CWDM at a highly competitive price with gobs of capacity that is ramping vertical right now? If so, if they take over the #1 market share position in CWDM, can they go from zero to hero, meaning 30%/40%+ market share in one or two quarters? If they do, will it all come from Applied Opto or will a big chunk of it come from the other - likely higher cost - competitors in the space? For example, couldn't Applied Opto drop the price and outbid InnoLight as well as Finisar and Lumentum that typically have potentially materially higher costs? Will the market growth be strong enough in 2018 for all players to grow meaningfully?
If Applied Opto is the clear #1 incumbent with a large and scalable factory, decent technology, and low costs, wouldn't it be likely that the big data center customers would keep them in the top 2 CWDM suppliers even if Intel gets a leg up in a rapidly growing market? I did read some stuff from an industry consultant that has been following the industry for decades who is not enamored with Intel's SiP technology, but thinks that its mere presence in CWDM will crush the pricing in that space, negatively impacting Applied Opto (i.e., take margins to 30% but not much market share). He believes Intel has already done this in PSM4, although I suspect Luxtera played an equal or larger role. So there it is. Please "illuminate" me. Did Intel crack the CWDM technology code? Is SiP viable at 150m - 2km in general? Has Intel displaced Applied Opto or any other existing volume supplier of CWDM recently or real time? Is Intel executing a vertical ramp real time? If so, how much share will they have by the end of 4Q or 1Q? Many thanks!