|Innovating The Next Big Thing||May 25, 2013|
• Leadership & Vision
• Innovation at HP
• HP Buzz
• Ecosystem: HP Partners & Customers
• Competitive Landscape: HP Rivals
• On the Go: Mobile & Wireless Solutions
• Enterprise Solutions
• Digital Arts & Entertainment
• Fine Print: Imaging & Printing
• Analyst Insights
• Enterprise Insights
• Network & Information Security
• Enterprise Mobility
Next Innovator Group
HP.com Quick Links
• The HP Blog Hub
HP User Groups
• Ghost City
Feedjit Live Web Stats
Ovum: Chinese OC vendors shake off stereotypes to enter top 10
Jun 21, 2012 – Karen Liu
The announced acquisition of WTD by Accelink will create an all-Chinese optical component (OC) vendor that ranks just behind Oclaro and Opnext globally. It also brings together the elements for integrated components needed to compete for next-generation leadership. The deal would have been bigger news had it gone through when first posited a year ago. Several deals since – including Oclaro’s acquisition of Opnext – have raised the bar for integrated capability as well as consolidation. Still Accelink/WTD ranks sixth even accounting for the announced deals (see Market Share Alert: 1Q12 Global OC, June 2012). The challenge for the company will be to exploit new synergies as the market moves rapidly to integrated 100G/400G client- and line-side interfaces. The news spotlights the potential for Chinese optical component vendors as they seek to shake off lagging perceptions as low-cost suppliers.
Next-generation optical components are the hurdle for Chinese vendors
What does the term “Chinese architecture” call to mind? Perhaps it conjures images of the Forbidden City or Shanghai skyscrapers. Now, what comes to mind for “Chinese optical component company”?
Many OC suppliers manufacture their products in China, but as a headquarters and development hub the country still lags. Many Chinese vendors show up at international trade shows, but ironically, these large numbers have only reinforced the stereotype of Chinese vendors as opportunistic resellers of passives and low-end transceivers.
What about technical leadership from Chinese transport optics companies? The combination of the two largest Chinese OC vendors is timely. Chinese carriers and system vendors have taken increasing prominence in the global telecom market. We have recently seen Chinese companies take the lead in non-transport optical communications segments.
Accelink’s and WTD’s heritage count, especially in the chip business
Accelink and WTD defy the unfortunate stereotypes in product type and company history. Accelink is a public company, competing in fourth place in transport components (amplifiers and DWDM line optics) behind JDSU, Oclaro, and Oplink. WTD is currently the seventh-place transceiver supplier but has additional business in other segments. The deal creates a truly world-class competitor not only in size but span of telecom products.
For semiconductor fabs, process maturity and scale are irreplaceable competitive advantages. Far from opportunistic, WTD has been making lasers since 1980, a similar vintage to other major telecom laser fabs around the world such as 3S Photonics, CyOptics, Sumitomo, and Mitsubishi.
The challenge will be to move fast in an accelerating market
What might look on the outside like a romance is actually a marriage of cousins within an old family. We hope this deal has more strategic intent beyond consolidation in response to margin pressures afflicting the global OC market, including Chinese suppliers. Accelink and WTD are both under the ownership of parent FiberHome Technologies Group, which evolved from a government ministry. They, along with optical system vendor Fiberhome Telecommunication Technologies, also within the holding company, have collaborated for years. The good news is the danger of cultural incompatibility is minimal. The risk is that there isn’t enough “new blood” to drive a step up to the next level of innovation and risk-taking.
Relationship creates unique opportunity for new optical integration business model
Aside from margins, component vendors are further at risk of having system vendors take over the most valuable components entirely. Huawei recently stated it see value moving increasingly to chips and software. It acquired CIP (the Center for Integrated Photonics) in the UK in 2011. Infinera has always differentiated through its own optics; Cisco acquired Lightwire in 2011.
Silicon photonics vendors and industry roadmappers are advocating a more efficient supply chain such as the IC model of fabless design shops (including OEM ASIC teams) relying on technology support from design tools, IP houses, and foundries. But this business model is not restricted to silicon.
Accelink and WTD, along with sister company Fiberhome, constitute a microcosm of the optical supply chain from chip foundry to system OEM. We don’t know if they have plans to do so, but we suggest the vendors should exploit this unique opportunity to define a new industry structure with roles and, more critically, cost and profit sharing along the lines suggested by the IC example.
» Send this article to a friend...
» Comments? Tell us what you think...
» More Analyst Insights articles...
Commentsblog comments powered by Disqus
Support This Site
• 5/24 Frontline Sentinel: What Java's installer should really say (Funny)
• 5/24 Frontline Sentinel: How to build C-level support for the benefits of penetration testing
• 5/23 Frontline Sentinel: "Interview with a Blackhat" by Whitehat Security
• 5/23 Gartner Says IT Spending in Indian Banking and Securities Market To Reach 422 Billion Rupees In 2013
• 5/23 Gartner Announces Rankings of Its 2013 Supply Chain Top 25
• 5/23 iSuppli: Global Touch-Screen Panel Shipments to Double by 2016, IHS Analyst Announces at SID
• 5/23 iSuppli: Falling Commodity Prices Give Buyers Using Cost Analysis the Upper Hand in Supplier Negotiations
• 5/23 Connect: Countdown to HP Discover May 23, 2013
• 5/23 Wireless Watch: New Intel chief puts post-smartphone devices at the heart of his agenda
• 5/23 Wireless Watch: Satellite spectrum under siege from cellular predators
• 5/23 Faultline: TiVo blows away numbers – still ignored by investors
• 5/23 Faultline: Yahoo gambles on social networking to make up for lost time
• 5/23 Canalys: Top iOS and Android apps largely absent on Windows Phone and BlackBerry 10 - App quality not quantity now needs to be the priority for Microsoft and BlackBerry
• 5/22 2013 Security Market Outlook - Gartner Security & Risk Management Summit Preview
• 5/22 iSuppli: China’s Labor Day LCD TV Sales Surge by Double-Digit Percentage
• 5/22 Connect: Countdown to HP Discover May 22, 2013
• 5/21 Gartner Says IT Operations and Management Software Market Grew 4.8 Percent in 2012
• 5/21 iSuppli: One Quarter of All Notebooks to Ship with Touchscreens by 2016; Intel Endorses Touch Technology at SID
• 5/21 iSuppli: Can UHD Televisions Avoid the Fate of 3D Sets?
• 5/21 iSuppli: After a Year of Decline, Global Flat-Panel TV Market Ekes Out Marginal Growth in the First Quarter
• 5/21 Connect: Countdown to HP Discover May 20, 2013
• 5/21 Connect: Countdown to HP Discover May 21, 2013
• 5/21 Frontline Sentinel: Network perimeter security: How to audit remote access services
• 5/20 Gartner Says Business Intelligence/Analytics Is Top Area for CFO Technology Investment Through 2014
• 5/20 Gartner Says Worldwide Supply Chain Management Software Market Grew 7.1 Percent to Reach $8.3 Billion in 2012
• 5/20 Yahoo Acquisition of Tumblr Can Lead to Content Platforms
• 5/20 iSuppli: Top IHS Experts to Attend SID Display Week 2013
• 5/20 iSuppli: How Intel Can Enable a Successful $200 PC in the Age of the Media Tablet
• 5/17 Connect: Countdown to HP Discover May 17, 2013
• 5/16 iSuppli: Shipments of Sports and Fitness Monitors to Total One-Quarter Billion from 2013 Through 2017
• 5/16 Connect: Countdown to Discover - May 16
• 5/16 Canalys: World-class speaker line-up announced for Canalys Channels Forums 2013 - Confirmed sponsors include Lenovo, HP, Cisco and EMC at keynote level
• 5/15 Gartner Says PC Market in Western Europe Declined 20.5 Percent in First Quarter of 2013
• 5/15 Gartner Highlights 2013 Cool Vendors That Are Transforming How Businesses Operate
• 5/15 iSuppli: Google Unlikely to Deploy its Fiber Broadband Service Nationwide
• 5/15 Connect: Countdown to HP Discover
• 5/15 Connect: Call for Papers Now Open - 2013 NonStop Advanced TBC
• 5/14 Asia Pacific CEOs View Themselves as Tech-Savvy Pioneers, According to Gartner CEO and Senior Business Executive Survey
• 5/14 Gartner Says Asia/Pacific Led Worldwide Mobile Phone Sales to Growth in First Quarter of 2013
• 5/14 Gartner Identifies Five Actions for Enterprise Architects to Harness the Disruption of Consumerization
• 5/14 iSuppli: Small Cells with Wi-Fi Set to Reshape Wireless Communications Market
• 5/13 Frontline Sentinel: How Facebook Updates Would Look in Real Life [Funny]
• 5/13 Gartner Says Project and Portfolio Management Software Market Grew 11 Percent in 2012
• 5/13 Gartner Says India IT Infrastructure Spending Will Reach $2.3 Billion By 2014
• 5/13 What to Expect at Google I/O
• 5/13 iSuppli: EU Antidumping Duties to Price Chinese Modules out of the European Market
• 5/13 iSuppli: Combo MEMS Inertial Sensors Motor Their Way to Brisk Growth in the Automotive Market
• 5/12 Frontline Sentinel: Two-Factor Authentication for Social Media Sites
• 5/12 Print Service Providers Worldwide Accelerate Growth with the HP Indigo 10000 Digital Press
• 5/10 McAfee Blogs: RealTime for ePO – Optimized Endpoint Security