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Jan. 29, 2003 — Despite the serious slump that has kept telecom systems makers from buying just about anything, MEMS-based optical components, such as variable optical attenuators (VOAs), are helping pave the way for the industry’s eventual turnaround.
“In terms of VOAs, it is fair to say that MEMS, in many ways, have won the battle, short term,” said Lawrence Gasman, president and chief components analyst for Communications Industry Researchers Inc.
However, Gasman added that the price of MEMS-based VOAs is still prohibitive, particularly in a telecom market that is killing off a number of small tech players.
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In-Stat MDR senior analyst Marlene Bourne said that the number of MEMS telecom companies has plunged from nearly 60 a couple of years ago, at the height of the technology’s appeal, to today’s figure of about 24.
“That will consolidate further, probably by half when it’s all said and done,” Bourne said.
Still, companies such as Newark, Calif.-based Lightconnect Inc. and Sunnyvale, Calif.,-based MegaSense Inc. are keeping their MEMS technology focused on telecom and surviving with simpler approaches.
“For us, it’s been the reason we’ve been successful in a difficult market,” said Yves Le Maitre, Lightconnect’s vice president of marketing. He credits small size and low power advantages from “simple MEMS products” that are easy to manufacture. “It’s about the right level of complexity.”
Daryl Inniss, senior analyst for telecommunications research firm RHK, credited Lightconnect with effective marketing. “When you talk diffractive MEMS, there is almost an immediate association with Lightconnect,” Inniss said. “So they’ve done a good job associating the two.”
Inniss also praised Lightconnect for its well-designed MEMS chips, which have good performance characteristics “not just on paper, but in people’s hands.”
“That helped to put them on the map,” Inniss said. “In this industry, it’s very heavily technology driven. To get a seat at the table, your products have to perform and meet pretty rigorous standards.”
Inniss said Lightconnect’s simpler approach, based on diffractive MEMS technology developed by David Bloom at Stanford University, matches a general trend for MEMS in telecom: the small technology’s ability to adapt to next-generation optical networks that are still taking shape. “It’s still in turmoil right now,” Inniss said. “(Companies) are trying to determine what it is exactly that is needed.”
For MegaSense, a 40-employee company that also develops MEMS-based components and subsystems, CEO Vladimir Vaganov said the slumping telecom market puts an additional burden on small companies such as his. “(Potential customers) say you’re great, but how can I be sure you will be in the market in a year?” Vaganov said. “People would rather buy from JDS and they’re not sure about Lightconnect or MegaSense.”
Still, Vaganov said companies putting MEMS to work in telecom do have an advantage as the small technology has earned a solid reputation in the industry, despite previous skepticism. MegaSense cites research from ElectroniCast Corp. that estimates the market will grow from $5 billion in 2002 to $15 billion in 2006 and Vaganov said an improved market and higher volumes would allow the company to cut MEMS component prices.
Meanwhile, Lightconnect is attracting funding even during these dark days of telecom. The company recently announced its third round of financing, raising $9 million from Sevin Rosen Funds, Incubic LLC, Morgenthaler Ventures, U.S. Trust, U.S. Venture Partners and Optical Capital Group.
The company wanted to strengthen its cash position and show a strong balance sheet, according to David Fenner, vice president of finance. Lightconnect’s Le Maitre said he hopes the funding — which brings total investment for the 58-employee company to more than $34 million — will allow Lightconnect to break even by late 2004.
Another company with MEMS technology for telecom, Sunnyvale, Calif.-based Silicon Light Machines, is scaling back its investment in telecom, according to product marketing manager Bob Monteverde. “You need to make sure you don’t over invest,” he said. “We will be scaling our businesses intelligently to what our customers are telling us and what the overall market is doing.”
Still, SLM is definitely staying in telecom, working with current customers and making sure its MEMS-based dynamic gain equalizers and reconfigurable blocking filters are built into next generation optical networks, Monteverde said.
“On the other hand, it’s very important we have revenues outside of telecom that can keep the company growing and in a strong state,” Monteverde said. “We look for advances that pay off across all of our applications,” he added, referring to SLM business in print and display markets.