RPR silicon gets a boost: IEEE protocol consensus reached; Infineon jumps in at OC-192 - Semiconductors

Electronic News, Feb 11, 2002 by Gale Morrison

Communications IC makers and the networking OEMs they supply are painfully aware of the boatloads of unlit fiber optic cable crisscrossing metropolitan areas all over not only North America but the world.

This overcapacity in the synchronous optical network (SONET) communications infrastructure pushed Bermuda-based Global Crossing Inc. into bankruptcy last week and may well do the same for a few others. And that means one more networking equipment buyer that can't pay the bills and won't be making any more purchases.

The entire supply chain--IC, networking system and carrier--is working toward some way, any way, to get greater efficiency out of the SONET ring infrastructure. For SONET is all about how carriers parcel out bandwidth and reliably deliver time-sensitive information such as voice using time-division multiplexing (TDM). But in this day and age, many customers just want to move around data packets, yet doing that on the SONET system without a software protocol is like delivering the nation's mail, letter by letter, each in its own limousine.

"In the communications arena, you have the TDM world to move voice and the new packet world to move data," said SubodhToprani, VP and general manager with Infineon Technologies' optical networking group. "There's this whole unification theory of energy, with everyone looking to find a way to transmit voice and data equally well without having to do expensive things such as sending out trucks and swapping out equipment."

Resilient packet ring (RPR) technology is a good start along the way, and just a couple of weeks ago, a monthslong stalemate between competing camps within the RPR standards IEEE group finally broke. Chipmakers now have a spec to look to when designing the RPR media access control (MAC) chip; carriers will more readily buy the equipment because the technology is not proprietary.

Infineon last week said that, given the IEEE group's consensus, it is going ahead with the licensing of Cisco System's spatial reuse protocol (SRP) technology--part of the proposed spec--and moving forward with the design of RPR MAC silicon.

"The point now being: RPR is past its first hurdle," said Roy Rubinstein, a senior analyst for the optical and semiconductor components group of highly regarded communications research house RHK Ltd. "This will give the service providers confidence. And so all of those chip companies interested can move their designs forward."

But, as the semiconductor industry sees so often, is RPR silicon another segment into which 20 companies rush, only to see prices drop beyond the ability to make a profit?

"I don't think there will be 20 competitors," Rubinstein said. "Certainly the chipmakers who count will be there. Obviously Infineon's made the announcement. Are companies such as Intel interested? Most definitely, yes. Mindspeed [Technologies] certainly is. A company called Chip Engine -- they've got mention of a design that will be used for RPR and other things.

"Who else? AMCCis obviously interested ... If we mention Intel, how does Broadcom feel? You know it's interested. Vitesse has been an early entrant in the MAC space. It's not clear where RPR is in their priorities, though that again may change as a result of this announcement [about the IEEE standard consensus].

Jeremy Donovan, VP and chief analyst of San Jose's Gartner Dataquest, said in a report last fall that he is already concerned about an overcrowding of the market. His analysis found the data pointing to the RPR semiconductor market totaling $175 million in 2005.

"(The total) $175 million is not trivial," he wrote, "but it may not be large enough to justify the number of vendors expected to enter the market. The entry of four or five semiconductor vendors is likely to drive down ASPs dramatically. In fact, there is reason to believe that RPR IC prices will fall as much as 50 percent in 2003."

Donovan said vendors may be able to leverage their expertise in SONET framing and Gigabit Ethernet, but he highlights the role Cisco is playing once again.

"Cisco is in large part responsible for the crowding of semiconductor vendors in the RPR space," he said. "One has to respect Cisco's attempt to limit supplier power by enabling a number of IC vendors at the same time. It's a great business strategy for Cisco, but it creates unfortunate circumstances for IC vendors."

Resilient Packet Ring SRP IC Forecast, 2000-2005


                          2000     2001     2002     2003     2004

OC-12 622-Mbps RPR/SR

  Units (K)                5.0     24.5     39.6     97.8    128.6
  ASP/Unit ($)            68.8     62.5     56.3     50.6     45.6
  Revenue ($M)             0.3      1.5      2.2      4.9      5.9

OC-48 2.5-Gbps RPR/SR

  Units (K)                1.3     11.2     46.7    144.0    249.3
  ASP/Unit ($)           275.0    250.0    225.0    202.5    182.3
  Revenue ($M)             0.4      2.8     10.5     29.2     45.4

OC-192 10-Gbps RPR/SR

  Units (K)                0.0      1.2      6.9     43.6     90.2
  ASP/Unit ($)         1,100.0  1,000.0    900.0    810.0    729.0
  Revenue ($M)             0.0      1.2      6.2     35.3     65.7

OC-768 10-Gbps RPR/SR

  Units (K)                0.0      0.0      0.0      0.2      0.5
  ASP/Unit ($)              NM       NM  1,800.0  1,620.0  1,458.0
  Revenue ($M)             0.0      0.0      0.1      0.3      0.7

Total Market

  Units (K)                6.3     36.8     93.2    285.6    468.5
  ASP/Unit ($)           117.9    149.8    203.8    244.4    251.2
  Revenue ($M)             0.7      5.5     19.0     69.8    117.7

                                 CAGR (%)
                          2005  2000-2005

OC-12 622-Mbps RPR/SR

  Units (K)              179.3        105
  ASP/Unit ($)            41.0        -10
  Revenue ($M)             7.4         85

OC-48 2.5-Gbps RPR/SR

  Units (K)              394.6        214
  ASP/Unit ($)           164.0        -10
  Revenue ($M)            64.7        183

OC-192 10-Gbps RPR/SR

  Units (K)              155.7        418
  ASP/Unit ($)           656.1        -10
  Revenue ($M)           102.2        367

OC-768 10-Gbps RPR/SR

  Units (K)                1.0         NM
  ASP/Unit ($)         1,312.2         NM
  Revenue ($M)             1.3         NM

Total Market

  Units (K)              730.6        158
  ASP/Unit ($)           240.2         15
  Revenue ($M)           175.5        198

NM = Not meaningful

SOURCE: GARTNER DATAQUEST