With Acacia acquisition, Cisco is disrupting the optical telecommunication market … and brings more light on Si photonics!

The acquisition of Acacia Communications by Cisco for $2.6B is an important milestone in the consolidation of the photonics landscape in many ways:

  • By doing so, Cisco, the Ethernet market leader, is entering the coherent module market for long haul.
  • Acacia’s technology can allow optical transmission up to 400Gb/s and is heading to 1Tb/s. The 400ZR pluggable optics is also in highly demand for high speed connections between datacenters. It will bring pluggable optics to switches and routers. And volumes are high.
  • With Luxtera’s acquisition a few months ago, Cisco has put under together one roof two of the most important Si photonics companies: Luxtera for short reach interconnect and Acacia for long haul interconnect. It will be interesting to see what the synergy of the two companies will give for Si Photonics.
  • Acacia is the third silicon photonics company Cisco has acquired. Cisco purchased Lightwire Inc. in 2012 for $271 million. It shows the interest Cisco has in Si photonics.
  • As for Luxtera, the acquisition price is quite high. In 2018, Acacia’s revenue was $340M. The $2.6B bid is therefore 7.5 times the 2018 revenue. This is quite a respectable valuation for a photonics company. In the end, Cisco will have put on the table more than $3.2B to acquire two Si photonics companies in less than 1 year.

All that is even more interesting if we look at the current market trends and market value for Si photonics. In the latest Silicon Photonics and Photonic Integrated Circuits 2019 report by Yole Développement, we estimate Si photonics will have 34% CAGR from 2018 to 2024, growing from ~$455M in 2018 (1.3Munits) to ~$4B in 2024 (23.5Munits). GAFAMs are the main driving force behind the deployment of Si photonics technology. They are currently setting up networks of interconnected datacenters with local datacenters at the nodes of the mesh. They are ahead of the “traditional” telecom players by setting up their own long haul and subsea networks for datacenter interconnects. Up to now they have been relying on traditional telecom players for long distance transmission.

2018-2024 Si photonics based transceiver forecast - Yole Développement

So what will be the next steps?

With these acquisitions, Cisco will have a strong position in the market for pluggable and coherent optics. The times will be tougher for Acacia’s main competitors, such as Ciena, Huawei and Nokia. As a result they could strengthen their relationship with other optical module makers.

The next question that arises is: what will Intel do? Intel is the market leader in Si photonics shipments as the company now ships more than one million units per year into datacenters. Such an acquisition will favor Si photonics technology in general and could accelerate Intel’s business too, by validating even more the approach.

Overall, this acquisition is very good news for the photonics industry.

About the author:

Eric Mounier - Yole Développement

With almost 20 years of experience in MEMS, Sensors and Photonics applications, markets, and technology analyses, Eric Mounier, PhD provides deep industry insight into current and future trends. As a Fellow Analyst, Technology & Market, MEMS & Photonics, in the Photonics, Sensing & Display division, he is a daily contributor to the development of MEMS and Photonics activities at Yole Développement (Yole), with a large collection of market and technology reports as well as multiple custom consulting projects: business strategy, identification of investments or acquisition targets, due diligences (buy/sell side), market and technology analysis, cost modelling, technology scouting, etc.
Previously, Eric Mounier held R&D and Marketing positions at CEA Leti (France).
He has spoken in numerous international conferences and has authored or co-authored more than 100 papers.
Eric has a Semiconductor Engineering Degree and a Ph.-D in Optoelectronics from the National Polytechnic Institute of Grenoble (France).

Related report:

Silicon photonics PIC - Yole Développement

Silicon Photonics and Photonic Integrated Circuits 2019

Silicon photonics: beyond the tipping point!
Market & Technology Analysis – Find more

Related Event:

Silicon Photonics Forum - Yole Developpement - CIOE

1st Executive Forum on Silicon Photonics

Yole Développement is proud to collaborate with the China International Optoelectronic Expo (CIOE) to organize an all-new Executive Forum on Silicon Photonics. It will take place on September 4, 2019 in Shenzhen, alongside the 21th CIOE. Join us to discuss the bright future of this industry!
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Source: http://www.yole.fr/

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