Sat. Aug 20th, 2022

Optical Competition Heats Up in First Half of 2020

It’s safe to say the optical industry has been up and hopping. Over the past few months, leading optical vendors including Ciena, Infinera, Huawei, and Nokia have been pushing the limits of modern optics.

Vendors are increasingly trialing 800 Gb/s technologies and, in the case of Ciena, actively deploying them. Meanwhile, Nokia has launched a new, more vertically integrated optical product line. But despite a surge in bandwidth demands due to pandemic-related work-from-home orders many of the vendors are still struggling financially as they grapple with supply shortages.

With that in mind, here are a few noteworthy optical developments from the first half of 2020.

Infinera Pushes 800G Limits in Latest Trial

Late last month, Infinera announced the successful trial of its 800 Gb/s-capable optics across a 730-kilometer span of Windstream’s network between San Diego and Phoenix. Further, looping the signal back, the vendor managed to double that distance at 700 Gb/s.

The trial used Infinera’s Infinite Capacity Engine 6 (ICE6)-equipped Groove platform operating on standard G.652-compliant SMF-28 optical fiber, and it used standard guard-bands used by Windstream across the rest of its network.

“With this trial we really wanted to focus on a very real-world network application,” explained Rob Shore, SVP of marketing at Infinera, in an interview with SDxCentral.

The test marked the vendor’s first public trial of its ICE6 optics, which are some of the longest claimed trials at 800 Gb/s line rates. The company had previously trialed its 800 Gb/s tech across a 950-kilometer stretch on an undisclosed production network.

Ciena Rolls Out 800G Optics in Russia

Just a few days later Ciena, which was among the first to bring 800 Gb/s optics to market, announced Russian telecommunications provider GlobalNet had rolled out its WaveLogic 5 Extreme platform on the company’s Waveserver 5 compact interconnect platform.

Using Ciena’s WaveLogic 5 Extreme optics, GlobalNet claims it has more than doubled the bandwidth of its network, enabling 600 Gb/s single-wavelength connections between Moscow and St. Petersburg and 800 Gb/s interconnect for the telecom’s data centers in St. Petersburg.

“The launch of 800 Gb/s will enable us to tap into industry-leading innovations to set new standards for GlobalNet network performance. In today’s fast-paced world, the operator needs to provide subsequent capabilities to meet customer’s rapidly changing needs,” said GlobalNet CEO Vladimir V. Vedeneev, in a statement. “With WaveLogic 5, we implemented the first 800 Gb/s solution in Russia and strengthened our leadership in providing the highest performance optical connections to the market.”

Huawei Joins 800G Party

In February, China-based telecommunications vendor Huawei unveiled its own 800 Gb/s modules. The modules can be tuned from 200 Gb/s to 800 Gb/s for use in everything from long-haul networks to data-center interconnect.

Following the announcement, Huawei put its 800 Gb/s modules to the test in a live production trial on Turkish telecom Turkcell’s network.

The vendor achieved 800 Gb/s line speeds between two data centers in Istanbul. Huawei also trialed 400 Gb/s line speeds across an unregenerated span of 1,040 kilometers from Istanbul to Ankara.

The trial used Huawei’s second-generation channel-matched shaping, faster-than-Nyquist algorithms, and artificial intelligence neuron function modules to achieve these results. According to Huawei, its channel-matched shaping algorithms alone can enable 20% longer transmission distances than previous generation optics.

Nokia Doubles Down on 400G

Nokia refreshed its optical portfolio at the end of May with an update to its WaveFabric Elements platform. But unlike its rivals, Nokia isn’t chasing 800 Gb/s optics just yet. Instead, the company is sticking with 400 Gb/s for its fifth-generation optics.

In an interview with SDxCentral, Kyle Hollasch, director of product marketing for Nokia’s optical networking division, argued that 400 Gb/s optics are the sweet spot because they can be deployed practically anywhere in the network and still deliver near-peak performance regardless of whether they are used for long-haul, metro, or data-center interconnect.

Nokia’s latest generation optics represent a turning point for the company as they are the first to integrate the Coherent Silicon Transmit and Receive (CSTAR) portfolio of silicon photonics chips, which Nokia acquired when it purchased Elenion Technologies earlier this year.

In addition to traditional coherent transceiver modules, Nokia’s portfolio is also going after the data center with a line of ZR and ZR+ QSFP-DD modules.

And Nokia’s data center ambitions don’t stop there. The company is slated to make another data center-related announcement during a webcast Thursday.

Nokia Claims 800G Conspiracy

Following its announcement, and seemingly in defense of its decision to stick with 400 Gb/s, the company published a blog post calling out its competition for what it saw as misleading 800 Gb/s optical claims.

“Carriers should expect 100-220 kilometer optical reach in most wave division multiplexing applications,” wrote Nokia’s Randy Eisenach, discussing competitors’ 800 Gb/s offerings. “For carriers, it’s important to understand actual realistic network performance that can be expected when using high-capacity wavelengths, as opposed to demo experiments.”

In the post, Eisenach argued 800 Gb/s speeds were next to impossible under real-world conditions using the current generation of digital signal processors. To achieve higher trial speeds, he claimed vendors were engaging in misleading practices by using low-latency fiber, eliminating spare margin, and removing guard band channels to eke out higher performance, something both Ciena and Infinera have categorically denied.

In a statement, Ciena said it never misrepresented the capabilities of its optics and called Nokia’s insinuations patently false. The company claims its WaveLogic 5 Extreme optics are capable of 800 Gb/s line rates at distances of 80 to 240 kilometers.

Meanwhile, Infinera claims it went out of its way to ensure its latest trial was representative of Windstream’s overall network.

Trouble in Paradise

Regardless of the practices used, neither Nokia or Infinera are faring particularly well financially.

Nokia’s experienced a $200 million decline during the first quarter of 2020 as a result of supply chain disruptions driven by the pandemic. These headwinds not only struck the company’s 5G business but also impacted its optical and IP businesses.

“ION’s year-on-year constant currency sales declined due to Q1 2019 being a particularly strong quarter, which benefited from pent-up demand for some of our newly introduced FP4 products,” said Nokia CEO Rajeev Suri, on the company’s first-quarter earnings call. “The first-quarter sales decline also stem from some supply chain headwinds related to COVID-19 that prevented us from delivering to certain customers.”

The company expects the brunt of those shortages to hit during the second quarter. Nokia is expected to release its second-quarter earnings later this month.

Infinera also felt the pandemic pain during the first quarter, but to a much lesser extent than Nokia.

“We were also impacted by the necessity to source key components from an alternate supplier at substantially higher cost in order for Infinera to fulfill delivery commitments in the normal course,” said CFO Nancy Erba, on the company’s first-quarter earnings call.

While Infinera’s revenue grew 12% year over year, it saw its gross-margins collapse to 28.3%, far below the company’s 31% to 34% guidance.

Unlike its competitors, Ciena managed to weather the first half of 2020 largely without incident. The company banked $91.7 million in net income on $894 million in revenue, which was up 3.4% year over year, exceeding investor expectations by $4.6 million.

The diversity of the company’s supply chain help to mitigate many of the COVID-19-related challenges, but Ciena CEO Gary Smith admitted the quarter wasn’t without some hiccups.

“We experienced some disruptions from our suppliers, including component constraints, extended lead times, and reduced or temporarily suspended operations,” he said.

Will Vertical Integration Save Struggling Vendors?

A recent emphasis on vertical integration could help to right vendor’s financial challenges according to a recent report out of LightCounting.

The report suggests that while the profitability of optical component vendors is at its lowest level in 15 years, larger more vertically integrated companies may have more buying power. And over the past few years, optical vendors have snapped up component manufacturers as a way to cut costs and edge out the competition. In 2018, Infinera snapped up rival Coriant and more recently Nokia acquired Elenion.

“An even stronger motivation for bringing the optics in-house is that it is becoming an even larger portion of the bill of materials of optical transport equipment, switches, and routers,” the LightCounting report reads.