AMCC demonstrates GPON Chipset, But Cramer Gets Company Wrong (AMCC, TLAB, MOT, ALA)

AMCC (AMCC) demonstrated a GPON chipset in a Xilinx FPGA at OFC in Anaheim. No announcement (that I saw) was made, and no press was in Lightreading.

AMCC previously announced a GPON SERDES and I had heard rumors that they were considering entering the GPON marketplace. Based on what I saw today, the rumors are true.

FTTH is getting so buzzy lately that even Jim Cramer has decided to pipe up in a rather technically vague manner. From the “When smart guys make fools of themselves department”:

Plus, the company (AMCC) makes a new chip that is great for the fiber optic rollout, and has gotten good press in tech trade publications, Cramer said. The new chip “PON” is a likely winner in the networking space, and could take us to the next step beyond DSL.

Moreover, the company’s biggest customer, Nortel (NT), is going to get a substantial contract from one of the Baby Bells, Cramer said.

While that might not be a big deal for a company the size of Nortel, it’s huge for company like Applied Micro Circuits.

Someone should tell Cramer AMCC is a little behind the curve here. Here’s why.

Regardless of the frothy attention received in recent months, the reality is that there will be two carriers (AT&T and Verizon) buying GPON equipment in any meaningful quantity over the next 3-4 years. Realistically, this means there will be a maximum of three GPON equipment suppliers that will participate. Right now, those suppliers would almost certainly be Motorola, Tellabs, and Alcatel.

• Motorola (MOT) was developing a GPON ASIC internally at their Horsham, PA and Andover, MA facilities. That development was suspended and an investment was made in Broadlight. It’s a pretty safe bet Broadlight is the favorite son at Motorola for a GPON MAC.
• Tellabs (TLAB) uses Broadlight today for their BPON equipment. If you crack open your Verizon FiOS ONU, chances are it’s a Broadlight chip inside. Again, safe bet that Broadlight is in the pole position for GPON component selection as Tellabs migrates their #1 FTTH customer to GPON.
• Alcatel (ALA) announced a partnership with Freescale (FLS) for a processor with integrated GPON MAC. Freescale has been spending big bucks promoting this, and word it the device is out of fab. Freescale can provide the total solution, including VoIP. Alcatel is a powerhouse player in residential DSL access, and will certainly parlay this into a dominant FTTH position.

Companies who don’t sell into these companies don’t control your their own destiny, and it will take an upset in the equipment order to make them successful.

In addition to Broadlight and Freescale, both Passave (PSVE) and Teknovus have announced their intention to enter the GPON market. Add in AMCC, and you now have five GPON MAC suppliers, and that’s just the companies that have announced something- there are probably more. With such a limited set of end customers, it’s tough to see a market for more than three GPON silicon suppliers. Someone has to lose.

AMCC must be hoping to use their processor and SERDES expertise to differentiate themselves, but it isn’t really any better than Freescale. Putting a GPON chipset into an FPGA is damned cool and a legitimate first step but beating the incumbents will take something more.

I met with Teknovus and Passave while here at OFC and it’s clear both are going to play an important role going forward. They are the only GE-PON suppliers that matter at this point, and Passave has market leadership today. Teknovus was even kind enough to give me a free copy of Ethernet Passive Optical Networks by Glen Kramer, a Teknovus employee.

Also, Centillium (CTLM) has a GE-PON product but word on the street is it is a complete disaster at OKI, the Japanese supplier to NTT. (I have not verified this with public information).

It will be interesting to watch these companies going forward, and how the battle for FTTH silicon market share plays out.