Active optical cabling (AOC) is a black-box solution to creating a fiber-optic connection and consists of a complete fiber-optic data link (transceivers plus cable) that can be plugged into existing ports, enabling a very rapid introduction of optical connections. AOCs provide customers with access to all the undisputed advantages of fiber (high bandwidth, relatively thin, lightweight cable, etc.) in a plug-in format.
Unlike most other supposed opportunities in the optical networking space, AOCs generally are not an opportunity because they embody the latest technology capable of providing the highest data rates. Instead, they are a clever design idea that enables the end user to (literally) plug into the power and security of a fiber-optics link, without any special knowledge of fiber optics and—in particular—with a largely electrical data communications infrastructure.
This all sounds rather dull compared with the latest innovation in “quantum networking,” or the data link operating at 100 Gbps. However, as the profiles later show, there is considerable and apparently growing interest in AOCs with new firms entering the market over the past 18 months and other firms sprucing up their AOC lines. Also, this is a market where we are dealing not just with small specialist firms, but with some large firms such as Avago, Finisar and Molex.
Evolution of the Addressable Markets for AOCs
CIR believes this ongoing—perhaps even accelerating—interest in AOCs is due to the fact that the addressable market for AOCs is potentially huge. That is, there are numerous applications environments where network managers would love to be able to install fiber optics without trying, as it were. And this is exactly the capability that AOCs are designed to provide.
For the time being such markets are focused especially on high-performance computing (HPCC) facilities and (to a much lesser extent) large data centers. However, both the firms that have recently entered the AOC space, or have been serious players in it for some time are essentially betting that AOCs will be able to be sold into other markets based on its claim to make fiber optics easy to install. The markets that AOCs have in mind for such a market expansion are primarily personal computing, digital signage and consumer electronics businesses.
Data center applications: This is clearly the market sector where most of the revenues for AOCs are coming from at present, and most of the revenues within the sector are coming from copper replacement within a 15- to 30-meter reach. This is precisely what CIR has been reporting in its AOC studies for several years now.
The only issue that is left to debate is how quickly AOCs will penetrate data centers. In particular, it seems important to explore where the next wave of opportunities for AOCs is going to come from within the data center, since these will be relatively easy for AOC firms to tap into without recourse to radical new designs or distribution chains with which they are not familiar.
In practice we think an assessment of the market prospects for AOCs in the data center boil down to answering two questions. First, to what degree will AOCs be deployed in smaller data centers? That is, how far can the addressable market for AOCs in the data center be extended downwards? The second question is how will AOCs compete with more standard 10-, 40- and 100-Gbps fiber solutions? And perhaps there is even a third question here and that is how—and to what degree—can AOCs compete with active copper cabling; a relatively new product category.
AOCs beyond the data center: Reasonable people might disagree about the commercial potential for AOCs in the data center, but we suspect that they would not do so by much. This is because there is a long history of fiber being used in data centers, so the parameters defining the possibilities for AOCs are quite well understood.
One cannot say the same thing about AOCs outside the data center, since this is unknown territory. Fiber optic interfaces for PCs have been talked about for decades and while fiber connections to large-screen TVs is actually a real phenomenon, we are mainly talking about niche markets here; videophiles and bars mostly. AOCs in the digital signage space seems to make sense, but is not yet fully established.
To CIR all of the above suggests that it is time for a careful examination of the prospects for AOCs over the next few years. And the big question here is whether the firms that are now investing heavily in the AOC space are actually making a wise investment or are they simply chasing after pie in the sky; a now traditional sport in the optical networking space.
After all, the prize here would be taking the AOC into huge consumer electronics and personal computing markets and this could prove more than a little daunting given that no PC vendor seems to be especially interested in parallel optical solutions and that there are so many other high-speed solutions in the consumer electronics world. These include mostly copper based solutions. And it remains quite likely that AOCs may have to compete some day with an optical USB solution. Finally, it has been several years since AOCs were supposed to enter retail stores and this has yet to be a significant trend.
We also note that the marketing issues surrounding AOCs are challenging. One steadfast factor in most of the optical networking business is that new products can compete to some extent on the basis of containing the latest advanced optical technology. However, AOCs could never make such a claim. Indeed, in some ways AOCs are really not all that differentiated in the marketplace, except in terms of which standard interfaces/transceivers they support. This means that AOCs have the potential of becoming commoditized and their suppliers will have to become increasingly skilled at dealing with this by skillfully building brands and sales channels.
Still, CIR believes that we shouldn’t dismiss the role of technology in the future of the AOC entirely. For one thing, technology improvements—and we are thinking particularly of silicon photonics in this regard—may address one of the big problems that AOCs currently face and that is cost. There is not that big a market for $300-$400 HDMI cables.