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Cisco sees the future of switching in Luxtera silicon photonics
Cisco believes the future in switching and routing is in Luxtera silicon photonics. As a result, the networking giant plans to buy the company for $660 million in cash.
Cisco is acquiring silicon photonics company Luxtera to stay relevant in switching and routing, as data centers struggle to move more internet traffic faster over networks.
Cisco said this week it would buy the transceiver maker, based in Carlsbad, Calif., for $660 million in cash. Companies plug Luxtera modules into switches and routers to turn their electronic traffic into optical signals capable of reaching speeds of 100 Gbps over optical fiber 2 kilometers in length.
Cisco, which expects to close the acquisition by the end of April 2019, resells Luxtera silicon photonics transceivers to its customers. But the networking giant isn't buying Luxtera for its transceiver business.
What Cisco wants is the company's expertise to build technology that moves data over light beams instead of the slower electrons over copper wiring used on chips today. The amount of traffic within web-scale data centers is growing so fast that Cisco sees a day when its line cards and application-specific integrated circuits become bottlenecks.
"That really implies an architectural shift for systems where you have to now think about coupling silicon plus optics in order to get meaningful capacity increases," said Bill Gartner, general manager of Cisco's optical systems group. "If we want to remain relevant in switching and routing, we believe we need to own the silicon technology and the optics technology in order to continue advancing that capacity."
The amount of data cloud providers and telcos are coping with today is enormous, and Cisco expects it to grow exponentially. In November, Cisco predicted annual global IP traffic would increase from 1.5 zettabytes in 2017 to 4.8 zettabytes by 2022.
Traffic drivers include the increasing number of mobile devices and the growing use of video in communications, entertainment and security. Also contributing to the growth is the ever-increasing number of cars, trucks and manufacturing equipment connected to the internet.
Luxtera silicon photonics in custom chips
Cisco believes moving maximum amounts of data center traffic will require custom silicon, which Luxtera can help it build. Also, many web-scale data center operators use Luxtera technology with white and brite box switches, giving Cisco a chance to offer its hardware as a replacement.
"It's a chance for them to at least make their pitch," said Shamus McGillicuddy, an analyst at Enterprise Management Associates, based in Boulder, Colo.
In the average enterprise, data center traffic is also ratcheting up, and Cisco expects 100 Gigabit Ethernet ports to become commonplace in the next couple of years. That trend will likely lead to more sales in optical fiber to connect server racks and the need for more technology like Luxtera transceivers.
Demand for 25/100 Gigabit Ethernet ports drove a 14% increase in port shipments in the second quarter, according to research firm IHS Markit, based in London. Falling prices were a significant contributor to the growth in 25/100 GbE.
With port prices falling, Cisco expects optic costs to comprise a more substantial portion of overall spending on switching, Gartner said. "We see that trend with our customers, and we believe that it's important for us to capture both the optic costs, as well as the port costs, as we think about market share."