Facebook Wants to See Optical Sector M&A

Following a lunchtime panel here on "Silicon Photonics in the Data Center," Yuval Bachar, network hardware engineer at Facebook , said, "There are so many companies doing silicon photonics now, and many of them are small, that I believe they will consolidate. A company like Broadcom or Marvell or someone like that will have to say 'which out of these small companies has the best technology.' It's a technology those bigger companies need in their portfolios."

Bachar doesn't think that Facebook itself would engage in that consolidation, even to save a technology it admires. "We don't want to win the ecosystem," he said. "We want to enable it, and we don't necessarily want to build it ourselves -- we want to buy it from others. So, I don't think we have any direct plans for acquisition, but rather a partnership model."

Facebook has relationships with more than 20 optical companies -- many of them transceiver module suppliers and silicon photonics developers -- though Bachar declined to name them, citing NDAs.

Though he described Facebook's willingness to "create inflection points" by being among the first to adopt new technology, the social media giant also struggles with concerns about the health of the smallest suppliers.

"We have to make our choices about the companies we work with on a technology level, but also on a business level," he said. "Who are their investors and partners? We have to do this because the technology is critical to running our data centers."

Bachar and his two fellow panelists, Aurrion CTO Greg Fish and Flavio Benetti, the group vice president and general manager of STMicroelectronics NV (NYSE: STM)'s Mixed Processes Division, also agreed silicon photonics developers must make manufacturing advancements in order to meet the sector's volume requirements. Fish said, "If silicon photonics technology is going to scale, it needs to be built on fabs. It needs to get out of pluggable modules, and get on boards. To deliver the cost requirements for scalability, it needs to become as simple as making a traditional integrated circuit."

Bachar added, "If the industry continues to build mega data centers, you have to adopt sophisticated manufacturing processes. You can't continue to have things made by very small hands. You have to invest in manufacturing."