Cisco bets $660M on silicon-photonics firm Luxtera

Cisco says it is buying optical-semiconductor firm Luxtera for $660 million and will build its silicon photonics into future enterprise data-center, webscale, and service-provider networking gear.

This photonic technology is essential to keep up with projected massive increases in IP traffic volume over the next four years, according to Cisco’s networking chief.

“Optics is a fundamental technology to enable this future. Coupled with our silicon and optics innovation, Luxtera will allow our customers to build the biggest, fastest and most efficient networks in the world,” said David Goeckeler, executive vice president and general manager, Networking and Security Business at Cisco

Cisco recently projected that by 2022, IP traffic worldwide will triple from 2017 volumes to 4.8 zettabytes per year by 2022, and there will be 4.8 billion internet users by 2022, up from 3.4 billion in 2017.

Upon completion of the deal for the privately held Luxtera, its employees will join Cisco’s optics business under Goeckeler.

According to a Bloomberg report on the deal, Luxtera develops silicon-photonics technology, a way of converting electronic information into photons and carrying it over fiber-optic cables directly into semiconductors, greatly speeding the transfer of data. Other equipment is usually needed to turn light from fiber optic cables into the electronic signals needed to run computers.

Luxtera says it can make a high volume of chips that can do that job, something that’s eluded other companies in the industry for years. The company competes with Finisar, Applied Optoelectronics, and others. Cisco’s bid reportedly beat out interest from Intel and Broadcom, according to Bloomberg.

Cisco said distributed cloud, mobility, and Internet of Things (IoT) applications are creating an unprecedented strain on existing communications infrastructure and that the combination of Cisco’s and Luxtera’s capabilities in 100GbE/400GbE optics, silicon, and process technology will let customers build future-proof networks optimized for performance, reliability, and cost.

Cisco further said the integration of Luxtera and Cisco’s optical transceiver portfolio will broaden Cisco’s offering of 100GbE and 400GbE optics.

“As system port capacity increases from 100GbE to 400GbE and beyond, optics plays an increasingly important role in addressing network infrastructure constraints, particularly density and power requirements,” wrote Rob Salvagno, Cisco vice president of Corporate Business Development in a blog about the deal. “The combination of Cisco’s and Luxtera’s capabilities in 100GbE/400GbE optics, silicon and process technology will enable customers to build future-proof networks optimized for performance, reliability and cost.”

Cisco in November brought high-speed Ethernet to the data center with four new switches it said will ultimately become the foundation of high-density, intent-based networks.

The new 400G Ethernet switches fall into two camps: Two boxes in the Nexus 9000 family aimed at large-enterprise network customers and two in the 3400-S class targeted at high-bandwidth hyperscale users.

The deal would be Cisco’s sixth of the year, which has seen it buy Ensoft, Duo Security, July Systems, Accompany, and Skyport earlier this year.