Ceragon Networks tackles the ‘build vs. buy’ debate for telecom chips, noting benefits from the in-house model
In 2007, when Steve Ballmer notoriously declared, “there’s no chance that the iPhone is going to get any significant market share. No chance,” Steve Jobs was forming the chip design team that would make his name, and the iPhone, permanent fixtures of technological legend. The design team, which Jobs astutely brought in-house, had invaluable capabilities that enabled Apple to maintain a massive moat between itself and an entire industry.
Almost every telecom equipment manufacturer faces the same conundrum as Apple did – the classic “build vs. buy” debate over the main components of a planned platform – a platform that should cost effectively address customers’ challenges. Buying “commercial off the shelf” chipsets can reduce costs and shorten the research and development process. But, COTS can also limit a platform’s functionality. Full customization is not possible if a company relies on outside vendors, who produce fixed products with fixed capabilities.
In many telecom domains, we have seen a growing trend towards the “build it yourself” model. For instance, high-end routing platforms, like Nokia (formerly Alcatel-Lucent) have long been developing their own network processors. Indeed, Nokia is launching its third generation of homegrown silicon this year. Other routing giants, such as Cisco, follow this trend as they move from COTS network processors to homegrown integrated circuits.
The optical communications realm has taken a similar path, with Infinera’s revolutionary optical, internally developed IC. Nokia recently followed Infinera with a powerful combination of innovations aimed at increasing capacity while also adding flexibility and improving efficiency in optical transport networks.
In the wireless backhaul domain, however, the majority of vendors have chosen to build their products and solutions based on COTS components, despite their limitations, and continue to buy chipsets from vendors such as Broadcom for their microwave systems.
However, there are only a few vendors who have chosen to build systems based on homegrown modems and radio frequency integrated circuits. This concept, called “vertical integration,” places the vendor as the only party responsible for the design and implementation of the main components, as well as of the system as a whole.
Such “vertical integration” vendors plan and manufacture the main components of their platform in-house. The build method enables companies to best accommodate their customers’ needs and challenges. By comparing basic parameters, such as spectral efficiency, capacity and system gain, the advantage of a vertically integrated platform over other products that are based on COTS components becomes very clear.
Additionally, there are many benefits to customers. Achieving higher system gain, for example, allows customers to use smaller antennas in their network, which, in turn reduces direct capital expenditure as well as related operational expenses such as tower leasing, installation and transportation costs.
Another example of potential savings comes from spectral efficiency gained by using the optimal modem technology. Spectral efficiency is a reflection of the cost structure of the telecom operator as it enables the reduction of spectrum fees, per given required capacity. This reduction becomes extremely significant when groundbreaking technologies are used. Such technologies include line-of-sight multiple-input/multiple-output and advanced-frequency-reuse – which can all be introduced uniquely, and way before competitors, thanks to unique IC technology.
Looking ahead, the mass introduction of new services and architectures, the advent of “5G” technology connectivity, the spread of “Internet-of Things” and the popularization of machine-to-machine communications will require vendors to quickly adapt their solutions and pressure them to keep pace with the evolution of the technology they are using. The move to ultra-high-speed wireless technology and the introduction of operations in new frequency bands (like E-Band and D-Band), will provide substantial benefits to vendors developing in-house chipsets, both in terms of time-to-market and efficiency, as they seek to accommodate the new demands from their customers. In the forthcoming ultra-high speed environment, COTS components will be a liability that reduces the time-to-market, as they take a relatively long time to obtain, ultimately delaying product integration in comparison to vertically integrated systems.
While the build vs. buy decision seems to be a vendor related dilemma, it has a major impact on customers (or communication service providers) as it hints to the platform that can bring the highest benefits. Systems built on homegrown chipsets deliver capabilities that allow customers to increase their operational efficiency, ensure their peace of mind and enhance their subscribers’ quality of experience.
Dudy Cohen is the strategic product marketing director at Ceragon Networks.
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