Reaching for Commanding Position in Optical Communications Parts (2000.11.22)

Shin-Etsu Chemical Co., Ltd. is reaching for a commanding position in the optical communications parts business. As a first step, they are augmenting the annual production capacity for optical isolators at their Gunma Complex (Annaka-shi, Gunma) to 600,000 units. Shin-Etsu plans to complete the expansion by January of 2001. Through this, the company is bolstering its strength in the rapidly growing optical communications field.

Optical isolators are devices which allow the transmission of emitting laser light in only one direction. When built into the laser modules which form the light sources for optical communications, they support the laser diode by preventing light reflected back to the diode from the fiber-optic conductors. Shin-Etsu's optical isolators have extremely low light-transmission loss and excellent thermal characteristics. They are particularly well suited to low temperature applications. They are also capable of handling wavelengths outside of their specified operating level of 1.55 microns.

Currently the company is pursuing vertical integration of the entire production chain for optical isolators, including everything from the garnet crystals used to form the substrate for the Faraday rotators (see notes1) which are an integral part of the optical isolators, to the finished devices. Thanks to Shin-Etsu's long experience in development of epitaxial technology, the company can even optimize the composition of the epitaxial film surfacing the garnet crystals to meet individual client requirements.

In addition to optical isolators, the company is already working to develop new product lines of in-line isolators, attenuators, and circulators (see notes2). Faraday rotators are used in each of these devices in the same way as in the optical isolators. This is a field where Shin-Etsu's technological strength gives the company a commanding edge.

The current global markets amount to 15 billion yen for isolators; 20 billion yen for in-line isolators; 10 billion yen for attenuators; and 15 billion yen for circulators according to company estimates. Substantial annual growth in the markets for all of these optical communications components is anticipated over the next ten years.

At the moment Shin-Etsu is putting most of its energy in this field into the optical isolators, and thanks to the growth of demand for telecommunications infrastructure, generated by expansion of Internet use, demand for the isolators is quickly increasing on the North American market. With their sure-footed approach to market expansion and development of new products, they aim to increase the scale of their optical isolator business to 5 billion yen in 2001 and 10 billion yen by 2002.

On a related note, the company has already entered the optical fiber preform business. In this field too, Shin-Etsu will reinforce its market power by pursuing vertical integration of production, starting from the quality natural silica from which the company's silicon metal and chlorosilane materials are synthesized. By November 2001, Shin-Etsu intends to finish a new factory at Kashima in Ibaraki Prefecture, with an annual production capacity of 12 million km of fiber-optical cable. Once completed, this new plant will bring Shin-Etsu's total production capacity to 24 million km of cable, occupying a 25% share of the world preform market.

Underneath this business strategy, Shin-Etsu is actively investing in equipment and R&D in order to raise their promising optical communications business as a second pillar to complement their semiconductor-related business.

Notes1
Faraday Rotator: The Faraday Effect is a phenomenon of rotation in the plane of polarization of light passing through a magnetic field in a direction parallel to the field, either forward or backward. The Faraday Effect is used in controlling the angle of the light's wave front.

Notes2
An "in-line isolator" is a device that ejects light travelling in the back direction from the light path. It is used in optical amplifiers for noise suppression.
An "attenuator" is a device for varying the coupling efficiency of output light. It adjusts the signal level of the optical amplifier.
A "circulator" is a device for changing the path of a light signal. It is built into fiber-optic transmission lines where it picks out and returns light signals to and from the original transmission lines.