‘We're the largest company in the world in optical connectivity'

A traditional manufacturer of optical transceivers, equipment used to illuminate fiber optic networks, Belgian firm Skylane Optics announced new investments to increase its assembling and distribution capacity in Latin America.

The company began operating in in the region in 2012, after setting up a presence in Brazil. In 2014, it considered expanding through the purchase of Brazilian chipset maker BrPhotonics, an unsuccessful JV attempted by Brazil's CPQD and US firm GigOptix.

Skylane complained that seven months after making an offer for the industrial facilities, it had not received a response, and gave up on the deal, focusing since on organic growth.

Years went by until Skylane was acquired this year by US group Halo Technology, a worldwide manufacturer of fiber optic transceivers whose portfolio includes optical communication brands Addon, ProLabs, Proline, Solid Optics and Aria Technologies, increasing its investment capacities.

BNamericas spoke to Rudinei Carapinheiro (in photo), director of new business at Skylane Optics Brasil, and with Hermano Albuquerque, head of Halo Technology for Latin America, about the company’s plans for the region.

BNamericas: Skylane announced investments to increase its local operations, following its acquisition by Halo Technology. In 2014, Skylane became interested in the assets of BrPhotonics in Brazil. What happened from then until now?

Carapinheiro: BrPhotonics was a completely ready-to-operate company. A very good asset. It would place Brazil on a much higher level. But after that business didn’t go forward, Skylane adapted its operation along with its head office in Belgium.

We prepared ourselves, not only in Brazil, but in Europe, to be ready for the new demands that would come, such as 5G. We have a lot in Brazil to expand in optical fiber connectivity, even before fiber reaches 5G antennas.

Then came the pandemic, which from the point of view of digitization was a preamble to 5G, a technology that will bring even more growth to the segment of networks and optical fiber. 

BNamericas: Did you buy another company locally or did you structure the business on your own?

Carapinheiro: We didn't buy anyone in Brazil. On the contrary, we structured the entire business together with the head office and we went enabling ourselves along with new partners, such as Halo.

Albuquerque: For us at Halo it was a very happy integration. Halo was already expanding around the world as a company focused on fiber optic connectivity. It already owned some companies linked to optic solutions.

Then it saw the opportunity to make a very large expansion in Latin America with the presence Skylane had not only in Brazil but in other countries in the region and decided to make this integration.

Before the acquisition, Halo had no presence in Latin America, which is one of the fastest growing markets in the world in telecoms. We are in a prominent position in the group because the LatAm unit is one of the fastest growing in percentage terms.

Skylane, for its part, saw an opportunity to have this new financial support to grow. A win-win deal.

BNamericas: Right, so in which markets in the region does Halo/Skylane now operate?

Albuquerque: We have offices in Mexico, Colombia and Brazil, which is our main one in the region.

In addition to these offices, we have operations in several countries in the region. We also sell to Peru, Chile, Guatemala, Honduras, Costa Rica, Panama and Bolivia.

In general, our clients in Central America are served by our office in Colombia, directly and occasionally by one or another partner. But we don't have partners in every country. We’re even in a commercial expansion phase.

In Brazil, we mostly serve our customers directly. But we also have local commercial partners and we closed new partnerships this year in the country.

BNamericas: Where is the equipment that supplies all these markets manufactured?

Albuquerque: After Halo acquired Skylane, whose headquarters were in Belgium, that gave an opportunity to bring more products to Brazil, because Halo has production centers in California, in the UK, in addition to Skylane's operation in Belgium.

So we were able to benefit from a much larger stock by bringing products from these countries. This was important during the pandemic, to meet the needs of our customers.

BNamericas: Considering all the logistical difficulty, the high cost of freight, FX, etc, wouldn't it make sense to have local production?

Albuquerque: The production of optical transceivers is extremely complex, few countries domain this technology.

But right now we’re expanding our headquarters here in Campinas [São Paulo state], moving to a new, much larger space.

The objective with that is to, one, triple the stock size. We’ll have many more products in Brazil. 

And secondly, we’ll now be Halo's fourth worldwide distribution hub. Campinas now becomes a hub for all of Latin America.

BNamericas: Will this hub be only for assembling?

Albuquerque: Yes. There is miniaturized electronics, such as laser, which Brazil has not yet mastered. 

But every part of assembling, quality assessment, programming, support and final QA is done locally. We are the only company in the sector in Latin America to have this type of structure.

Before, we brought products to Brazil and sold them only to Brazil. We brought products to Colombia, and sold only to Colombia and to countries in Central America. Now, we’re increasing our assembling capacity and centralizing everything in Brazil. 

We will no longer have independent operations in Latin America. We’ll centralize support in Brazil.

Carapinheiro: The size of our building became too small with the increased market demand. We’ll now have many more employees and a much larger inventory.

BNamericas: When will the opening of the new facility be?

Carapinheiro: The soft opening will be in January, between the 10th and the 15th. And then we’ll start preparing the installation of the machines and all the rest.

We’re anticipating the boom in optical connectivity that 5G and also datacenters, which also demand a lot of fiber, will bring.

BNamericas: Who are your main competitors?

Carapinheiro: Skylane is focused on the part of optical transceivers, which are used to illuminate optical fiber. In this sense we also work with Infinera, Cisco, Datacom, Huawei, Fiberhome, Padtec, all these players.

We don't have a specific competitor. We instead have an alliance-value with these brands.

Albuquerque: These companies are often our partners. Our customers buy a switch for example from Infinera and complement it with our optical receiver. These devices work together.

Carapinheiro: Padtec, for example, manufactures optical transponders, inside of which an optical transceiver goes embedded.

It’s worth mentioning that the open RAN model – interoperable open networks – is another driver for our products to have an even greater penetration in the market.

Skylane's technology is already compatible with all switches, routers, available on the market.

BNamericas: Of all the segments, where are Skylane’s main growth drivers?

Albuquerque: We have great growth opportunities. Firstly, we have a multitude of new companies and internet service providers implementing new fiber optic networks, which will demand new solutions and need optic connectivity.

In addition to that, there’s a huge amount of fiber optic network already deployed. With the increased demand for capacity, service providers don't necessarily need to build new such networks, but just upgrade bandwidth. 

Say, raising the network data traffic capacity from 1Gbps to 10Gbps, or from 10Gbps to 100Gbps. To do that, companies buy an optical transceiver.

BNamericas: What kind of companies in the sector make up your main clients? Large carriers, ISPs, datacenters?

Carapinheiro: Skylane was founded in Brazil in 2012 and we were one of the pioneers in the area of optical transceivers. We started our business with ISPs.

Later we managed to get into the tier 1 segment, that is, of big telcos. And we are today inside datacenters too. I dare say that almost all datacenters, the most famous and important ones in the local market, rely on our technology.

But we’re also in submarine cables and government projects, hospitals. All of what requires fiber and optical connectivity.

As a side note on that, Skylane's optical transceivers were used at the World Cup and Olympic Games in Brazil. My kids in Belgium watched the World Cup games in 4K, 8K technology thanks to Skylane transceivers.

Albuquerque: Brazil has 14,000 internet service providers registered at [regulator] Anatel. Of these, around 6,000-7,000 must be those effectively operational. It's a universe of opportunity. And we have hundreds of them as customers, including all the major ISPs.

At the end of 2020 we started to grow very strongly in the tier 1 segment and in the datacenter market.

I would say that in the last 12 months we should have added at least 120 new customers.

BNamericas: Not having local manufacturing, didn't you have problems with delivering products to all these customers during the pandemic?

Carapinheiro: We prepared with our headquarters in Belgium, which anticipated the increase in demand for more broadband capacity by service providers during the beginning of the pandemic in Europe.

So, we knew that this demand for transceivers was going to explode when the pandemic reached our shores, and we prepared ourselves with a good amount of stock to serve our customers.

We managed to serve them in the most diverse corners of Brazil in exceptional terms, in the best possible delivery time. In some extreme cases delivery took longer. In others, no.

BNamericas: What are your demand expectations?

Albuquerque: Our expectation for growth in terms of volume is huge. The Brazilian telecom market as a whole generates around 50bn reais [about US$10bn] in revenues.

If you look only at the 5G auction, Anatel expects companies to invest 45-50bn reais in the country. Half of this refers to the obligation inherent in the auction process.

So we have another 25bn reais for telecom spending, not considering the tender obligations. This involves building towers, pipelines, fiber, software, etc.

Of this total, we expect around 2.5bn reais in Brazil to correspond to fiber optic infrastructure over the next three to four years. This is our addressable market.

Carapinheiro: Not to forget about datacenters as well. 

Because to get all the benefits of connected cars and other high-level applications to come, we need datacenters to be spread out in the territory, we need nano datacenters, to reduce latency as much as possible. 

The enemy of the datacenter is latency. To have the lowest possible latency in edge computing you need optical fiber. And every little port on a datacenter rack switch needs optical transceivers.

BNamericas: How much is the group investing in Brazil and in the region?

Albuquerque: We have a series of investments planned.

In this first moment, which involves the physical expansion of the site, inventory, software, we’re talking about US$5mn in the new headquarters. Throughout the year, we’ll have additional investments.

Besides, because the Halo group is merging with Amphenol [a California-based provider of active and passive fiber optic interconnect components], that will give us even more investment capacity.

I would say that today, we’re definitely now the largest company in the world in optical connectivity. And the strength we gained to expand in Brazil and in the region is enormous.