Broadcom's Big Bluff on CPO

Broadcom has appeared solidly behind its public engagement with co-packaged optics, developing switches with optical I/O. In fact, the supplier seems to be pulling out all of the stops in at least leaving the impression that it is organizing the entire firm around CPO. There are also potential blueprints to compel customers to purchase the full CPO solution in order to obtain the switch ASICs. fibeReality is unaware of another sizable corporation that has ostensibly made such an immense commitment to this networking concept as its core strategy. One explanation that we have heard is that SVP and GM, Alexis Black, has been able to persuade CEO, Hock Tan, to adopt this new, all-encompassing vision, despite the latter always being adamant about high profitability. We cannot believe that Tan, who has a meticulous understanding of the marketplace would buy into the CPO hype, which has close to a zero chance of adding meaningful revenues to his balance sheet in any kind of foreseeable future. Just the complete alterations/challenges in operations, pricing, servicing, etc., alone help to exclude the possibility -- never mind the lack of a clearly defined purpose for CPO. Then there is the very long-lasting promise of pluggables with the relatively high confidence level in getting beyond any future obstacles (not to mention one should always avoid betting against copper). Therefore, there must be another explanation for this perceived massive effort by Broadcom. At a minimum, there must be a backup plan, which likely included Tan telling Black that she has been given a fixed amount of time to make this scheme work. In the meantime, there will continue to be demonstrations, such as with the half-CPO switch at ECOC.

Abstractly, such an effort towards CPO looks fantastic. In addition to not only continuing to lock in the hyperscalers to a greater extent, Broadcom could now take hold of optical expenditures as well. In other words, the optics integrated would give it a much larger revenue stream for the same number of switches shipped.

The reality is that just the impression of Broadcom positioning itself as by far the dominant force in CPO, is the ultimate defensive move, along with the justification of the ludicrous amount of spending on packaging, systems, etc. by the company on this idea. The stakes in the supplier maintaining its position in high-end switching are incredibly high for two major reasons: 1) it is a major cash cow and 2) the immense amount of psychological warfare in the overall data communications networking space.

Regarding both points, Broadcom wants to preempt....

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