Harnessing the Power of Photons to Drive AI Innovation
How are photonic particles, a force naked to the human eye, revolutionizing the very bedrock of AI infrastructure?
Uncover the answer at the Six Five Summit: AI Unleashed! We're stoked to feature Jim Anderson, CEO at Coherent Corp, as one of our visionary Cloud Infrastructure track speakers. He joins host Patrick Moorhead for a deep dive into the critical, transformative role Coherent’s technology plays in powering the AI era.
Key takeaways include:
🔹Photonics – The Unseen Accelerator of AI: Explore Coherent's central and indispensable role in fueling the AI revolution, highlighting how photonics fundamentally accelerates both AI training and inference.
🔹Coherent's Unique Edge in the AI Landscape: Discover what truly sets Coherent apart in the rapidly evolving AI space, from their enduring customer relationships to their distinctive market differentiation.
🔹Photonics' Broad AI Impact: Unpack the diverse aspects of Coherent's business where AI intersects with photonics, showcasing the wider, pervasive impact of this technology beyond traditional datacenter transceivers.
🔹Sustaining the Innovation Engine: Gain exclusive insights into Coherent's powerful "innovation engine" and their forward-thinking strategies for continuously remaining at the forefront of technological advancements in the AI era.
Learn more at Coherent.
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Patrick Moorhead: The Six Five Summit is back for its sixth year, and we are talking AI nonstop. We're building out those hyperscaler data centers all the way to the endpoints and pretty much everything in between. We have had Jim Anderson on the Six Five multiple times, multiple companies. This is wonderful. And I'd like to bring him in. He's now CEO of Coherent, and we're going to talk about cloud infrastructure and talk about photons and how they're enabling all of this AI goodness. Jim, great to see you.
Jim Anderson: Great to see you too, Pat. We love photons and are happy to talk about photons all day long. So thanks for having me. I appreciate it.
Patrick Moorhead: Yeah, absolutely. You know, I like to call it, you know, Jim's playbook, right? You come into a company, you run the play, modify, make tweaks, and I've observed it and really enjoyed watching it at three companies. And you did the same thing at Coherent. And, at least from an investor's point of view, it's all about talking to that audience. But you also have to bring in things like core value proposition with your customers. Where the market is headed there. But I think the first thing probably in people's minds is, first of all, who is Coherent? Why do photons matter to AI?
Jim Anderson: Yeah, absolutely. So, first of all, Coherent, the simple way you can think about the company is it's really the global leader in photonics. And what is photonics? Just to make sure everybody knows what photonics is. So photonics is really about harnessing the power of a photon. And the photon is the basic particle of light, harnessing that power of that photon to do all sorts of amazing things for our customers. But the three basic things that we can do with a photon is we can transmit data with it at very high speed, at high bandwidth. We can use photons in, for instance, lasers to change the nature of materials. And then the other thing we can do with a photon is we can bounce it off a surface and we can measure or sense things about the nature of the surface. So that's the basic, basic things that we can do with photons. But all of those basic things drive an amazing amount of innovation. And in data centers, AI data centers, photonics and the photon is becoming an increasingly important part of data center architecture and how data centers are getting designed and built. And Coherent's really at the center of that.
Patrick Moorhead: Yeah, it is amazing. Even though it took a while for photonics to become a reality, the growth curve is astonishing. And it's directly related to the need to move a lot more data quickly and also do it at lower cost due to power and maybe a, you know, simplified infrastructure. It's been pretty astonishing. And I'm not in that copper will die, you know, camp. You know, we keep giving life to copper here, even creating new protocols for it to talk over. But it's great to see, it's great to see how this industry has migrated. You know, there are. Go ahead, Jim.
Jim Anderson: Yeah, I was just going to say, you know, one of the things about photonics is, you know, I started my career in the world of electrons. I've been in the semiconductor industry for almost my entire career actually. I started as a microprocessor architect on data center servers, right? Way back when. So I've been around data centers my entire career, mostly in the world of electrons. But photons have some pretty amazing properties relative to an electron, relative to the power efficiency and the bandwidth of data that they can transmit. And so what we've seen over the course of data center evolution is Pat, you'll remember when we first started building data centers, all of the networking connections between the computing nodes were all electrical when we first built data centers, right?. And now, if you fast forward to today, the entire scale-out part of the AI data center, which is all the connections between the racks, that's all optical today. Because as we increase data rate or we increase distance, you're forced to move out of the electrical domain into the photonic domain. It's really the only way to achieve the bandwidth that you need. So now today, AI data centers, the entire scale out portion of the network optical. And what we're going to see over the rest of this decade is the beginning of the last remaining part of the network within the data center. That's electrical, which is the scale-up. These are the connections within the rack. Those will start to migrate to the more use of optical in the scale-up portion of the network as well. So again, photonics and that technology just continues to become more and more important to how data centers are architected and designed.
Patrick Moorhead: Yeah, optical went from I can't afford it to you can't afford not to do it.
Jim Anderson: That's exactly right. That's well said. Yeah.
Patrick Moorhead: So, hey, let's talk about differentiation. You know, every company I talk to says they're the leader in AI, and they're driving this wave. And you know, some pundits in your space just say, listen, this is a, this is a commodity, Jim, right? And you know, Asia is just going to take over this entire market. At your investor day, you talked about deep customer relationships, right? Why do customers keep coming back and buying more?
Jim Anderson: Yeah, there's really, it's a great question. And there's really, it comes down to two things, right? Number one, it's our technology, so the breadth and depth of our photonics technology. And then number two, it's about being able to deliver that, right? It's one thing to innovate on technology; it's an entirely separate thing to be able to scale, to deliver at scale, high volume, high levels of quality. And when you look at Coherent within the photonics world, Coherent is really the only company that's got the breadth and depth of technology combined with the manufacturing scale. And you really have to have both of those with the customers.
And so on the first one, on the breadth and depth of technology, if you look at, for instance, we build the transceivers that go into data center optical networking, just one example. The transceiver is what converts the electrical signal to optical and vice versa. And in that transceiver, we don't just assemble and test the final product, we build all the key photonic ingredients that go into that, right? We design all of those photonic ingredients. That means all the different types of lasers, whether it's indium phosphide or gallium arsenide. The photo detectors that are used at the other end of the wire from the laser, all of the key materials, isolators, optics that go into that transceiver. So we've got the broadest and deepest portfolio of technology. And as you know, Pat, that's probably number one most important thing for customers as a partner of a multi-generational basis is what is the portfolio and innovation around technology that you could bring to us. But number two, the second part of the discussion is, okay, so you have the right technology solution, can you deliver that? And that's where we've got the other part of the key customer care about, which is that we're able to deliver complex photonic technologies at scale. So, materials, devices, subsystems, even full systems and software, we're able to deliver high volume at scale. So that combination is critically important to our customers.
Patrick Moorhead: Yeah, I'm always fascinated when I look at the evolution of industries. They go through different cycles of aggregation and disaggregation. And in your space, aggregation is the name of the game. One throat to choke and also time to market. You know, people could buy this thing from this place, this thing, and then find somebody to put it together. Maybe they can do it for one cycle, right? But try to do that for two, try to do that for three. Oh, and by the way, try to have enough manufacturing capacity online to make that happen in various places around the world. So you know, it's interesting as a recovering product guy, Jim, you know, I look very closely at core value propositions, and it's working. And you know, probably the tip of the spear, at least on the hyperscaler side with the switch, is you actually had an optical switch that I believe you started shipping as of late. I think that's what you announced. And you know, you're going all the way from, you know, making the tiniest components to actually shipping the optical switch and, and pretty much everything in between.
Jim Anderson: Yeah, I actually, I'm glad you asked about the optical switch because that was one of the products when I first joined Coherent that I was like wow, I can't believe this because I didn't know about this product before I joined. And by the way, I just passed my one-year anniversary a few days ago. But when I first, within the first week or two I joined the company, somebody showed me this kind of prototype around the optical switch and I said oh my gosh, guys, we’ve got to get this to market as fast as possible. Because what an optical switch does is, if you think about the data transmission from one computing node to another computing node, you know, the data transmission is done optically in the scale-out domain. But if you want to switch from one place to the next, today it's done mostly with electrical switches, right? Well, if you replace that electrical switch with an optical switch, you can keep that data signal in the optical domain. You don't have to convert it to the electrical domain. And that has a tremendous performance and power efficiency benefit. And so yeah, shortly after I started, we really ramped up investment in this product line and accelerated our time to market. And the team, I'm really proud of the team, just within the last couple of weeks, they achieved first revenue on this product line. And we have a very, very differentiated solution inside our optical switch. So we're providing the whole switch and the software on top, but inside, the key technology that allows the signal to switch is based on what's called digital liquid crystal technology. It's a non-mechanical technology, and the other solutions that are out there are based on MEMS, which is fundamentally a mechanical technology, and that has reliability issues. Our solution is non-mechanical digital liquid crystal, which is borrowed from our telecom business; it's actually been used in undersea applications in our telecom business for years. So it's field-proven technology. So we brought this now into the data center. Tremendous advantage and reliability, and a bunch of other characteristics. So yeah, customers are really excited about it, I'm excited about it. And now we're, now we're shipping revenue, which always makes me happy.
Patrick Moorhead: Jim, I learn something new every day about the company. I did not know undersea cables. Yeah, you just don't want to send a sub down there to fix a MEMS-based device, do you?
Jim Anderson: No, I mean obviously that. You know, we use the undersea cable example because that dive, that is the highest level of reliability that you have to achieve, right? And because nobody wants to take a submarine to depth.
Patrick Moorhead: No, exactly. This is great. Hey, we're talking submarines here, folks. This is great. Yet another innovation for Coherent.Hey, let's dive in. So we talked a little bit around the data center transceiver. Essentially, everybody out there, it's the device that you plug into the switch that makes that optical connection. We talked about what are other parts of the AI value chain, other end markets that you participate in?
Jim Anderson: Yeah, okay, good question. I would say a couple. So if we move beyond the data center, first example I give you is as you know, a lot of these workloads are so huge that they're starting to span multiple data centers or the data centers are constrained by the amount of just physical space or power that they can get into the data center. We're seeing these workloads span multiple data centers where they're running across multiple data centers. If you're going to run it across multiple data centers, what's key is that you have to have very high-speed connections between those data centers and very, very wide, high-bandwidth pipes. So what that means is you need optical networking, you need very high bandwidth, high-speed optical networking links. So what we're also seeing is a big increase in demand of these data center interconnect DCI transceivers, for instance, that we build to enable that high-speed networking between data centers. And so we're seeing tremendous growth there. And here again we have great technology here because for years we've been providing key optical technology into telecom applications. And this is kind of like a telecom application. This is a telecom-grade technology used for the connections between data centers. So that's one that we're really excited about. The other one that you might not think about, that's maybe not as obvious, is AI data centers, the demand for AI, that's really driving the entire semiconductor technology transitions. It's driving the semiconductor nodes from you know, three nanometer to two nanometer and beyond. So it's driving the most advanced semiconductor technology. And you know what enables that is the wafer fabrication equipment, the semicap equipment. And if you look inside that equipment, a lot of that equipment relies on photonics, and that's where Coherent comes in. So another big area that we support AI data centers is in the photonics, lasers, and optics that go into semicap equipment. When I, you know, when I started my career, we were on the, I think it was the quarter micron technology node. Pat, when you started what were you guys, like 100 micron or?
Patrick Moorhead: I think it was 250.
Jim Anderson: I was kidding. That was.
Patrick Moorhead: 250.
Jim Anderson: I was on quarter micron when I started my career. And on the quarter micron node, we maybe had two or three optical inspection steps. That's now grown to, when you look at three nanometer going to two nanometer, that's grown to almost 100 optical inspection steps. And that means photonics. So the amount of photonics, lasers, optics has grown over the years, and the complexity of those photonics has grown, which drives the amount of content. So that's another key area where Coherent supports the AI, especially AI data centers, is in the complex semicap equipment that drives the advanced technology nodes.
Patrick Moorhead: That is so cool, Jim. It really is bricking laser beams. By the way, the hybrid multi-cloud is just starting and connecting data centers. And people laughed at me 10 years ago when I talked about having an application where the compute is in one data center, and the data is in another data center.
Jim Anderson: Yeah.
Patrick Moorhead: And what this does, it makes it, it makes it a reality. And it's like well, why would I want to do this? Well, let's say I wanted to have an application in the public cloud and then the private cloud or on premises and be able to span those. So, that's even regardless of AI. And now, even though the Chinese did this first, we have US companies even like Meta, who are spanning models across data centers. A high-speed interconnect is the only way you can do that and make that happen. And then when you get into these reasoning models, when it comes to inference, this is not just about training, and you need a very large set of planar memory to go across for reasoning models. I believe that we will see those spanning multiple data centers as well.
Jim Anderson: Yeah. And just as you said, look, that can only happen if we have super high bandwidth, super fast connections between those data centers, and that means optical networking, and that means driving the most advanced speed and the widest bandwidth optical connection.
Patrick Moorhead: You can't do this with copper. And I don't think anybody's connecting data centers with copper anymore.
Jim Anderson: This is all optical, right? It's just telecom grade, super high speed, high bandwidth connection.
Patrick Moorhead: Yeah. You know, we need a new industry terminology, right? We have scale-up networking, scale-out networking, and I don't know, scale-out-out networking. Is that what it is?
Jim Anderson: Okay, I just made that up. Well, yeah, we should come up with it.
Patrick Moorhead: No, we coined it here. Let's plant that flag, Jim, and move that forward as the standard. So, Jim, the innovation engine. I remember talking to you the first time you came in. I was like, Jim, first of all, embarrassed I don't know who Coherent is. Why would you join them? What are they doing? And I think it was, I don't know, a month or so in, and you said Pat, I looked under the hood at all of the innovations, all of the technology, and all of the, of the possibilities here. I, I also recognize that, you know, when I look at, you know, what your EPS goals were, I map that against your financial goals. It's like, okay, Jim, how are you going to keep the innovation engine chugging along?
Jim Anderson: Yeah, that's a great, that's a great question. So you know, look, I'm an engineer, so I love innovation, right? So it certainly comes from a place of love. On innovation, I think in my experience there's really two things that you need to drive an effective innovation engine. Number one is there is a culture around innovation. You have to have a culture. It's interesting. And I think companies that don't have a strong innovation culture, it's really hard to build an innovation culture. The great thing about Coherent is when I came in, is that's probably our strongest cultural attribute as a company, is this is an amazingly innovative company. I think it's the most innovative company I've ever worked for. And I've worked for a number of extremely innovative companies.
Patrick Moorhead: That's big. I mean, you were with Broadcom, AMD, right? Lattice. Yeah.
Jim Anderson: And we innovate. We were talking about optical switches. We innovate at the system and software level. But what's really cool about Coherent is that we innovate all the way down through the technology stack. We innovate at the device level, all the way down to the material science, the fundamental physical level for photonics. So there's this really strong culture of innovation, and I certainly want to continue to nurture that, and there's a number of things that we're doing internally to make sure that we continue to nurture that culture. Actually, next week we're going to have an innovation summit within the company where we bring together all of the key technologists across the company here to the Bay Area and have a summit and talk about how do we drive better, faster innovation for the company. So we're really excited about that. That's one example. So that's one thing I think it's about building a culture of innovation. But then I think the second piece is, and this is kind of where what you mentioned around the EPS and profitability is, look, it's about investment too. We've gotta invest for innovation. You've gotta place the right investment. But I also think you gotta be careful. This is where I'm a big believer in customer-driven, market-focused innovation, where let's innovate, but let's innovate for the benefit of our customers. For the benefit of the market. For the benefit of the industry. Let's know that as we innovate that customers are going to see real, genuine benefit from that, and that the company will see a return, a good return over time on that. A good return on that investment. And so I think the second piece about it is making sure that those innovation dollars, those investment dollars, are directed at the right big areas of innovation that we know are going to drive a great return for the company over the long term. And so that's certainly something I've been focused on over the past year is making sure that we've got those dollars investing in the right long-term innovation engines.
Patrick Moorhead: Yeah. So it's not about technology for technology's sake, it's really innovation for customer's sake.
Jim Anderson: You got it. Yep.
Patrick Moorhead: Hard to do. Particularly, you have to make bets and and guess on where the industry's going in three to five years. I mean, sometimes it's easy. It's like, you know, hey, faster, cheaper, and more reliable. Okay, that's where we're going. But to be able to intersect that with industry standards and new technology and what I always like to talk about is the art of the possible. Your customers will never tell you what they need. And certainly if they do, it's going to be too late. If you don't already have if you don't already have that. And you have to kind of transpose yourself three to five years from now to see where this goes. And, by the way, I did a few projects like that before, and I really like it. And you get, like, you get the brainiacs in the room from a technological standpoint and then the people who really, you know, have a decent idea of even, you know, future casting out there. It's a lot of fun.
Jim Anderson: Absolutely. And this is exactly one of the themes of. I mentioned we're going to do an Innovation Summit internally next week. This is exactly one of the themes, hey, let's look beyond the horizon. Let's make sure that we're thinking about what's beyond the horizon and what innovation we can drive, way ahead of what our customers have even thought about. This is one of the key themes we'll discuss internally next week. And then let's make sure we invest in that as well. And then, what I love about Coherent is the deep technology innovation that we do at the fundamental physical layer. I think that really helps us understand the art possible. When you understand the fundamental device physics behind photonics. Right. The material science, then you're able to understand what truly is the art of the possible, and then drive to that.
Patrick: Hey, Jim, I really appreciate the time. Our audience loves hearing what Jim Anderson is up to. What is the big deal with photons? Hopefully, everybody understands why those are so important to AI today and in the future. So I appreciate that.
Jim Anderson: Yeah. Thanks, Pat. Thanks for giving me a chance to tell you about why we love photons so much.
Patrick Moorhead: So, everybody out there, thanks for joining this cloud infrastructure spotlight at the Six Five Summit. We're in our sixth year, and we just keep going here, and it keeps getting better, hopefully. Yes, that's what you told us. So, hey, connect with us on social media. Tune in to more conversations we're having on our website, sixfivemedia.com, for more insights. Not as in Moor Insights, but more insights, coming up soon. Take care.
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Speaker
Jim Anderson was appointed Chief Executive Officer of Coherent Corp. and a member of the Board of Directors on June 3, 2024. He previously served as a director and as President and Chief Executive Officer of Lattice Semiconductor Corporation since September 2018.
Prior to joining Lattice, Mr. Anderson served as the Senior Vice President and General Manager of the Computing and Graphics Business Group at Advanced Micro Devices, Inc. (AMD). Prior to AMD, Mr. Anderson held a broad range of leadership positions spanning general management, engineering, sales, marketing, and corporate strategy at companies including Intel, Broadcom (formerly Avago Technologies), and LSI Corporation. Mr. Anderson has served on the board of directors of Entegris, Inc., since March 2023, and he currently serves on the board of directors of the Semiconductor Industry Association. He previously served on the board of directors of Sierra Wireless from April 2020 to January 2023.
Mr. Anderson earned an MBA and Master of Science degree in electrical engineering and computer science from the Massachusetts Institute of Technology, a Master of Science degree in electrical engineering from Purdue University, and a bachelor’s degree in electrical engineering from the University of Minnesota.


