Fabless chip design company Credo Technology Group Holding Ltd. today announced that it has reached a deal to acquire Israeli silicon photonics startup DustPhotonics Ltd. for up to $1.3 billion in cash and stock.

Under the terms of the deal, Credo will pay $750 million in cash and issue approximately $123 million in shares at closing. According to Calcalist, Credo may also pay up to approximately 3.21 million additional shares, valued at around $430 million based on current pricing, contingent on DustPhotonics hitting certain financial milestones.

Founded in 2017, DustPhotonics offers a portfolio of Silicon Photonics Photonic Integrated Circuit technology for optical transceivers spanning 400G, 800G and 1.6T speeds, with a roadmap extending to 3.2T. The company employs about 70 engineers with expertise in photonic integration.

DustPhotonics operates as a fabless semiconductor company, designing SiPho PICs that integrate key optical functions onto a single chip rather than assembling them from discrete components. The approach reduces component complexity, improves manufacturing yields and enables lower costs at scale as port speeds advance beyond 800G.

Its PIC portfolio supports both integrated and external laser configurations and is already deployed in transceivers at leading hyperscale AI clusters. The company is also developing near-port optics and co-packaged optics applications, which bring the optical engine closer to switch or GPU silicon to reduce power consumption and latency.

The acquisition brings DustPhotonics’ SiPho PIC technology in-house and expands Credo’s connectivity portfolio beyond its existing SerDes and digital signal processing products. The combined stack from the two companies will span SerDes, DSP, silicon photonics and system integration, covering both electrical and optical interconnects for AI scale-out and scale-up networks.

“Combining forces with DustPhotonics marks a defining step in Credo’s strategy to lead across the full spectrum of AI connectivity,” said William Brennan, chairman, president and chief executive officer of Credo Technology. “We’ve built a strong position in high-speed electrical solutions and this move decisively expands that leadership into Silicon Photonics with best-in-class PIC technology that complements our ZeroFlap Optical Transceivers and DSP portfolio.”

The transaction is expected to close in the second quarter of this year. Shares in Credo rose about 13% today after the announcement.

Coming into its acquisition, DustPhotonics had raised more than $100 million in venture capital funding, although the amount raised varies depending on the source. Investors in the company included Avigdor Willenz, Intel Capital Corp., WRVI Capital, Greenfield Partners, Sienna Venture Capital, Atreides Management LP and Exor Ventures.

Image: DustPhotonics