LightTrends

 

Is Demand for Optics Cooling Off in Q1 2017?

 

��LightCounting releases Quarterly Market Update Report and Database

 

 

Demand for optics was red hot in 2016, but several suppliers of components and modules guided for lower revenues in Q1 2017, raising concerns of a potential market downturn. LightCounting analysis suggests that these concerns are not justified. Demand for optics remains strong and projections for 2017 are consistent with market forecast published by LightCounting in October 2016.

Seasonally weak Q1 demand for optics in China, combined with a few glitches in production at Finisar and NeoPhotonics as well as lower demand from one customer of Acacia do not derail our outlook for the market in 2017. Deployments of 100GbE optics in mega-datacenters will contribute the most to market growth in 2017, while the broader market will hold steady, as shown in the figure below.

LightCounting expected stabilization in demand for optics this year after a new record set in 2016. For example, shipments of 100G DWDM ports increased by more than 50% in 2016 and are projected to increase by 30% in 2017 - a more modest, but still very healthy growth rate. The transition in 100G DWDM deployments from long haul to metro networks started in 2016 and will continue this year. Ciena, Infinera, and Huawei reported increases in 100G ports shipped for metro applications in the second half of 2016. Pricing of optics used in metro applications is lower, so 30% growth in the number of ports shipped will probably only translate to 5-10% growth in revenues for equipment suppliers.

AT&T and Verizon guided for modest increases in capex for 2017, which includes funding for deployments of ROADMs, 100G DWDM and trials of 400G DWDM products. Chinese service providers will report their financials in late March, but we expect them to maintain investments in optical networks on the same level as in 2016 and follow the example of AT&T and Verizon in deployments of next generation technologies.

Internet Content Providers spent 25% more in the second half of 2016 compared the same period of 2015 and this trend should continue. High-speed optics remains a priority for operators of mega-datacenters. LightCounting expects that these customers will purchase more than 1 million units of 100GbE optics in 2017 - similar to the number of 40GbE transceivers sold in 2015. Shipments of many new 100GbE transceivers will double and triple in 2017, while legacy products, such as CFP LR4, are likely to hold steady.

LightCounting recently reported on record shipments of 100GbE transceivers in 2016: “Sales of 100GbE Optical Transceivers Exceeded $1.1 Billion in 2016”. This data will be used to update our forecast for Ethernet transceiver market, which will be released on March 31st along with a new report titled “High-Speed Ethernet Optics”.

Detailed analysis for sales of 100G DWDM, 40GbE and 100GbE optics in 2014-2016 is presented in LightCounting’s Quarterly sales database, released along with the Market Update Report. The database includes historical data on quarterly shipments and pricing of more than 100 products in Ethernet, CWDM/DWDM, SONET/SDH, Fibre Channel, FTTX, Wireless Fronthaul, EOM and AOC market segments. More than 20 leading optical component and module suppliers contributed data to this report.

The report also presents an analysis of revenue and spending trends of top-tier Communication Service Providers (CSPs) and Internet Content Providers (ICPs), financial results of telecom and datacom equipment vendors, including the market shares of the leading suppliers of 100G DWDM transport equipment.

Detailed information on the report is available at: http://www.lightcounting.com/marketupdate.cfm


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ABOUT LIGHTCOUNTING MARKET RESEARCH

LightCounting is a leading optical communications market research company, offering semiannual market updates, forecasts, and state-of-the-industry reports based on its analysis of primary research with dozens of leading module, component, and system vendors as well as service providers and other users. LightCounting is the optical communications market’s first choice source for the accurate, detailed, and relevant information necessary for doing business in today’s highly competitive environment. For more information, visit: www.LightCounting.com or follow us on Twitter at @LightCounting.