LightTrends

 

Demand for Optics in China Continues to Surprise

 

LightCounting analyzes the latest market data with highlights from Optinet China 2016

 

The scale and speed of infrastructure projects in China is fascinating, whether they are roads, bridges, bullet trains, airports, or optical networking projects. With 120 million households enjoying fiber broadband connections, China is home to half of the world’s FTTH subscribers. More than 50 million of these FTTH connections were added in 2015 and another 40 million customers will be connected this year.

Figure 1, redrawn from a presentation by Leping Wei of China Telecom at Optinet China 2016, offers projections for FTTH deployments in China and Worldwide. In addition to China Telecom and China Unicom, China Mobile announced very aggressive targets for FTTH deployments in 2016.


Source: China Telecom presentation at Optinet 2016

Despite these records, China is ranked #89 in the world by Akamai in terms of actual broadband speed. Improving this ranking will require an acceleration of upgrades to the rest of the networking infrastructure in China. Current market indicators for optical components and modules suggest that this acceleration has started.

LightCounting reported on very strong demand for 100G DWDM optics recently, for applications in long-haul and metro core networks in China. We are also seeing that extended reach (40/80km) 10G optics used in metro-access applications are enjoying very strong demand, further straining the industry supply chain.

While deployments of FTTH and wireless fronthaul optics were mostly supported by Chinese transceiver vendors, the current upgrades in networking infrastructure in China are directly impacting all the leading Western companies. For example, Finisar stayed away from very high-volume and low-cost FTTH markets and was very selective with taking orders for wireless fronthaul products. High-end 10G/100G optics is the key market for Finisar, as well as Fujitsu, Lumentum, Oclaro and Sumitomo. CyOptics (now part of Broadcom) and Mitsubishi Electric - key suppliers of 10G and 25G lasers for extended reach 10G and LR4 100G products - can hardly keep up with the demand.

As upgrade projects in China are accelerating, the rest of the world is not standing still. Service providers in Europe and North America continue to install 100G DWDM optics and cloud companies are ramping massive deployments of 100GbE connectivity in mega-datacenters. It will be a very busy year for the suppliers of optics, but it is a good problem to have. Component shortages helped vendors to reach profitability in the past and we expect this to happen in 2016 as well.

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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.