Normal service resumes: Q1' 2010 to match
pre-crisis levels

By Dr. Vladimir G. Kozlov, Founder, Chief Analyst, LightCounting, LLC

Overall sales of optical transceiver increased modestly in Q2 and Q3. If this trend continues, extrapolating into the next two quarters, transceiver sales in Q1 2010 could resume to Q2 and Q3 2008 levels.

Pause. Resume. After our industry experienced one of the most dramatic global economic meltdowns in recorded history, let us pause briefly to reflect that we survived 2009, our proven resilient industry forges ahead even in crisis, as does the flow of relentless traffic. As a result of demand led mainly by foreign and new emergent markets and notably tighter inventory control, transceiver sales began to show considerable improvement in the second half of 2009, with purchasing resuming again to replenish depleted inventory levels.

Datacom applications requiring Fibre Channel and Ethernet appear to be recovering the earliest, while SONET/SDH and WDM modules used in telecom networks remain nearly flat so far. The FTTx market has been the least affected by the economic downturn, since FTTx deployments remains a strategic priority at service providers worldwide. However, despite economic stimulus offered by governments in many countries, sales of FTTx modules declined by 10 percent in the first and second quarters, posting a modest increase in Q3 2009.

Optical interconnects sales proved to be a bright spot, increasing by 85 percent and 19 percent in Q2 and Q3 2009, respectively. Most of this increase is attributed to sales of high data rate 12x10 Gbps and 4x10 Gbps, transmitters, receivers, transceivers and 4x10 Gbps and 12x10 Gbps active optical cables for applications in high performance computers.

Overall sales of optical transceiver increased modestly in Q2 and Q3. IF this trend is extrapolated into the next two quarters, sales in Q1 2010 could resume to Q2 and Q3 2008 levels.

Notwithstanding turbulent market fluctuations brought on by the global macroeconomic climate, the volume of data and video traffic combined with stringent requirements surges ahead as does the increased use of virtualization that moves computing tasks within the datacenter and over the long-haul network. Consequently, as the traffic increases, the demand for faster transceivers will ultimately drive sales of 10 Gbps, and possibly even 40 Gbps, and 100 Gbps modules.

This transition along with pressures by a sustained economic crisis requires transceiver vendors to get creative and determine how to best manage their R&D investments, costs of manufacturing, and marketing operations to adapt to higher unit volumes and faster technologies with lean gross margins.

"Despite dramatic fluctuations in the global macroeconomic climate, the volume and intensity of data and video traffic continues to surge as does the use of virtualization that moves computing tasks within the datacenter and over the long-haul network.” Notes Dr. Vladimir Kozlov, Founder and Chief Analyst, LightCounting. "Consequently, as the traffic increases, the demand for faster transceivers will drive sales.”

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