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OFC 2015 -THE MOST EXCITING AND INTRIGUING EVENT IN THE INDUSTRY SINCE THE YEAR 2000


LightCounting Analyst Team Reviews OFC 2015 Conference and Exhibition Highlights

OFC 2015 had all the elements of a well-scripted show: suspense, excitement, danger and bright future on the horizon. The leading actors were brilliant in inspiring the audience with their visions of the future while carefully pushing the industry in the directions of their choice.

Several unfolding plots made the show script multi-dimensional:

Demand for optical connectivity inside datacenters puts optics further into the spotlight than it has been in the last 15 years. Web2.0 companies look at the performance of their datacenters as one of the key differentiating advantages and optics is a critical element. Sales volume expectations for 100GbE optics inside datacenters are high and success of 40GbE in the last two years, adds a lot of credibility to the story. However, the very aggressive price targets for 100GbE optical transceivers shared by Web2.0 representatives at the show-“a dollar per gigabit per second” per Yuval Bachar of Facebook - are bordering on the ridiculous. Optical transceiver start-ups may have no choice but to accept such outlandish targets, but can they actually deliver the products and build a profitable, sustainable business around it?

Optics for connecting datacenters with each other or the core network is another hot area of the market. Sales of optical networking equipment for this application reached $400 million in 2014 and are projected to exceed $4 billion in the next five years (according to a third party’s estimate). 100G DWDM optics seems to be the right solution here, but the specific price points and technological implementations chosen are yet to be seen. Many new system equipment makers are competing with the established purveyors of DWDM transport equipment now, as Web2.0 companies are keen to “eliminate stacked margins” in the conventional supply chain for this equipment. The challenge for optical component and module suppliers is to find a way to do business with existing and new parties and still make a profit.

Deployments of 4G LTE infrastructure created a whole new market segment for optical transceivers over the last three years and shipments of fronthaul optics exceeded $400 million in 2014. This market is also getting ready for another wave of growth this year as China Telecom and China Unicom try to catch up to their main rival, China Mobile, after recently receiving their final FDD-LTE licenses. However, the heavy concentration of demand from China makes suppliers of fronthaul products nervous. The current plans for 2015 are ambitious, but will they materialize?

FTTx connectivity is another key element of the big picture, providing for the last mile broadband solution to the most valuable part of the network-the end users (or at least to their home and office WiFi networks). While shipments of FTTx optics peaked in 2013, demand for current generation GPON optics is not going away. It was evident at OFC that development of next generation FTTx technologies are ongoing, and NG-PON2 standards should be ratified this year. Active optical cables (AOCs) and embedded optical modules (EOMs) have taken optics to the front lines of the battle with copper connectivity in very short reach applications. The Consortium for On-Board Optics (COBO) announced just prior to OFC holds a potential for taking this market segment from proprietary solutions into the mainstream of the industry. Will this consortium be successful? We will continue to report on the progress of this new venture.

These topics are covered in a Research note released by LightCounting Market Research to the clients. Please contact info@lightcounting.com for information about our reports and services.

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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.