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Scaling the mega-datacenter market opportunity -- Ethernet transceivers inside them and DWDM optics connecting them.


LightCounting releases High-Speed Datacenter Optical Interconnects Report


Investments by Web2.0 companies in mega-datacenters and supporting networking infrastructure has created a new and very dynamic segment in the optical components and modules market. The latest report from LightCounting offers an in-depth look at the development of this new market in 2010-2014 and its growth in 2015-2021. The database provided with this report presents detailed sales projections of more than 50 product categories of Ethernet optical transceivers and DWDM optics used to interconnect the datacenters Web2.0 companies.

It is an exiting time for the industry! Staring with early sales of 10GbE SFP+ optics to Google in 2007, the global demand for 10GbE optics surged in 2010-2014. More than 40 million of SFP+ 10GbE transceivers were shipped over the last 5 years, with more than half of these used in mega-datacenters. Volume shipments of 40GbE optics started in 2013 and are projected to exceed 2.5 million units in 2015 with more than 75% being shipped to Web2.0 customers.

Demand for 40GbE and 10GbE optics will remain strong in 2016-2021, but it is the emerging opportunity for 100GbE in datacenters that makes it really exciting. In times like this, it is more important than ever to have a market forecast based on real market drivers rather than subjective opinions often fueled by excitement.

LightCounting’s forecast methodology is based on correlation between growth rates of the aggregated bandwidth of optical connectivity and Internet traffic. This method worked very well for forecasting demand for DWDM optics in 2006-2014, but using it for projecting demand for Ethernet transceivers in 2010-2014 was more challenging.

The latest forecast is based on an improved model, which segments the total market for Ethernet optical transceivers into three parts: mega-datacenters, telecom and enterprise datacenter networks. Applying the bandwidth/traffic correlation model to these segments separately makes it possible to account for different dynamics present in these markets.

Another challenge when applying the bandwidth/traffic growth correlation model to datacenter optics, was that it is the data traffic inside these datacenters rather than the Internet traffic that matters. Data on the traffic growth inside mega-datacenters has been hard to find in the past. Luckily Google recently released some of this information (shown in Figure 1) - just in time for this study.

Figure 1: Data Traffic in Google Datacenters in 2008-2014.

Google’s data indicates that the traffic increased by a factor of 50 over the last 7 years, corresponding to an average annual growth rate of 75% - well ahead of global Internet traffic. However, the data also shows that the traffic growth rate in 2014 was about 50% - down from about 80% in 2012 (the red lines in the chart are added by LightCounting).

This is a single, but very important data point. It shows that the dynamics of traffic growth inside of mega datacenters is similar to the pattern observed in many other networks, including those of telecom service providers, scientific organizations, and Internet exchanges. While their growth is indeed very fast, it is slowing down gradually in terms of percentage of the total.

This analysis offers comfort that the scale of the data tsunami is not a divergent function and it may reach a ceiling eventually. The growth of most systems (such as networks, markets, or economies) follows the well-known S-curve and slows down in terms of percentage of the total as they mature. Giant stars that eventually explode as supernovas are one of few exceptions. The data presented in Figure 1 suggests that data centers will avoid a supernova explosion.

The latest data from Google also offers a metric for segmenting the demand for optics from mega-datacenters in 2008-2014 and extrapolating it to 2015-2021.

The latest forecast for optical Ethernet transceivers for applications in datacenters assumes that growth in data traffic will decline gradually from 50% in 2015 to below 30% in 2020. Once again: please note the traffic will continue to grow very fast, but the relative growth rate will slow down.

The total sales of Ethernet optical transceivers are projected to reach $4.9 billion in 2021 - up from $1.6 billion in 2014. Annual shipments will exceed 50 million units in 2019 and continue to grow. Mega datacenters will consume about 30% of the shipments and account for more than 50% of the total sales by the year 2021.

Interconnecting the data centers drives demand for DWDM optics. Shipments of 100G and 400G DWDM ports for mega-datacenter interconnects (Mega-DCI) will account for 20% of the total DWDM ports sold in 2021 - up from about 10% in 2014.

Detailed information, including a breakdown of the products by data rate, reach and form factor is available in the report database. The report has an extensive focus on 40GigE and 100 GigE transceivers. It provides a summary of technical challenges faced by 100GigE transceiver suppliers, including a review of the latest products and technologies introduced by leading suppliers.

The following vendors shared confidential sales data with LightCounting for this report: Acacia, Accelink, Applied Optoelectronics, Avago, Coadna, Delta, Eoptolink, Finisar, Fujitsu, HG-Genuine, Hisense, Hitachi Cable, Innolight, JDS Uniphase, NEC, NeoPhotonics, Oclaro, OE Solutions, Source Photonics, Sumitomo, Superxone, and TE Connectivity.

To purchase the report or subscribe to our services, please contact George Stojsavljevic at George@lightcounting.com

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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.