25GbE almost done; but more new Ethernet options are coming



Looking forward to an Industry Connection discussion session at the September IEEE meeting


LightCounting Internet Index companies collectively spent $19 billion on servers, network equipment, and other property and equipment in H1 2015 - up 16% from the same period of 2014. The top five spenders among the top 15 Web 2.0 - Amazon, Apple, Facebook, Google, and Microsoft - collectively spent $16.2 billion in 1H15, 84% of the total for the entire Index (Figure 1). The biggest spender in absolute terms was Google, which spent $5.4 billion, followed by Apple at $4.4 billion.

Chinese companies, which make up only 6% of the Index in terms of revenues, grew spending by 56% in 1H15 versus 1H14, and accounted for 8% of total spending. Tencent spent 101% more than in 1H14 ($672 million) and Alibaba spent 86% more ($527 million).

Figure 2-2: Internet Index company spending on property, plant, & equipment

Source: Company financial reports

Capex spending of the top 15 service providers declined by 16% in H1 2015 and it is projected to decline by at least 6% for the year. The depressed figures are due mainly to the strong dollar. In Europe, network investment is up in Euros, while Japanese operators continue to report revenue growth in yen in the first half of 2015.

Another factor for the lower H1 2015 revenues is the weaker performance of the Chinese operators. 2014 was a turning point for the Chinese operators: China Mobile and China Telecom both had revenues up 1% but China Unicom’s were down 4%. Yet for the six years up to 2014, double-digit annual growth was the norm for the Chinese telecoms market. As for Chinese capex, spending is always stronger in the year’s second half, but the yuan has been devalued which will depress overall 2015 capex figures.

LightCounting forecasts that the revenues and capex of the 15 leading operators will be down in 2015. Revenues are forecast to reach $992 billion in 2015, down 6% compared to 2014. This is the first decline since 2009 and the first time revenues have dipped below one trillion dollars since 2010. Capex is forecast to total $184 billion in 2015, also down 6% compared to 2014. The operators' revenues from 2010 to 2015 (estimate) are shown in Figure 2. The purple dashed line shows what would have happened to the 2015 revenues had the foreign exchange rates of the 1H 2014 remained the same.

Figure 2: Total revenue of the top 15 service providers

Source: LightCounting and Financial filings of AT&T, British Telecom, China Mobile, China Telecom, China Unicom, Comcast, Deutsche Telecom, Orange, KDDI, NTT, Softbank, Telecom Italia, Telefonica, Verizon, and Vodafone

These trends in infrastructure spending, along with the latest sales data reported to LightCounting by leading suppliers of optical components and modules provided the basis for August 2015 Market Forecast and Database.

It will take a very strong Q4 to keep the optical networking market growth on track in 2015. Some of the big 100G projects were pushed out to the very end of the year. Any further delays will derail LightCounting latest projections for 25% growth in sales of optical components and modules this year. Another concern is ability of suppliers to keep up with strong demand for FTTx optics and some of the new products such as DWDM CFP transponders.

With all these challenges in mind, there is still a good chance for the optical component and module market to deliver the highest annual growth in 2015, since it increased by more than 30% in 2010.

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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: or follow us on Twitter at @LightCounting.