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Sales of optical transceivers increased in Q2 2018 despite the ZTE shutdown

LightCounting releases its September 2018 Quarterly Market Update Report

ZTE is one of the largest consumers of telecom optical transceivers in the world and the company’s shutdown in Q2 2018 was painful for many suppliers. However, strong sales of Ethernet optics for datacenter and enterprise applications sustained the global optical transceiver market, as illustrated in the figure below. Global demand for optics used in wireless fronthaul and FTTx also started to improve in the first half of 2018.

Figure: Global sales of optical transceivers

Sales of DWDM modules were impacted the most by the ZTE shutdown and this market segment hit a multi-year low in Q2 2018 – down by more than 20% from Q2 2017. Suppliers provided strong guidance for Q3 2018 as ZTE is back in business. For example, Acacia anticipates close to a 40% sequential increase in Q3 2018 sales with ZTE responsible for 60% of the additional revenue.

Shipments of 100GbE SR4 and CWDM4 modules in H1 2018 exceeded our expectations and demand for these products remains steady in the current quarter. Sales of all other 100GbE transceivers were slightly below our projections. Several suppliers cited excess inventory accumulated by Amazon, which is hurting the sales of 100GbE PSM4.

Demand for 10GbE transceivers was very strong in H1 2018 with unit shipments increasing by more than 20%. The majority of these modules are sold for applications in enterprise networks. Cisco reported a 42% increase in the number of 10GbE ports shipped into this market in H1 2018. Even 1GbE transceiver sales were up slightly in Q2 2018.

In terms of customers, infrastructure spending by Internet Content Providers (ICPs) in the first half of 2018 was 80% higher than in H1 2017. This benefited manufacturers of datacenter equipment such as servers and switches, whose sales were 16% higher in the first half of this year compared to the same period of 2017. Equipment sales at Cisco were up 7% and Dell – up 28%. Total revenues of Inspur (a Chinese server supplier) was up 136% compared to Q2 2017. Hopefully rumored capacity constraints at Intel will not limit server sales in H2 2018.

Communications Service Providers also grew their capex in the first half of 2018, though only by 2.6% compared to H1 2017. While commercial 5G services were launched in September 2018 by Verizon, it’s four city rollout and other operators’ equally small initial deployments are not yet of a scale to require an appreciable increase in capex. Publicly reported sales figures from telecom equipment makers were down 6% in Q2 2018 because of ZTE’s forced shutdown. Ciena and Infinera reported double digit gains. Optical business at Nokia was up 8%, but total network sales were down in Q2 2018.

The newly published Quarterly Market Update provides data and commentary on the Q2 2018 financial results of CSPs, ICPs, networking hardware, optical components, modules and semiconductor chip makers. It also includes shipment data through Q2 2018 for more than 100 optical transceiver and WSS products, obtained via LightCounting’s proprietary vendor shipment survey. LightCounting subscribers can access the report and database at: https://www.lightcounting.com/login.cfm



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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.