LightTrends

 

Strong finish expected for optical components in 2015

 

 

New quarterly update published by LightCounting

 

Four times a year, the LightCounting team collects company financials and operating metrics from across the optical communications value chain, and we receive proprietary shipment data from more than 20 optical components vendors. We review the data, compare it to our existing forecasts, and tell clients what is happening in the market, in the form of a Quarterly Market Update.

The just-published September 2015 update reflects our analysis of financials and vendor shipment data through the first half of 2015, and industry news through Q3 2015. This graphic from the report summarizes the growth in service provider capex, and equipment and component vendor revenues, for 2Q 2015 compared to 2Q 2014:


Figure 1

It’s clear that telecom service provider capex fell off in the first half of 2015 compared to 2014, due to completion or tapering down of some large deployment projects around the globe, including China Mobile’s LTE deployment, Vodafone’s Project Spring, and Sprint’s Network Vision. Mega-datacenter operators on the other hand increased spending by 7%, which although positive, is smaller than the double-digit growth rates we are used to seeing for this group.

Equipment maker revenues grew a scant 2% and 4% in the datacom and telecom segments, respectively. ‘White box’ makers continue to make inroads in the datacenter equipment segment, while on the telecom side, Huawei’s and ZTE’s market shares gallop upward, and those of other incumbents languish. Pricing pressure continues to weigh heavily on revenue growth. Keen interest in Software Defined Networking and Network Function Virtualization may also be a factor in dampening equipment demand, as service providers take a breather to rethink their network plans.

2Q15 sales growth among optical component companies was a little better than at the equipment level, with datacom up 10% and telecom up 7%. One of the main reasons for this is the growing adoption of 100Gbps components, which carry a higher price tag than slower speed devices.

The second chart (below) shows 2Q 2015 sales growth for the main product categories that we forecast. Ethernet and WDM are the two largest segments in terms of revenues, and both grew at a respectable/healthy rate. Optical interconnects continued to show rapid growth but are still a very small segment, totaling a little over $50 million in sales in 2Q 2015. FTTx also experienced high growth, driven by an acceleration of China’s broadband plans. The wireless segment on the other hand was down considerably, but that was to be expected given the extraordinary amount of LTE gear deployed by China Mobile in 2014.


Figure 2

Our Market Forecast published in August projected total optical transceiver market growth of 25% in 2015. Subsequently, some public optical components companies gave rather soft guidance for the balance of the year in their 2Q 2015 earnings calls, and political developments in China have called capex spending there into question. Based on our analysis of the most recent data and news, we have also decided to soften our outlook for optical components sales in 2015, but only to the extent of reducing our forecast growth rate from 25% to 15%. Even at this lower growth rate, full-year 2015 industry revenues should set a new record high, above $4 billion. One of the reasons we did not reduce our outlook more is that we are seeing private companies growing faster than the industry average and winning market share from the larger public vendors.

The Quarterly Market Update also highlights a number of mergers, acquisitions, and spin-offs, and new 100Gbps and 400Gbps products for Data Center Interconnect.

Other LightCounting news

LightCounting CEO and Founder Vladimir Kozlov will be attending ECOC 2015 in Valencia, Spain the last week in September, and plans to travel to Japan for client visits and research later in the year.

LightCounting Principal Analyst Dale Murray continued his participation in the IEEE 802.3 Ethernet standards-writing task forces, attending the September meeting in Bonita Springs, Florida. His recent Research Note on new Ethernet options describes the choices facing the committee as 50GbE and other new PMDs are addressed.

LightCounting Principal Analyst John Lively attended CTIA’s ‘Super Mobility 2015’ conference and trade show in Las Vegas in September, and published a Research Note summarizing new developments in mobile RAN small cells, LTE-A, fronthaul, and backhaul. He will be chairing the first day of IIR’s Next Generation Networks conference being held in Dallas, TX, October 6&7, 2015.

Recently published reports:

  1. State of the Optical Communications Industry, May 2015
  2. High-speed Datacenter Interconnects, June 2015
  3. Next-Generation FTTX Optics, July 2015
  4. Optical Communications Market Forecast, August 2015

Coming soon:

  1. Mobile Fronthaul Optics Report & Forecast, November 2015
  2. Active Optical Cable Market Analysis & Forecast, December 2015


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.