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Can the global optical transceiver market return to double digit growth after declining 4% in 2019?

 

 

LightCounting releases October 2019 Optical Communications Market Forecast Report

 

 

The short answer is yes and our latest forecast for 2020-2024 is projecting for 15% CAGR, similar to the market growth rate recorded in 2010-2016, as illustrated in the figure below.



The market is overdue for growth after three slower than expected years in 2017-2019. This forecast may look too optimistic now, but this could really happen if:

  • Deployments of 5G will roll out as expected, lifting demand for wireless fronthaul optics to a new record in 2020 and beyond.
  • Shipments of next generation Ethernet modules, including 2x200GbE, 4x100GbE and 400GbE will reach decent volumes in 2020 and price declines in the Ethernet market return to their historical average of 15-20% per year, instead of 35% in 2018. This how the suppliers lost 15% growth in revenues in 2018.

The last bullet point is the most critical for the market’s growth in 2020-2024. Ethernet is already the largest segment of the global optical transceiver market and it is projected to account close 60% of the total in 2024.

At the end of 2018, the industry was looking forward to a turnaround in 2019, despite concerns about the escalating trade war between the US and China. The good news is that the trade war’s impact was not as significant as it could have been in 2019. The ban on sales of US-made products to Huawei, imposed by the US government in May 2019, sent a shock wave across the supply chain. However, it did not take long for suppliers of optics and ICs to figure out how to continue shipping products to Huawei, since the ban proved to be not as broad as feared. Sales of WSS modules, tunable lasers, modulators and coherent receivers exceeded our expectations in 2019, partly because of excess inventory, prudently accumulated by Chinese customers, including Huawei, in anticipation of further restrictions on sales of US-made products.

The bad news of 2019 was that volume deployments of next generation Ethernet transceivers were pushed out into 2020. Facebook announced their plans of staying with 100GbE optics in March of 2019 and transition to 200GbE in 2020-2021.�� Amazon started deploying 4x100GbE DR4 transceivers in the middle of 2019, but the project was pushed out into 2020 because of problems in the performance of PAM4 DSP chips. Google continued to deploy 2x200GbE optics, but the volumes remained limited. Alibaba pushed out deployments of 400GbE modules into 2021 because of a decline in their businesses’ growth rate related to a general slowdown in consumer spending in China. Demand for 400GbE optics for new core routers was also weaker than expected in 2019, as service providers are taking more time in evaluating these new products.

It is time to start catching up on all these plans.

The report provides a detailed market forecast through 2024 for optical components and modules used in Ethernet, Fibre Channel, CWDM/DWDM, wireless infrastructure, FTTx, and high-performance computing (HPC) applications.

Key inputs include an analysis of the business and infrastructure spending of the top 15 service providers and of the leading Internet companies, and sales data from 2016 to H1, 2019 from more than 30 transceiver vendors, including more than 20 vendors that shared their confidential sales information with LightCounting. The forecast is based on LightCounting’s proprietary forecast model, which correlates transceiver sales with network traffic growth and the projected deployments of LTE and FTTx systems for broadband access.

More information on the report is available at: https://www.lightcounting.com/Forecast.cfm.

 


About LightCounting Market Research 
LightCounting -- The name alone is what sets us apart and defines us as a company. We are a leading optical communications market research company, offering semi-annual market updates, forecasts, and state-of-the-industry reports based on analysis of primary research with dozens of leading optics component, module, and system vendors, as well as service providers and cloud companies. LightCounting is the optical communications market's source for accurate, detailed and relevant information necessary for doing business in today's highly competitive environment. Register to receive our monthly newsletter: LightCounting.com or connect with us on LinkedIn and Twitter.

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