LightTrends

 

No Surprises in Q3 2017 Optical Communications Market

LightCounting Releases December 2017 Quarterly Market Update

 

It was business as usual for the optical communications market in 3Q17. As illustrated in the figure below, which compares the industry financials for Q3 2017 with the same quarter of last year, spending of telecom service providers declined again, while leading internet companies ramped up their infrastructure investments (shown as datacom capex in the chart). These growth rates in inftrastructure spending are well correlated with sales of networking equipment and optical components in the telecom and datacom segments.

Chinese service providers reduced their capex in 2017 as planned and China Telecom mentioned that they will continue to cut capex in 2018. Orange is the only company on our list of top 15 telecom service providers that is likely to spend a little more than planned in 2017.

The leading internet companies reported sharply higher revenues and set new records in spending in 3Q17. Alibaba, Facebook and Google increased their infrastructure investments by 142%, 62% and 39%, respectively. Facebook disclosed plans to double its capital expenditures in 2018.
Among the datacom equipment suppliers, Arista and Dell reported 50% and 25% increases in sales, respectively. Declining sales for the telecom networking equipment segment overall were directly related to lower revenues by Huawei, Nokia and ZTE.

Optical transceivers for the Cloud datacenters continue to enjoy solid demand.  Applied Optoelectronics and Innolight reported 27% and 94% higher revenues in Q3 2017, compared to the same quarter last year. Shipments of PSM4 and CWDM4 100GbE modules set new records, however demand for LR4 100GbE QSFP28 transceivers was softer than expected.

Suppliers of optical components and modules in the telecom market reported sequential increases in sales of 100G DWDM transponders and WSS modules, but these were not sufficient to compensate for declines in FTTx and wireless fronthaul markets on the sequential or year over year basis.

Suppliers of semiconductor chips, lead by Broadcom, Intel and Qualcomm reported higher revenues in Q3 2017 (not shown in the figure above). Demand for their products remains strong across a range of market segments including automotive and communications. Analog Devices, Qualcomm and Xilinx mentioned increasing levels of activity in the wireless communications segment, including 4.5G and 5G projects. Expectations remain high for initial commercial deployments of next generation wireless technologies in 2018, confirming our projections for the optical fronthaul market described in Next Generation Access Optics Report, published in November 2017.

Highlights from the December 2017 Quarterly Market Update will be discussed in a webinar scheduled for 2pm ET on December 20, 2017. All LightCounting subscribers are welcome to register for this event. Please contact Renee Isley (renee@lightcounting.com), if you would like to join the event or receive a copy of the presentation.



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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.