LightCounting releases a preview of its January 2014 Market Forecast Database

Data collected by our LightCounting team on the sales of optical components and modules in 2013 is a combination of success stories and failures. Some market segments almost doubled in 2013, but others declined by a third. The top line numbers are substantial: posting 9% growth for the year with the total sales exceeding $4.2 billion. The preview of the forecast database released by LightCounting this week projects a similar growth rate for the total market in 2014, but the growing top line numbers hide a lot of volatility.

Growth in annual sales of datacom optical products accelerated, reaching 20% in 2013, compared to 16% in 2012. The telecom optical components and modules market remains dormant, advancing by just 3% in both 2013 and 2012. It is possible that the telecom market will have a better year in 2014. LightCounting data suggests that the datacom market responds faster to changes in economic outlook, than the telecom industry, which could lag a recovery by three-to-five quarters.

Growth in the datacom market will moderate in 2014

It has been a very strong year for the datacom market despite Cisco’s comments on its reduced growth projections in late 2013. See our newsletter on this: The Perfect Storm at Cisco: Is it a Signal of the Global Economic Climate Change.
Optics continues to gain share in data center interconnects at the expense of copper. SFP+ 10GigE SR transceiver sales grew 26% in 2013 as 10GBASE-T (100 meter reach copper cable solution) remained on the fringes. SFP+ active optical cables (AOCs) are starting to compete with direct attach copper cables (DACs) for 1to 5 meter connections.

Sales of Ethernet optical transceivers were up 37% in 2013, exceeding $1.3 billion. This will remain the largest market segment in 2014, but its growth rate is expected to moderate. Shipments of 100GigE modules will continue to ramp upwards in 2014, but growth in revenues will be modest, as competition among suppliers will push prices down.

Sales of 40GigE transceivers more than tripled in 2013, mostly due to strong demand from mega-datacenters, operated by companies like Google. However, the market for 40GigE transceivers may be volatile in 2014, given that a small number of large customers are driving the demand for these products.

Solid growth in the sales of 10GigE products in 2013, which are now used in a wide variety of applications by many customers, was the best news for the Ethernet transceiver market in 2013 and it should sustain the market’s growth in 2014, compensating for any potential volatility in the sales of other products.

The telecom market is overdue for growth

LightCounting expects that increasing sales of 10G products will return the telecom market to growth in 2014 as well. Sales of 10G DWDM transceivers fell by 11% and 16% in 2012 and 2013, respectively. LightCounting expects this market segment to rebound in 2014. Deployments of 100G DWDM optics advanced significantly in 2013 and will continue next year, but these products remain too expensive for the broader DWDM market.

Current pricing of 100G DWDM transponders is about 30 times that of 10G DWDM transceivers. Nevertheless, 100G is already being deployed in long-haul and some metro applications, as it creates additional value for network operators. In long-haul networks, 100G is maximizing the transmission capacity of the fiber base today and future-proofing it for the next ten years. Aggregation of rapidly increasing numbers of 10G ports into 100G on core routers is another value that 100G optics brings to core networks.

What is the additional value of 100G in the broader metro DWDM market? Financial companies like the low latency of coherent transmission. However, apart from these financial transactions, there are few applications benefiting from low latency, at least not yet. Network operators with a limited fiber base in metro areas may choose 100G to maximize fiber utilization, but it is hard to imagine a shortage of fiber in the majority of metro areas. Network operators have mentioned that even some fiber cables deployed in metro areas during the telecom bubble of 1999-2000 remain underutilized.

Can network operators sell 100G access lines to customers? This would certainly justify having 100G in the metro. CenturyLink recently announced the first customer purchase of 100G connections – Digital Globe – a company specializing in high-definition mapping technology, which will use 100G connectivity to transfer massive amounts of data between its data centers. This is still a very special case, despite an increasing number of data centers worldwide. 

There is no doubt that 100G will be a must have technology in metro networks once 1G broadband access lines become ubiquitous and 10G becomes widely used in access layer aggregation. It is just starting to happen now and it may take ten years for 1G/10G/100G lines to become widespread throughout access/aggregation/transport layers of metro networks, respectively. In the meantime, 10G optics will remain the workhorse of telecom networks.

More  analysis of 100G deployments is available here: Are Network Operators Overinvesting in 100G Networks?

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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 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 source for accurate, detailed, and relevant information necessary for doing business in today’s highly competitive environment. Privately held, LightCounting is headquartered in Eugene, Oregon. For more information, go to, or follow us on Twitter at