Market for optical component and modules maintains momentum for growth despite a slow start in early 2011


EUGENE, Ore. – September 19, 2011 – Sales of optical components and modules increased by more than 30% in 2010, raising concerns of a potential market bubble. Market weakness in early 2011 added fire to these speculations, bringing bad memories of the market burst 10 years ago. However, current situation is very different from the boom of 1999-2000, when the market was growing at more than 100% per year. At that time, there was a huge disconnect between the growth in component sales and sustainable level of networking infrastructure expansion, which resulted in excess inventory of components after the market crashed in 2001.

Inventory management across the whole supply chain has improved significantly over the last decade, as the industry strived to reduce cost and improve profitability. Manufacturing of optical components improved as well, but it is still unable to respond smoothly to changing demand across a variety of products. Component suppliers were struggling to ramp up production as demand picked up in 2010. Lead times for some products doubled or tripled during the year, creating shortages and forcing customers to increase inventory reserves. However, these constraints were largely limited to specific product categories like 40 Gbps components or Wavelength Selective Switches (WSS).  For example, sales of short reach OC-768 transceivers and WSS modules increased by 150% and 50% in 2010, respectively.

The slowdown in sales of optical component and modules in early 2011 has also been limited to product categories, which outperformed the total market in 2010 or had very long lead times, like WSS and 40 Gbps modules. There is very little, if any, excess inventory of components accumulated across the broader market according to information obtained by LightCounting.

“Sales of most products remained steady in early 2011 and they are clearly picking up in the second half of 2011,” commented Vladimir Kozlov, founder and CEO of LlightCounting. “Fibre Channel and Ethernet transceivers declined in Q1 2011, but stabilized in Q2 and sales of 10 GigE transceivers continue to grow fast. Telecom transceiver market remained steady in Q1 2011, but it declined further in Q2 mostly due to lower sales of 40G client-side modules. We expect that by the end of this year, the telecom market segment will be strong again and we are certainly looking forward to a really good year in 2012.

Detailed analysis of the optical communications market, based on confidential sales data provided by more than 20 leading vendors, is presented in a new LightCounting Market Update report to be released on September 26, 2011:

About LightCounting
LightCounting is a market research company focused on in-depth study of the optical communications market. Our research covers the whole supply chain including components, modules, systems, and their applications. Most of our analysis is based on confidential sales data provided exclusively to LightCounting by leading component and module suppliers.

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