July 9, 2021
Optinet China 2021 – an exercise in reading between the lines
LightCounting reports on presentations and discussions at this event
Over 680 enthusiastic technical experts gathered at the JW Marriott in Beijing on June 16 and 17 for the 21st annual Optinet China conference. Beijing has a vaccination rate over 80% so while face masks were worn by the attendees the mood was light and not in any way dominated by the pandemic. This conference was one of few optical industry events in China offering an excellent simultaneous English translation of the speeches, but that service was not provided this year since very few foreigners were expected to attend.
Speakers at Optinet rarely address critical topics directly, and politically sensitive subjects, such as US sanctions on Huawei, are completely ignored. Reading in between the lines of public statements and carefully asking questions in private discussions is the only way to learn what is really going on. This year it was exceptionally challenging to get good insights. Our team did the best we could, but most of our questions remained unanswered.
Our impression is that the strategic priorities of the Chinese government and the key vendors supporting them, including Huawei, have not changed, but the tactical approaches are being reconsidered. The focus on using domestic optical and IC technologies and supporting local suppliers has never been higher. Component shortages, trade barriers and geopolitical uncertainly have created a “perfect storm” which is unlikely to drift away anytime soon.
One exception is the fiber cable industry, where Chinese companies account for more than half of the global supply. This seems to be the only area where supply exceeds demand. Chinese telecom service providers deployed a lot of fiber cables in their core and access networks, including FTTx and fiber to the antenna. With a majority of these projects completed now, demand has fallen and pushed prices to new lows.
The latest high profile initiative of the Chinese government is to build a national network of Cloud datacenters (DCs) and regional DC clusters. This could trigger the next massive deployment of fiber. However, there is no clear plan on how this new network will be constructed. Telecom service providers are likely to take the lead, but they are not generally the ones actually providing Cloud services. Cloud companies, led by Alibaba, have allocated huge investments to support the initiative, but it’s not certain they will be given the freedom to expand their infrastructure as they see fit.
Finding the right balance between maintaining government control, while giving enough freedom to private enterprises to stimulate economic development is not a new dilemma for the Chinese government. Most notable however is that in 2021, the balance seems to be tilting towards more control and less freedom. Few companies are willing to take the risk of finding out where exactly the new boundaries are. Let us count on President Xi’s wisdom for resolve this stalemate.
Dawei Li, Founder, CTO and Vice President of Hisense Broadband presented his expectation for the market in 2021, shared by many of the attendees: 10GPON and 400G data center market will be the bright spots, 5G will continue to be sluggish, the growth of domestic data centers will be slow, and the global IC supply will remain tight and full of uncertainties.
Soon after Optinet China conference, CBN and China Mobile released a tender for 400,000 of 5G base stations to be installed over the next 12 months. China Telecom and Unicom are expected to release their tenders shortly. It is very likely that the wireless fronthaul market will pick up steam in H2 2021. Deployments of 10G PON are exceeding LightCounting’s forecast for 2021, keeping many Chinese suppliers in business, including Huawei. 400G deployments in Chinese DCs will be minimal for the rest of the year, but Amazon and Google are deploying 400G optics in high volumes, as expected. LightCounting’s upcoming report “Mega Datacenter Optics” will include an updated forecast for 400G and 2x400G Ethernet and DWDM transceivers, AOCs and CPO.
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