27 April 2016

Sales of optical components and modules for network applications to reach $10bn by 2021, despite declines in infrastructure spending

Sales of optical components and modules for network applications will grow 18% in 2016 then at a compound annual growth rate (CAGR) of 12% over 2016-2021 to $10bn, according to the 'Optical Communications Market Forecast Report' from LightCounting.

Demand for optical connectivity remained strong in 2015, despite a declining capex of telecom network operators and lower-than-expected growth in infrastructure spending by the cloud companies. Optics takes on a larger share of the connectivity as data rates rise. Increasing complexity of high-speed optics translates to higher product pricing, boosting revenues of suppliers while offering cost reductions to end-users in terms of dollars per Gigabit of bandwidth, says LightCounting.

The spending of the 15 leading network operators is set to drop in 2016. The operators' guidance on their fourth-quarter 2015 earnings calls means that the Far East will spend less in 2016 and, in the case of the Chinese operators, significantly less. LightCounting forecasts that capex will fall 7% to $178bn in 2016.

LightCounting estimates that its Internet (Cloud) Index companies will spend $43-48bn on servers, networks and other infrastructure in 2016, up slightly from $42.6bn in 2015. The low end of the range assumes that the spending-to-revenue ratio of 6.7%, seen in Q4/2015, persists for all of 2016. The high end of the range assumes that the second-half 2015 slowdown was an anomaly, and that spending grows at 15% in 2016 (at the same rate that revenue is expected to grow).  

Excluding the FTTx and wireless segments, the optical transceiver market was up 11% in 2015, averaging a 9% CAGR in 2010-2015. LightCounting projects 18% growth in 2016 and 12% CAGR in 2016-2021 for sales of the optics used in Ethernet, Fibre Channel, CWDM/DWDM, SONET/SDH and AOC/EOM applications.

Sales of FTTx and wireless optics are strongly impacted by demand for these products in China and tend to fluctuate wildly, notes the market research firm. Sales of FTTx transceivers and BOSAs (bi-directional optical subassemblies) were up by a staggering 58%, compensating for an 18% drop in sales of wireless front-haul optics in 2015. These segments are expected to contribute about $2bn to the total market in 2021, but annual fluctuations are likely to continue.

"This forecast hinges on the adoption rates of several new technologies," notes Dr Vladimir G. Kozlov, founder & CEO of LightCounting Market Research. "100G Ethernet and DWDM optics, flex-grid WSS [wavelength-selective switch] modules and 10G PON [passive optical network] transceivers are some of the key products to watch in 2016," he adds.

Tags: Optical communications

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