Although telecom capex is down and equipment sales increase slowly in 2015, optical transport equipment market still got a strong increase in the past year. Among all the factors having impact on optical transport equipment sales increase, demand for wavelength division multiplexing (WDM) systems plays an essential role. For this reason, Dell’Oro Group, the market research firm, forecast the optical transport equipment market will hit $15 billion by 2020. Now, this article may review and analyze 2015 optical transport equipment market conditions and give some forecast about 2016 optical components market.
Strong Demand for 100G and FTTx Drives Optical Component Growth
LightCounting published a report which aimed at analyzing 2015 optical transport equipment sales situations in December 2015. The following graphic from this report summarizes the growth in service provider capex, equipment and component vendor revenues, for the first 9 months of 2015 compared to the same period in 2014. From this chart, we can clearly see that telecom service provider capex is down in 2015 compared to 2014. This phenomenon was mainly assigned to completion or tapering down of some large deployment projects around the globe, such as the China Mobile’s LTE deployment. Besides, weakness in European and Japanese currencies also contributed to the decline in service provider’s capex. However, mega-datacenter operators on the other hand increased spending by 9%. Although it seems positive, LightCounting thinks it is smaller than the double-digit growth rates they are used to seeing for this group.
We can also see from graphic that equipment maker revenues grew a scant 3% in the datacom segment, while the telecom segment is down a percent. Computer hardware makers continue to make inroads in the data center equipment segment, while on the telecom side, Huawei’s and ZTE’s market shares gallop upward, but those of other incumbents languish. Besides, keen interest in software defined networking (SDN) and network function virtualization (NFV) may also be a factor in dampening equipment demand. What’s more, seen from the chart above, it is worth noting that 2015 sales growth among optical component companies through September 30 was a much better than equipment level, with datacom up 18% and telecom up 3%. One of the main reasons for this is the growing adoption of 100G components, which carry a higher price tag than slower speed devices. Strong demand for 100G and FTTx optics in China is likely to continue in 2016, as Chinese service providers are catching up on many delayed projects.
Ethernet and WDM Equipment Sales Experienced High Growth in 2015
In LightCounting’s report, there is another chart (below) which shows 3Q 2015 sales growth for the main product categories. From this chart, we can see that Ethernet and WDM equipment are the two largest segments in terms of revenues, and both grew at a respectable and healthy rate. Optical interconnects continued to show rapid growth. FTTx also experienced high growth, driven by an acceleration of China’s broadband plans. The wireless segment on the other hand was down considerably, but LightCounting think it was to be expected given the extraordinary amount of LTE gear deployed by China Mobile in 2014. Besides, LightCounting’s market forecast report also showed that total optical transceiver market grew 25% in 2015, which is a very strong finish for the year. From all the above data, full-year 2015 industry revenues just set a new record high. But we can forecast that in 2016 optical transport equipment sales will continue grow rapidly, because some private companies such as Fiberstore grow really faster than the industry average and win market share from the larger public vendors.
DWDM Equipment Sales Will Increase Rapidly in 2016
2015 was a good year for suppliers of 100G dense wave division multiplexing (DWDM) optics and transponders. LightCounting estimate that the total number of 100G DWDM ports shipped in 2015 will be close to 150,000, just above their forecast published in August 2015, shown in figure below. As carriers all over the world move away from legacy SONET/SDH technology and deploy DWDM infrastructures that can support 40G and 100G speeds, the strength of the DWDM market is more and more apparent. As a result, many analyst firms see the DWDM market will grow significantly faster than the overall optical hardware market. And LightCounting’s expectations for 2016 range from a moderate growth of 30% to a more radical 50-60% increase, indicated by the dashed lines in figure below.
From the Dell’Oro Group’s report published on February 23, 2016, the optical transport equipment market grew 10 percent year-over-year in the fourth quarter of 2015, propelling market revenue to just under $4 B for the quarter and over $13 B for the full year, and the WDM metro revenue growth outpaced all the other optical technology segments. In 2016, as the number of Internet users expands, bandwidth per user is increasing, putting enormous pressure on core backbone networks and metro networks, and with the transition from 2.5G to 10G and from 10G to 40G and now 100G optical channel rates, high-speed optical transport equipment market especially WDM equipment market will have an infinite growth potential.