SOURCE: LightCounting, LLC

LightCounting, LLC

March 28, 2011 06:00 ET

Optical Communication Industry Is Well Positioned for Growth in 2011-2015, Despite Near Term Uncertainty in the Market

EUGENE, OR--(Marketwire - March 28, 2011) - Despite near term uncertainty in the market, the optical communications industry is well positioned for growth in 2011-2015, according to the latest forecast report released by LightCounting. Very strong demand for optical components and modules used in datacom and telecom networks is an early indication of the industry-wide recovery. Latest data on Q4 2010 sales reported by several suppliers exceeded our previous estimates. Sales of optical transceivers increased by 35% in 2010, while such a high growth rate is not sustainable, LightCounting forecasts that sales of optical transceivers will increase by 10% in 2011, exceeding $3 billion.

Sales of passive optical components, ROADMs, pump lasers and amplifiers increased well ahead of the total market for components and modules in 2010, suggesting that a new cycle in infrastructure upgrades may be starting now, since these devices are typically used in early stages of network installations. For example, sales of WSS modules used in ROADMs jumped by 47% in 2010. Part of this sharp increase in sales was related to shortages in components that forced equipment manufacturers to establish inventory reserves, temporarily boosting component sales. Some suppliers have recently indicated that Q1 2011 sales, and bookings for the second quarter have slowed as a result of excess WSS module and other component inventory held by their customers.  

"We have seen growth rates for the optical networking equipment market lag behind the sharp increases in components sales we observed over the last 18 months," commented David Krozier, industry analyst at LightCounting. "We expect that equipment sales will accelerate in 2011, so the slowdown in component sales should not last for more than a quarter or two to balance the supply chain."

The earthquake in Japan is sending new ripples through the industry since manufacturing of many key communication components is still based in Japan. While leading suppliers including Fujitsu, Mitsubishi, Opnext and Sumitomo have resumed operations, most of them are being impacted by rolling power blackouts, which may continue for several months. Since the Japanese production model relies on outsourcing of sub-component manufacturing to numerous smaller businesses in Japan, it is very likely that disruptions among these smaller suppliers will slow down the recovery as well. On a brighter side, possible shortages of optical components are forcing equipment manufacturers to resume aggressive purchasing practices that were put on hold in early 2011.

"Despite a slow start in 2011, the industry is resuming steady growth that was interrupted by the economic recession of 2008-2009," commented Vladimir Kozlov, founder and CEO of LightCounting. "Optical connectivity becomes essential across a wider range of networks including datacenters, enterprise and even wireless infrastructure as data transmission rates reach 10 Gbps. This technological transition will drive the industry growth for many years to come."

Sales of optical transceivers employed in wireless infrastructure systems more than doubled in 2010, driven by continuing deployments of 3G wireless networks. First installations of LTE networks planned for 2011-2012 will create demand for even higher data rate optics. Apart from traditional optical backhaul, this market now includes short reach optical connections between antenna towers and base stations.

Demand for 40Gbps components and modules remained strong in early 2011, indicating that upgrades in core networks are continuing. It is very likely that shipments of 100 Gbps optics will grow sharply in 2011, as many system vendors start shipping their latest products. Deployments of 10 GigE optical interfaces in datacenters will account for the bulk of datacom transceiver sales in 2011, while Google is cheering the industry touting demand for 100 Gbps interconnects.

The forecast report presents analysis of infrastructure upgrades at the top ten network operators, a summary of trends in the networking equipment market and detailed analysis of the forecast for optical components and modules. The forecast database includes historical data from 2007 to 2010 and a detailed market forecast through 2015 for optical components and modules used in Ethernet, Fibre Channel, SONET/SDH, CWDM/DWDM, wireless infrastructure, FTTx, and high performance computing applications. The sales data for 2007 to 2010 accounts for more than 30 transceiver vendors, including 25 vendors that shared confidential sales data with LightCounting. The market forecast for 2011 to 2015 is based on LightCounting's model correlating transceiver sales with network traffic growth and projected subscribers of FTTx systems. 

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.