U.S. fiber-optics demand to grow over 10% annually through the year 2006

July 7, 2002--The market for fiber-optic equipment and systems in the U.S. is projected to increase 10.3 % per annum through 2006 to over $22 billion.

Jul 8th, 2002

The market for fiber-optic equipment and systems in the U.S. is projected to increase 10.3 % per annum through 2006 to over $22 billion. While well below the robust gains registered throughout most of the 1990s, forecast growth represents a significant improvement over the early 2000s performance that was characterized by extreme weakness in technology-related capital investment. Long-term prospects are even more favorable, with annual growth averaging close to 18% between 2006 and 2011, exceeding $50 billion in the latter year.

Fueling gains will be strong demand for advanced-generation information technology (IT) and emerging multimedia services, including interactive gaming, high-definition video conferencing, streaming media, video downloads and peer to peer networking. Such services are inherently broadband-intensive, and accelerating demand accompanying economic recovery and expansion will absorb existing fiber capacity and prompt significant investment in new capacity, especially during the latter half of the present decade.

However, intermediate-term prospects will be adversely impacted by the need to work off the extensive fiber overcapacity built up during the late 1990s, especially within the bedrock long-haul telecom segment, and to a lesser extent within the cable television and private data network markets as well. Less established segments such as military/aerospace, automotive and utilities will exhibit better growth through mid-decade. Longer term, conversion of the local access telecom and in-building markets from copper to fiber cabling will promote expansion of fiber optic markets. This is likely to occur on a very gradual basis, however, given the high costs involved.

Technological innovation will also drive fiber optics market growth over the longer term, as improving business fundamentals allow vendors to build up research and development budgets cut back during the downturn. Holding particularly good prospects are all-optical switches based on micro-electro-mechanical systems (MEMS) technology, to replace the less efficient optical-electrical-optical switches presently representing the state-of-the-art; and dense wavelength division multiplexers (DWDMs), designed to handle the burgeoning bandwidth requirements of Internet and multimedia traffic.

Fiber Optics (published 06/2002, 265 pages) is available for $3700 from The Freedonia Group Inc., 767 Beta Drive, Cleveland, OH 44143-2326. For further details, please contact Corinne Gangloff by phone 440.684.9600, fax 440.646.0484 or e-mail pr@freedoniagroup.com. Information may also be obtained through www.freedoniagroup.com.

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