LightCounting on 2011: Cheer up

Yes, 2011 has seen macroeconomic uncertainty, debt crises, natural disasters, and unprecedented late season collapses by the Boston Red Sox and the Atlanta Braves. But market research and analysis firm LightCounting points out that, at least for the optical components and subsystems industry, a few good things have happened as well that bode well for the future.

Yes, 2011 has seen macroeconomic uncertainty, debt crises, natural disasters, and unprecedented late season collapses by the Boston Red Sox and the Atlanta Braves. But market research and analysis firm LightCounting points out that, at least for the optical components and subsystems industry, a few good things have happened too that bode well for the future.

First, says LightCounting, revenues for the top 12 service providers has risen this year by 7.5%, a step in the right direction after two years of flat lining. While such carriers still remain cautious about spending their new-found wealth, LightCounting points out that increasing bandwidth demands will continue to pressure these service providers to loosen their purse strings. Once the economic environment settles down and revenues grow further, LightCounting expects capital expenditures (capex) to rise faster than these revenue increases. Even with the overall cautious approach to capex, LightCounting expects carrier spending to have increased 5% in 2011.

This uptick in capex has benefited networking companies and their optical technology suppliers. LightCounting says network equipment sales will grow by more than 10% this year, while optical transceivers sales will be up 8% by the time 2011 ends.

Signs point to continued growth over the next three years, LightCounting believes. The company remains confident in its previous forecast that the optical transceiver market will grow at an 11% CAGR from 2012 to 2015. It does foresee a few changes from its prognostications earlier this year, however:

  • The fact that power-efficient 10GBase-T development fell another 6 months behind schedule will widen the window of opportunity for suppliers of optical interfaces and direct attach cables. Sales of 10-Gigabit Ethernet SFP+ modules should benefit particularly.
  • On the other hand, LightCounting has lowered its projections for sales of 8G and 16G Fibre Channel transceivers, mainly because of extended life cycles of previous-generation (4G) products.
  • 40-Gbps DWDM transponders also will not sell as well as LightCounting originally believed, as system vendors will turn toward in-house manufactured interfaces as they have initially for 100 Gbps.
  • Meanwhile, the adoption prospects for 100 Gbps in datacenters, including short-reach transceivers, will be better than previously believed.
  • Sales of FTTx components have grown strongly this year due to demand in China, but such demand levels probably aren’t sustainable. LightCounting foresees a potential “hard landing” in 2012 or 2013.
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