Ovum: Optical components market contraction on the way

To the surprise of no one who has followed the financial fortunes of companies such as Finisar and Oclaro, Ovum reports that growth in the global optical components (OC) market slowed in the first quarter of 2011. In addition, the market research and analysis firm doesn’t expect the space to show any more life in the second quarter. As a result, Ovum believes the sector will begin to contract.

To the surprise of no one who has followed the financial fortunes of companies such as Finisar and Oclaro, Ovum reports that growth in the global optical components (OC) market slowed in the first quarter of 2011. In addition, the market research and analysis firm doesn’t expect the space to show any more life in the second quarter. In fact, Ovum believes revenues in the sector will begin to contract.

In its recently released “Market Share Alert: 1Q11 Global OC,” Ovum estimates that the optical components market grew sequentially by 1 percent in the first quarter of the year to reach $1.59 billion. While this figure represents an increase of 27 percent year-on-year, Ovum calls the small sequential improvement “a sure sign” that the growth seen in 2010 is dissipating – a conclusion buttressed by Ovum’s vendor revenue guidance for the second quarter of 2011 that indicates the market could in fact shrink between 2 percent and 8 percent sequentially. Such a downturn would be the component market’s first sequential decline in two years.

Says Karen Liu, Ovum analyst, “The sequential growth of 1 percent is the smallest since the first quarter of 2009, and the year-on-year-growth is the smallest since the last quarter of 2009. This weaker growth is a reflection of the contraction that we believe will come to light in the second quarter of this year.

“These are sure signs that the OC market is slowing when compared to 2010,” she continues. “The market returned to normal stable growth after the global recession, but the picture for the second quarter of 2011 may be cause for concern as it could be a sign that the market is about to recoil.”

Liu says her analysis shows weakness in ROADMs and filters for the first time in six quarters. Sales of transmission discretes were also down this quarter, she adds.

"Meanwhile, vendors such as Finisar have cited weaker spending in China as a major factor behind the slow sales, confirmed by our analysis of quarterly revenues from the optical networking (ON) market. ON sales in China posted a 20 per cent contraction, which pulled down the whole Asia-Pacific region,” Liu says.

For more on optical components and suppliers, visit the Lightwave Buyers Guide.

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