SEPTEMBER 29, 2010 -- Ten years after the Internet bubble burst and took the global telecommunications business down with it, the market for optical telecom network equipment finally has begun a sustained recovery, according to market research firm iSuppli Corp. Growth in Internet traffic and robust spending by China are among the factors pacing the upward trend. Sales of optical semiconductors, including MEMS, will be among the beneficiaries, iSuppli says.
Worldwide optical telecom network equipment revenue will amount to $13.5 billion in 2010, up 7.7 percent from $12.5 billion in 2009, iSuppli predicts. Revenue will continue to rise during the next four years until it reaches $22.1 billion in 2014, the highest total since the market peak of $24.95 billion in 2000, according to the market research firm.
The revival of optical networking is being fueled by the continued expansion of the Internet, say iSuppli analysts.
“While the heady days of the dot-com era are gone forever, the Internet is still expanding at a compound annual growth rate (CAGR) of around 45 percent,” said Lee Ratliff, senior analyst, broadband and digital home, for iSuppli. “Major factors driving the Internet’s growth include the explosion of high-bandwidth video traffic, peer-to-peer traffic, the rapid expansion of China’s broadband market and the deployment of fiber-to-the-home (FTTH) systems.”
Expanding bandwidth demand is prompting upgrades to existing fiber networks; for example, telcos are increasing their deployment of DWDM. Furthermore, new fiber is being installed at rapid rate, including undersea networks such as the East Africa Submarine Cable System (EASSy).
The rise of China
In April, China’s Ministry of Industry and Information Technology (MIIT), together with six other ministries, announced a plan to provide tax incentives and financial subsidies for domestic fiber broadband equipment, optical chip, and optical module manufacturers.
Driven by this stimulus, broadband Internet subscribers in China are set to rise to 242.7 million in 2014, up from 132.5 million in 2008, according to iSuppli’s China Research service. Along with such an increase, China’s telcos will double their spending on passive optical network (PON) equipment from 2010 to 2014, iSuppli asserts.
Optical semiconductors and MEMS recover
iSuppli also predicts that, after nearly a decade of stagnation, revenue from semiconductors used in optical networks also is finally is set to begin a multiyear expansion in 2010. Optical network semiconductor revenue is projected to expand to $3.6 billion in 2014, up from $2.1 billion in 2010.
Within this semiconductor segment, the market for optical MEMS for telecom equipment is expected to enjoy a renaissance. After eight years of flat or negative growth, the market for optical telecom MEMS will expand at a CAGR of 17.2 percent from 2009 to 2014, says iSuppli. Revenue will rise to $245.8 billion in 2014, up from $111.2 billion in 2009.
“As deployment of (FTTH) surges, there’s a need to build up metro and long-haul networks to accommodate faster data rates,” said Jérémie Bouchaud, director and principal analyst for MEMS research at iSuppli. “This will have a positive impact on sales of optical MEMS used in metro and long-haul optical telecommunications gear.”
Wavelength-selective switching reconfigurable optical add/drop multiplexers (WSS ROADMs) are expected to be the fast-growing portion of the optical telecom MEMS market.
Furthermore, MEMS are experiencing rapid growth as variable optical attenuators (VOAs), and are taking share from competing devices, iSuppli asserts. Chinese players like O-NET are rapidly adopting MEMS for their VOAs. As a result, unit shipments of MEMS VOAs will grow by 78 percent in 2010, according to iSuppli.
Other attractive areas for MEMS in optical networks include tunable filters, crossconnects, and 1XN switches.
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