KMI: Double-digit growth to return to optical networking

August 16, 2004 Providence, RI -- Are happy days here again? According to a new study by KMI Research, the optical networking market will see double-digit growth from 2004 through 2006.

Aug 16th, 2004

August 16, 2004 Providence, RI -- Are happy days here again? According to a new study by KMI Research, the optical networking market will see double-digit growth from 2004 through 2006.

KMI has released a new report, Optical Networking: Worldwide Equipment Markets Update for 2004. Among its significant findings, the report concludes that through 2009 the ON market will grow at a 12% compound annual growth rate (CAGR). The market, which includes SONET, SDH, DWDM, DXC, and OXC products, was $7.6 billion in 2003 and will reach $15.3 billion in 2009.

KMI's analyses of these ON products include segmentations by vendor, geographic region, and long- vs. short-distance applications. Although metro (short-distance) applications were strong in 2003, the long-distance segment will show a healthy near-term bounce upward for some products, such as DWDM, because systems installed a few years back are filling up. This market growth is driven by bandwidth demand, which is growing at slower rates than in previous years but still fast enough to force new equipment deployments as capacity limits are reached.

Richard Mack, vice president and general manager of KMI, said, "With carrier capital spending getting stronger, and with the introduction of increasingly versatile transmission equipment, the optical networking market is returning to annual growth rates in the range of 10% to 20%. More importantly, we believe that these growth rates are reasonable and 'healthy' or sustainable, given the input we've had about bandwidth requirements and budget expectations."

The report is based on a survey of more than 225 individuals with network operations or purchasing responsibilities at telecom carriers, as well as interviews with suppliers and other research. Other report highlights and key findings include:


  • Vendors with a strong foothold in Asia -- particularly China -- have increased their market share, with Huawei breaking into the top five for 2003, for example.
  • This year (2004) will see the resumption of growth in long-haul DWDM equipment.
  • Ethernet capabilities will show strong growth, with more than half the survey audience indicating that Ethernet will represent more than 40% of their line-card purchases in 2006.
  • Only the OXC product segment saw growth in 2003, while SONET and SDH products maintained their position as the dominant segment in terms of market value.
More in Business