Despite the effects of the COVID-19 pandemic, including supply chain issues, Ethernet optical transceiver sales reached $3.7 billion in 2020 to set a new record, according to LightCounting. The figure represented 33% growth versus 2019, when sales declined by 18%, the first annual drop since 2009 (see “Ethernet transceiver sales to decline 18% in 2019: LightCounting”). And demand for Ethernet modules should remain strong for the next several years, despite the advent of co-packaged optics, LightCounting predicts in its most recent High Speed Ethernet Optics Report.
While service providers and enterprise network operators spent heavily in the first half of 2020 to keep up with the bandwidth demand spike COVID-19 created, that momentum greatly diminished in the second half. Conversely, cloud companies maintained a strong demand for Ethernet optical transceivers throughout the year, accounting for most of the overall uptick.
As legacy Ethernet product demand declined in the second half of 2020, high-speed modules at 100G and greater led the way. For example, sales of 200 Gigabit Ethernet (GbE) FR4 transceivers grew in the year’s final quarter, and LightCounting expects Facebook to increase its purchases of such devices this year and next. And Innolight reported initial deliveries of 2x400GbE transceivers, with LightCounting reporting that Google is now evaluating these modules for deployment in 2022.
Such trends bode well for high-speed Ethernet optics through the 2021-2026 forecast period, LightCounting believes. The period will see growth in 400GbE and 2x400GbE (800G) module demand, which will enable an overall CAGR for Ethernet transceivers of just over 10% from 2021 to 2026, the market research firm estimates. That will lead the total market for Ethernet connectivity reach $6.8 billion in 2026 – and that figure doesn’t include any revenues from co-packaged optics (CPO).
LightCounting believes the market will see demand for 800G CPO chiplets during the forecast period, as the figure above indicates. However, company analysts suspect they may be somewhat optimistic with this forecast, given how long it has sometimes taken for the community to adopt new technology, particularly with the initial wave of CPO offerings likely to be based on proprietary designs. Having previously predicted CPO sales will begin next year (see “Expect co-packaged optics deployments in 2022: LightCounting”), LightCounting now expects cloud companies and very large enterprises to make limited deployments of CPO beginning in 2025-2026, with “massive adoption” waiting until well after the end of the forecast period. However, LightCounting expects network operators to begin evaluating CPO technology as soon as it’s available, and noted in the earlier report that high-performance computing and AI clusters offer significant opportunities for initial deployments as well.
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