While not all precincts have reported, early ballots indicate that optical communications technology vendors were winners in the second quarter of 2021, LightCounting believes. In a research note, the market research firm says that quarterly earnings reports for 2Q21 so far indicate that, despite supply constraints and continuing pandemic-induced economic turmoil, service providers posted strong revenues, which should continue to support strong demand for optical communications technology.
Hot areas of demand during the quarter included 400G transceivers and coherent modules, ROADMs, pump lasers, and 3D-sensing chips. The jump in pump laser sales, reported by such suppliers as II-VI and Lumentum, bode well for optical communications in general, assert LightCounting. Such components are used in optical amplifiers, which generally are fielded early in new transmission line deployments. So the uptick in pump laser sales likely indicate new fiber network deployments, which will drive demand for other optical communications components and optical transport systems.
Optical transceiver deployments also remained strong during the quarter, particularly among hyperscale data center network operators. For example, LightCounting says that 200GbE module deployments at Facebook appear to be on track, judging by the 60% growth in sales of such devices II-VI reported. Elsewhere, LightCounting analysts interpret the 50% growth in sales of EML chips that Lumentum reported as indications that Amazon and Google are rolling out 400G Ethernet transceivers at an accelerated pace.
Yet the market picture isn’t completely rosy, with component and resource shortages expected to have a significant impact in the third quarter and beyond. For example, Fabrinet said supply constraints dampened its Q2 2021 revenue by $25-30 million, which such headwinds expected to continue for at least the next few quarters. Lumentum also said its third-quarter module sales likely will be reduced by $30 million because of semiconductor shortages, with Neophotonics predicting a reduction of $8 million in third quarter sales for similar reasons.
Such statements won’t come as news to systems houses, several of which are already suggesting that supplier shortages are hurting their business. Infinera stated component shortages have cost the company $30 million to $35 million in sales so far this year. Meanwhile, Arista reported semiconductor lead times have stretched to 40-60 weeks, roughly double pre-pandemic levels. And Juniper Networks said it expects to face extended component lead times and higher costs for the rest of the year.
The consensus, LightCounting states, is that shortages should continue to hamper the industry for several more quarters.
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