Expect cloud Ethernet and DWDM transceiver sales to continue growth path: LightCounting

Aug. 4, 2022

2 min read

Despite macro-economic headwinds, optical module spending by the Top 5 cloud operators should continue strong growth.

They may not grow at the 35% pace seen last year, but sales of Ethernet and DWDM optical transceivers to the Top 5 cloud companies should continue ticking upward by double-digit percentages over the next several years, according to LightCounting. The market research firm expects such module sales to the major cloud operators to enjoy a compound annual growth rate (CAGR) of 14% from this year through 2027, according to prognostications in LightCounting’s July 2022 Mega Data Center Optics report.

Amazon’s module spending is declining this year because of excess inventory of 400G DR4 and 100G DR+ transceivers, LightCounting reports. Meanwhile, growth in Google’s spending is expected to moderate in 2022-2023, which accounts for the moderation in this year’s expected uptick. However, LightCounting believes that Meta will double its optics spending. Taken together, the sales of Ethernet and DWDM transceivers to the Top 5 should reach $7.2 billion by 2027, from a $3.2 billion base in 2021.

Microsoft launched deployments of 400G DR4 and 400ZR transceivers in 2022, thus lifting spending to $500 million. LightCounting notes that Apple is particularly secretive about its spending plans. However, the market research firm expects Apple to invest more in data center construction in the next 5 years.The worst-case scenario seems to be the most plausible at the moment, but even in this case the total capex will ramp at 9% CAGR over the next 5 years (after zero growth in 2023),” LightCounting says. A recession would put dampers on capex, LightCounting notes. However, the company believes that data center construction, servers, switches, and optics will remain priorities and thus spending in these areas will continue to increase at a faster pace than total capex – or at least remain steady if total capex shrinks (a scenario not illustrated in the figure below).

Of the three scenarios for cloud capex LightCounting considered, it seems at the moment that the most pessimistic is the most likely to occur.

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About the Author

Stephen Hardy

Editorial Director and Associate Publisher, Lightwave

Stephen Hardy is editorial director and associate publisher of Lightwave and Broadband Technology Report, part of the Lighting & Technology Group at Endeavor Business Media. Stephen is responsible for establishing and executing editorial strategy across the both brands’ websites, email newsletters, events, and other information products. He has covered the fiber-optics space for more than 20 years, and communications and technology for more than 35 years. During his tenure, Lightwave has received awards from Folio: and the American Society of Business Press Editors (ASBPE) for editorial excellence. Prior to joining Lightwave in 1997, Stephen worked for Telecommunications magazine and the Journal of Electronic Defense.

Stephen has moderated panels at numerous events, including the Optica Executive Forum, ECOC, and SCTE Cable-Tec Expo. He also is program director for the Lightwave Innovation Reviews and the Diamond Technology Reviews.

He has written numerous articles in all aspects of optical communications and fiber-optic networks, including fiber to the home (FTTH), PON, optical components, DWDM, fiber cables, packet optical transport, optical transceivers, lasers, fiber optic testing, and more.

You can connect with Stephen on LinkedIn as well as Twitter.