Top 5 Asia-Based Companies
- Huawei Technologies
- Fujitsu
- Sumitomo Electric Industries
- Furukawa Electric
- NEC
When the telecom market imploded in 2000, taking much of the optical communications industry down with it, few observers could have guessed that a Chinese company would infiltrate the ranks of Merrill Lynch's five leading optical systems suppliers worldwide in 2003 and pose a threat to Cisco Systems' router business in price-sensitive markets. The move reflects Asia's status as the global region to watch based on market growth, manufacturing prowess, rapid advances in communications services, standards initiatives, and top-notch research from industry companies, carriers' labs, research institutes, and universities.
Our choices for the Top 5 Asia-based companies in 2003 include the traditional Japanese powerhouses still dominant in Japan (and in some cases North America) and the up-and-comer from China that is making inroads so fast it cannot be ignored.
Huawei Technologies is the only supplier among the six leading optical systems companies worldwide that gained market share during the last 12 months, according to market analyst RHK. In a late November equity research report, Merrill Lynch analysts ranked the company even higher, estimating that Huawei, headquartered in Shenzhen, China, could place in the top five optical systems vendors worldwide in 2003, with nearly $1 billion in sales and close to a 10% market share.
Huawei is indisputably gaining ground in both percentage of the market and market share, based largely on the company's dominance in China. The company is also increasing its market-leading share within Asia, currently about 20%, according to RHK. The China market is big enough that a company can play almost nowhere else and still have a decent position, observes Dana Cooperson, group director, optical networks, at RHK.
"The question for Huawei is, how successful are they going to be at expanding into Western Europe and into North America?" says Cooperson. Huawei has a presence in North America through subsidiaries Huawei America and FutureWei.
"One of the things that hurts them outside of their home territory is that they've got a reputation for being a low-cost follower," explains Cooperson. "And it's a question of whether people will embrace that...or whether Huawei will in fact just change that whole perception."
Fujitsu, established in 1935, is still a dominant supplier of traditional SONET/SDH and legacy equipment, and the Tokyo-based company is working to develop its offerings in next-generation equipment markets.
First on RHK's list of optical systems sales worldwide for Asia-based companies, Fujitsu ranks fourth among companies worldwide, holding steady with about an 8% share based largely on sales strength in Japan and North America. The company's telecom products and sales are country-specific, with subsidiary Fujitsu Network Communications (Richardson, TX) responsible for maintaining North America sales to Fujitsu's strong RBOC base. In 2003, Fujitsu continued to win major contracts with the RBOCs for its Flashwave 4000 SONET ADM products. Fujitsu Network Communications also began targeting multisystem operators in North America, introducing a DVB-ASI to its carrier class Flashwave 4500 multiservice platform.
Sumitomo Electric Industries, another Japanese incumbent surviving the downturn and proving its staying power, started to manufacture optical-fiber cables in 1974. Today, Sumitomo offers a range of telecom and datacom products—from optical fiber and cable to air-blown fiber cabling systems—and a range of components for WDM and CWDM, amplifiers, pump lasers, optical fiber Bragg gratings, optical data interconnects, and packaging. In a tumultuous year that saw more shakeouts and consolidation in the components industry, Sumitomo was ranked fourth worldwide in subsystems/components sales during the last 12 months based on market share, according to RHK research. However, the company expects to report an operating loss in its information and communications business in fiscal 2004.
Sumitomo Electric Lightwave (SEL), a wholly owned Sumitomo Electric Industries subsidiary headquartered in Research Triangle Park, NC, is finding fiber to the home (FTTH) development one of the bright spots. In September, SEL launched new aerial and buried drop fiber optical cables for fiber to the premises (FTTP) and FTTH networks. It has worked with Japan's dominant carrier, Nippon Telegraph and Telephone on FTTH research and development for years.
SEL also notched a significant win in November when Verizon Communications announced that the company was one of the four vendors the carrier would contract with for the initial phase of its planned FTTP rollout, scheduled to begin this year. SEL will provide fiber-optic cabling and other outside plant equipment.
Furukawa Electric, Tokyo-based fiber and cable supplier, is also holding its own despite a rough 2003 for its U.S. subsidiaries. After posting a loss of $979 million for the fiscal year ended last March, optical fiber/cable and component supplier OFS (Norcross, GA), which majority shareholder Furukawa owns jointly with CommScope, was restructured in September. The company cut several hundred jobs and gained a new management team, headed by Kiyoshi Takeuchi, former president and chief executive of Fitel USA, a wholly owned subsidiary of Furukawa. That same month, components company Optical Communication Products, a maker of optical transceivers, transponders, transmitters, and receivers, of which Furukawa owns 58.1%, announced it was evaluating a potential merger or sale.
Despite these setbacks, the company continues to advance its research. Furukawa and its holdings presented 33 papers at OFC 2003 discussing advances in grating-based optical devices, new optical sources based on super-continuum generation, research on microstructured optical fibers such as bandgap fibers, among other topics. OFS also continues to push the boundaries in new application areas. Last March, the company demonstrated an Ethernet passive-optical-network architecture carrying CWDM over its zero water peak AllWave fiber.
NEC is another Tokyo-based company to watch in 2004. Among systems houses worldwide, NEC ranks third in Asia based on market share and is second behind Huawei for systems sales by Asia-based companies in Asia, according to RHK. For systems sales worldwide, NEC ranks ninth, based largely on its strength in Asia and its SONET success in North America with AT&T, according to RHK. "Even though right now they've got a pretty steady stream, that won't be the case for much longer," says Cooperson. "I know that they are rethinking their strategy and what they are going to do in North America."