Connector market signals return to 'normal' growth
Fiber-optic connectors get little or no respect. While the so-called "hot" component categories such as DWDM filters, photonic switches, and optical amplifiers grab the headlines, fiber-optic connectors remain ubiquitous, a key part of almost all other components. As the signal makes its way over fiber through optical backplanes, switches, filters, amplifiers, and other components, each transmitter and receiver pair is dependent on several connector pairs. As a result, connector market trends reflect the health of the overall fiber-optic components industry.
After the discouraging drop in global connector consumption across applications—telecommunications, private data networks (LAN/WAN), cable TV, military/aerospace, specialty, and non-production—from $915 million in 2000 to $773 million in 2002, with a much larger decline in shipments due to component inventory swings, the total market is forecast to climb to $853 million this year. Global connector consumption and shipments will return to a relatively normal pattern in 2004–08, passing the billion-dollar level next year and climbing to $2.61 billion in 2008. ElectroniCast expects an annual growth rate of over 25% during 2003–08. This outlook encompasses 18 multimode- and 15 singlemode-fiber connector types—a list that continues to expand.
Of all fiber-optic-connector applications, telecom was hardest hit by the industry recession. In 2000, telecom equipment and related installation apparatus and network interconnects represented $433 million or 47% of total global connector consumption. Only a partial recovery is expected through 2004, with telecom dropping to a 33% share of total consumption. Strong growth in telecom connector use will resume, however, increasing share to 35% or $924 million in 2008. Private data networks, including related equipment, also will drive strong connector consumption value growth, averaging 24% per year during 2003–08 to reach $880 million.
In contrast to the 2001–02 collapse of the commercial connector market, harsh-environment applications have maintained strong growth (though from a modest early value base). Numerous military/aerospace systems that were in development—and design-in of fiber-optic links—are now shifting into substantial production. These systems often require heavy-duty connectors substantially different from the commercial components. These environments require operation (and sometimes installation) in extremes of temperature, shock/vibration, radiation, solvents, and other challenges. Amphenol, ITT-Cannon, Delphi Connection Systems, Deutsch, Tyco Electronics, and Fiber Systems International are leaders in this market.
Through most of the optical-component history, connector shipments tracked well with consumption (attachment to fibers and modules). Over the 1999–2000 span, however, concern about potential parts shortages led to orders and shipments substantially greater than consumption. Conversely, in 2001–02, as the deployment and production of fiber-related communications equipment fell rapidly, the consumption of connectors included a large share from inventories. That is illustrated in the Table, which shows 17% of shipments in 2000 building up inventories (on top of substantial 1999 inventory increases), followed by a 2001–02 decline in consumption rates with a large share of consumption provided by inventories. By early 2003, nearly all excess inventory had been consumed, along with modest consumption growth and firming of prices, supporting shipment value growth.
Fiber-optic commercial connector average prices range from $3 to $16 (versus $20–$50 for military/aerospace fiber-optic connectors), with substantial variance depending on quantity, connector type, and other contract details. Major vendors report unit prices plummeting to the $2 level for leading connector types because of the 2001–02 inventory glut. The mid-2003 low pricing is broadly considered to be unsustainable. Some vendors are likely to withdraw from the market; others are focusing on new lower-cost connector designs.
More than 200 vendors offer fiber-optic communications connectors (excluding custom-design and special-purpose connectors), according to ElectroniCast estimates. The market is dominated by major corporations with a broad base in interconnection components, such as Tyco Electronics (formerly AMP), ITT-Cannon, Amphenol, Molex, and 3M. Leading fiber-optic-cable vendors such as OFS-Brightwave and Corning Cable Systems also hold substantial shares.
The next 25 years of fiber optics will bring continuing evolution of fiber-connector concepts, analogous to the advancements already seen in the IC semiconductor field: greater density, smaller size per function, and much lower cost per interconnect. Multifiber-link vendors such as Xanoptix are looking ahead to 512-fiber interconnects within the next decade. The auto industry is developing a 100-Mbit/sec transceiver with a connectorized plastic optical fiber link for under $10. A family of miniaturized single- and dual-channel singlemode and multimode connectors is also likely to emerge, consistent with low-cost miniaturized, yet high-performance (multigigabit), transceivers.
Jeff D. Montgomery is chairman and founder of ElectroniCast (San Mateo, CA), an optical technology market research and analysis firm.