Market research and analysis firm Ovum predicted last week that demand for optical network (ON) hardware will increase 3% each year through 2019. The slow but steady growth will see the optical transport market worth $17 billion in 2019, Ovum expects.
The demand for fiber-optic network equipment for data center interconnect (DCI) will be a primary driver, according to Ovum's "Optical Networks Forecast Report: 2014–19." Sales of DCI equipment now exceed $3 billion globally on an annualized basis, making Internet content and cloud providers an important new market segment for equipment providers, in Ovum's view.
"Spending on DCI is having a material effect on the market, particularly in North America where many of the Internet and cloud providers have large networks connecting hyper-scale data centers," explains Ian Redpath, principal analyst at Ovum. "Our capex research indicates that Internet content providers (ICPs), whose primary business is the creation, storage, and dissemination of digital information, and carrier-neutral providers are spending heavily on data center infrastructure, including optical transmission for DCI. Shipments of 100G equipment in particular are growing strongly in the Internet content and carrier-neutral markets."
Optical network hardware vendors have taken note. Companies such as ADVA Optical Networking, Alcatel-Lucent, BTI Systems, Ciena, Cisco, and Infinera have already targeted the DCI space in North America, according to Redpath. While Alcatel-Lucent and Ciena have been traditionally strong players in the carrier-neutral and ICP market in the region, preliminary data through 3Q14 indicates that Infinera is the fastest-growing company in this sector. Other companies with strong growth in the region include ADVA and BTI, Ovum adds.
Ovum says it will have more data on this area this April when it completes a DCI spending study it began last September.
Other regions of the world also should see an uptick in spending on fiber-optic network systems. "China is the second largest market for the broader ON equipment sector after North America and is projected to grow 9% in 2014 as Chinese carriers invested in LTE and fixed broadband rollouts,” Redpath says. Over the next five years Redpath and Ovum forecast a 4% CAGR for China.
Meanwhile, Ovum expects the "Rest of Asia & Oceania" (RoAO) region will grow at a 4.7% CAGR to 2019. This region sees service providers rapidly modernizing their network infrastructures, with optical networks upgraded to support wireless growth, according to the company.
Spending in Europe, the Middle East, and Africa likely will prove down once again in 2014, but Ovum expects the region to finally resume growth in 2015. Meanwhile, North America will grow at a 3.2% CAGR to 2019, largely driven by the growth in the DCI applications. North America is expected to be the biggest region for DCI in 2015 due, in part, to the rapid emergence of carrier-neutral/ICP players as an important segment, particularly for 100G.
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