Connector market forecast to grow through 2002
Despite predicted growth in sales of connectors and related interconnect hardware, the balance is predicted to shift significantly both among and within regions.
Charles S. Xu Kessler Marketing Intelligence Corp.
In 1996, the worldwide market for singlemode and multimode fiber-optic cable, transceivers, and interconnect products was $10.2 billion. Of this, $1.2 billion (12%) were sales of interconnect products--including fiber-optic connectors, cable assemblies, panels, distribution frames--and other interconnect accessories, including attenuators and unmounted sleeves.
Fiber-optic connectors, the core element of the whole interconnect product family, have achieved remarkable growth over the past ten years. Kessler Marketing Intelligence Corp. (kmi) monitors the worldwide demand for singlemode and multimode connectors, and uses this research to evaluate and forecast the markets for related interconnect products. The following forecasts for connectors are based on the sales of unterminated connector plug units, although connectors are often sold as pigtails or jumper cables rather than as unterminated plugs.
Volume up, prices down
Connector volume. The worldwide singlemode and multimode connector volume exceeded 82 million units in 1996, nearly 10 times as many as in 1988. The worldwide volume will grow at a compound annual growth rate (cagr) of 23%, and reach 283 million units by 2002. Figure 1 shows the worldwide growth trend of singlemode and multimode connectors from 1988 through 2002.
Worldwide singlemode connector volume has increased more than 10 times, from 2.5 million ends in 1988 to 27.7 million ends in 1996, a cagr of 35%. The demand for singlemode connectors will continue to rise over the next few years, reaching 97 million units by 2002. By that year, the singlemode volume will be more than three times what it was in 1996. The cagr from 1996 to 2002 will be 23%.
In 1996, Asia-Pacific replaced North America as the world`s largest consumer of singlemode connectors. The region will hold this lead for the next six years. The Asia-Pacific region`s share of the worldwide singlemode market will grow from 38% in 1996 to 45% in 2002. The North American market, the second- largest singlemode connector market worldwide, accounted for 34% of the volume in 1996 (9.3 million). That share will drop to 21% by 2002, even as volume rises to 20 million units.
In 1996, the worldwide demand for multimode connectors was nearly 55 million units, more than eight times greater than in 1988. The multimode connector volume will grow at a 23% cagr to 186 million units in 2002. kmi defines one "unit" as one fiber end; therefore, a two-fiber-end connector, such as a duplex SC, a Fiber Distributed Data Interface, or an Escon connector, would represent two fiber ends. North American installations have accounted for more than 50% of the unit volume worldwide for multimode connectors since 1988, and they will hold this share for the next few years. Asia-Pacific and Western Europe will continue to be the world`s second- and third-largest multimode connector markets, respectively.
Prices. The rising demand for singlemode and multimode connectors, the volume of production, the improvement in production processes, and the increased number of connector suppliers have eroded the prices of both singlemode and multimode connectors (see Fig. 2). Singlemode prices have dropped much faster than multimode. This is primarily due to the switch from more- expensive types, such as the biconics and the D4s in the United States and the FCs in Japan, to less expensive types, such as the SCs, in an increasing number of countries worldwide.
Fiber has not yet significantly penetrated the fiber-in-the-loop (singlemode) and fiber-to-the-desk (multimode) market segments--areas with the most growth potential for interconnect components. Continued innovation in connector design and improvement in termination and assembly processes will allow connector vendors to cut costs and prices. kmi forecasts that connector prices will continue to decline--as much as 8% annually for singlemode and 4% annually for multimode.
Demand shifts
North America. North American singlemode fiber-optic connector volume will more than double, from 9.3 million units in 1996 to 20.1 million units in 2002, with a cagr of 14%. The United States accounted for 90% of the North American market in 1996 and will remain at this level over the next few years. The United States has been a strong market due to its extensive fiber-optic infrastructure. Also, telecommunications deregulation in 1996 opened up more segments of the telecommunications and information services markets to competition.
The Canadian market for singlemode connectors is similar to the U.S. market in makeup. In both countries, long- distance operators are a relatively small segment, and local telecommunications operators are the dominant customer group. Furthermore, in both countries, cable-TV operators are a strong segment of the fiber-optics market.
Mexico, on the other hand, is still building a long-distance telecommunications infrastructure; therefore, demand in Mexico for singlemode fiber-optic connectors for feeder/local networks will not increase until early in the next decade.
North American multimode fiber-optic connector volume will more than triple, from 30.2 million units in 1996 to 95.1 million units in 2002, with a cagr of 21%. The United States will continue to have about a 90% share of the North American multimode market and make about 50% of worldwide shipments over the next few years. This U.S. dominance is due to an advanced computer industry, higher computer density, and a stronger commitment to data-communications networks.
So far, most multimode connectors have been installed in premises backbone networks; the number of units for fiber-to-the-desk applications is less than 10% of all multimode connectors shipped each year. One major reason is the higher cost of fiber-optic components compared to electronic components. Major connector manufacturers are designing new connectors or improving existing plugs to address the fiber-to-the-home market, and these new connectors will become commercially available in a year or two. If the fiber-optics industry embraces the new connectors, the market share of multimode connectors in horizontal wiring networks could increase to 15% to 20% by 2000. This could increase demand for multimode fiber-optic connectors in the long term.
Long-term trends
Figure 3 shows the long-term trend of singlemode and multimode connector use in North America from 1988 to 2002. The SC type has made significant headway in the singlemode market, taking market share away from other one-time dominant connector types, such as biconics and D4s. The share of SC connectors will rise incrementally over the next few years because some cable-TV equipment manufacturers favor SCs over FC-type connectors.
The multimode market share of the ST-type connector rose to nearly 80% in 1993 to 1994. With the introduction of SC connectors, the share of the ST has gone down, especially since the mid-1990s, when SCs were standardized for premises wiring. The acceptance of duplex SCs in other data-communications standards is also helping this connector. The SC connector will account for about 60% of multimode plugs installed in North America by 2000.
Western Europe. In 1996, West European fiber-optic connector volume was 13.7 million units. Singlemode connectors represented 33% of the total (4.5 million units), and multimode volume was 67% (9.2 million units). The singlemode share will increase to 35% by 2002, when singlemode volume will be 16.5 million units, an increase of 267% over the volume in 1996. Multimode volume will increase 232% to 30.6 million units. From 1996 to 2002, the cagr for singlemode connectors will be 24% and for multimode connectors, 22%.
In 1996, the United Kingdom had Europe`s largest singlemode connector demand, with slightly less than 1.3 million units or 28% of the West European total. Second-ranked was Germany, with 19% of overall volume. Italy ranked third with 13%, followed by France (11%) and Spain (6%). These five markets represented 76% of the singlemode connector volume. In 2002, the top five markets will compose 68% of the singlemode volume. Both British and German shares will decline. By that year, Italy will replace Germany as the second-largest singlemode connector market.
In 1996, Germany was the largest multimode connector market in Western Europe, with 34% of the region`s total. The United Kingdom was the second-largest, with 24%. France had 15%. Switzerland and Italy were the fourth and fifth, respectively, each with 4%. These five markets represented slightly more than 80% of West European multimode connector demand. In 2002, the rank of the top five markets should remain the same, but they will represent 74% of the West European multimode connector volume that year.
The SC connector is increasingly being adopted throughout Europe for singlemode and especially multimode applications (see Fig. 4). Nevertheless, the more established FC connector remains the dominant connector type for singlemode applications in several countries, and the same can be said for the ST connector in data communications. The E-2000 connector has made headway in some countries and among certain cable-TV and utilities operators; however, a limited supplier base and actual or anticipated price factors have dampened its acceptance. Other connector types, such as the DIN and EC, have had limited success outside of a few markets.
Asia-Pacific. The Asia-Pacific region`s volume of singlemode and multimode connectors will grow from 24.1 million units in 1996 to 95.5 million units in 2002, with a cagr of 26%. Singlemode volume will increase by more than 300%, from 10.6 million units in 1996 to 43.4 million units in 2002. Multimode volume will increase by 286%, from 13.5 million units to 52.1 million units, in the same time span. From 1996 to 2002, the cagr will be 26% for singlemode and 25% for multimode.
Japan has been dominant in the Asia-Pacific connector markets, especially in singlemode shipments. Nippon Telegraph & Telephone Corp.`s commitment to build an all-fiber-optic network using the fiber-to-the-home technology will be the main factor behind a surge of demand for singlemode connectors over the next few years. Following Japan is China, which has achieved significant improvement in building a nationwide telecommunications infra-structure using state-of-the-art technologies, including fiber optics. China`s share of the singlemode volume will be the same (17%) from 1996 to 2002, which means the country will keep up with the growth of the Asia-Pacific singlemode connector market. Ranked third in 1996 was Australia (6%), but this status will be surrendered to Korea (8%) in 2002. The top three countries combined will account for nearly 80% of the region`s singlemode connector volume for both 1996 and 2002.
In 1996, Japan represented 54% of the Asia-Pacific multimode connector market. Ranked second through fourth were Korea (11%), Australia (10%), and China (7%), respectively. The four markets combined for 82% of the Asia-Pacific multimode total. Looking ahead, the market with the most significant market share improvement will be China. In 2002, China`s share of the region`s multimode total will increase to 19%. And because of the rapid increase in sales of multimode plugs in other Asia-Pacific markets, the market share of the top four markets in 2002 will decrease to 74%. Japan`s market share will slip to 37% by that year.
Emerging markets. Emerging fiber-optic connector markets include Latin America and the Caribbean, Eastern Europe, the Middle East, and Africa. The four markets accounted for 5.4 million singlemode and multimode connector units in 1996 and will reach 25.4 million units in 2002. From 1996 to 2002, the cagr should be 31% for singlemode, 26% for multimode, and 29% for singlemode and multimode combined. These growth rates are faster than those of North America, Western Europe, and Asia-Pacific. The emerging markets` share of the worldwide singlemode total has improved remarkably from the late 1980s (2% to 3%) to the mid-1990s (10%) and will reach 17% by 2002. Multimode market share has been improving all along but not as rapidly as singlemode. The region`s share of the world multimode total will remain at about 4% from 1996 to 2002.
In 1996, Latin American and Caribbean regions were the largest singlemode markets within the emerging markets category, with a 44% market share. Ranked second and third, respectively, were Eastern Europe (31%) and the Middle East (21%). Among the countries that will drive the singlemode connector demand are Argentina and Brazil (South America); the former Soviet Republics, Poland, Hungary, and Romania (Eastern Europe); and Israel (Middle East). Some of these markets, due to their relatively small sizes, have nearly completed their long-distance and cable-TV networks and will focus on metropolitan networks. Over the next few years, demand for singlemode connectors will grow faster in Eastern Europe than in other emerging markets. This region`s market share will rise to 46% of the category`s singlemode connector total by 2002. Because of this, other emerging markets` share of singlemode connector volume will decrease.
In multimode, Eastern Europe had a larger share (42%) of the emerging market total in 1996, followed by Latin America and the Caribbean (33%) and the Middle East (21%). As in the singlemode market, these three regions account for nearly the entire multimode connector volume. In other words, Africa`s share is negligible. In 2002, Eastern Europe`s share will increase to 49%, the Latin American and Caribbean share will remain the same, but the share of the Middle East will drop to 14%. This suggests that Eastern European multimode connector demand will grow much faster than that of the rest of the emerging markets.
Worldwide hardware market
Figure 5 shows the worldwide singlemode and multimode fiber-optic interconnect hardware market from 1994 through 2002. In 1996, the worldwide market for singlemode fiber-optic interconnect hardware was nearly $600 million, up 21% from the year before. In 1997, the singlemode market will increase 17% to $694 million. Annual growth rate will be 17% in 1998, 18% in 2000, and 16% in 2002. From 1996 to 2002, the cagr for the singlemode market will be 17%.
In the singlemode market, more than 90% of the connectors are factory-terminated. Most of the terminated parts--jumpers and pigtails--are loaded on interconnect hardware (distribution frames and wall/rack mount panels) and sold with the hardware. In 1996, sales of this hardware were 84% of the total. That percentage will increase to 87% by 2002.
In 1996, the worldwide multimode market was $668 million, up 21% from 1995. This market will increase by 24% to $825 million in 1997 and by 144% to $2 billion by 2002. In the multimode market, more than 60% of the connectors are factory-terminated; the remaining are plugs installed in the field. As with the singlemode market, some jumpers and pigtails are loaded on termination hardware; others are primarily for retrofitting previously installed parts, lighting up dark fibers, or reconfiguring terminations.
Included in the "Other" category of the multimode market are sales of specialty connectors for avionics, sensor, and closed-circuit TV applications; commercial connectors for noncommercial applications, such as medical, geophysical, and other military programs; and parallel array-type connectors such as MP, MT, and MACII connectors.
One major area of interest is the horizontal wiring segment of the premises network. This is represented in the "wall plates" category of the multimode market. In 1996, wall plates were 13% of the entire sales of multimode interconnect hardware. This percentage will be 14% in 1998, 17% in 2000, and 20% in 2002. This forecast might be conservative if new connectors addressing fiber-to-the-desk emerge and are widely accepted within the industry.
Conclusion
In 1996, North America had more than half of the worldwide singlemode and multimode interconnect hardware market. In the multimode market, North America will remain in this position over the next few years. The region`s singlemode market share, on the other hand, will decrease, reaching 30% by 2002. Asia-Pacific will become the market with the greatest growth potential for singlemode connectors. u
Charles S. Xu is a senior analyst with Kessler Marketing Intelligence Corp., Newport, RI.