Telecom laser market to grow 30% in 2003

23 January 2003 -- The telecom laser market will grow 30% in 2003, but spread over fewer suppliers, says Strategies Unlimited.

Jan 23rd, 2003

23 January 2003 -- Although the timing of the recovery of the telecom market is still uncertain, and laser inventories remain on shelves, the telecom laser market should grow nearly 30% in 2003, largely due to the continued installation of line-cards into existing systems, according to Strategies Unlimited' report "Telecom Lasers, Transceivers, & Transponders: Market Review and Forecast � 2003". However, with dozens of suppliers competing for a share of the pie, prices and margins will remain squeezed.

"Traffic is continuing to grow, albeit more slowly, and prices will stabilise enough for revenues in this market to grow beginning in 2003," says Tom Hausken, Optical Communication Components Practice Director at Strategies Unlimited. "But, there is only business enough for a few key suppliers, plus some additional niche players. The longer it takes to consolidate, the longer will be the pain."

In some respects, the laser market has fared better than many other optical components during the current industry downturn, says Strategies Unlimited. Laser products are installed into systems not only as new systems are installed, but also as new channels are added to existing systems. Consequently, laser manufacturers have not experienced the extreme swings seen by manufacturers of fibre-optic cable or optical amplifiers.

Also, average selling prices (ASPs) of lasers generally have scaled upwards as the data rate of those lasers increased, since higher-data-rate lasers are expensive to package. ASPs for many passive optical components, by contrast, have risen only modestly with new generations of systems.

However, the industry remains plagued by inventory buildups that occurred during the initial phase of the industry downturn. As of the end of 2002, excess inventories remained for products aimed at the long haul market such as continuous-wave lasers on the ITU grid, depressing sales of laser diodes.

Despite slow sales, the number of suppliers has expanded far beyond any reasonable value, even for this diverse market - 2003 likely will bring a shake-out.

Strategies Unlimited expects some recovery in 2003 as inventories are reduced to reasonable levels. Products in the best inventory position are metro transceivers and newer products such as lasers for coarse wavelength division multiplexing (CWDM).

Integration of new features into functional blocks, or transponders, provides a higher-revenue opportunity for many players in the 10 and 40Gbit/s markets. While their overall penetration into the market is limited, these products sell for higher prices, and also scale well with data rates.

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