Optical hardware sales resume growth says Ovum

Concurring with other market research firms (see "Fiber-optic network equipment sales up 27% sequentially in 2Q13" and "Optical transport system sales resume year-on-year growth says Dell'Oro"), Ovum reports that optical network equipment sales jumped in the second quarter of this year. Revenues grew 29% sequentially and 7% versus 2Q12, making the quarter the first in the last six to reflect year-on-year revenue growth. The $4.08 billion spent in the quarter pushed annualized spending on fiber-optic network equipment to $14.9 billion.

Sales in North America and China led the way, overcoming continued weakness in EMEA as well as relatively soft demand in South and Central America, Ovum states in its new “Market Share: 2Q13 Global ON” report. Despite the geographically lopsided nature of the market, Ovum analysts feel the downturn that began in 1Q12 may finally be behind us – unless we’re in Europe, where spending remains problematic.

“We always expect an uptick going into the second calendar quarter. However, sales of over $4 billion help dispel some of the fear generated by the slow start in 1Q13,” says Ron Kline, network infrastructure analyst at Ovum. “100G revenue growth is pumping a lot of enthusiasm— and revenue— into the market and increasing the revenues for converged packet optical (CPO) and Optical Transport Network (OTN) switching gear.”

Ovum says that annualized revenues for CPO gear surpassed $6 billion for in the quarter, making up 42% of all optical network hardware sales. Shipments of 100G ports grew 61% in the quarter, leading this niche to surpass $1.6 billion on an annualized basis. ROADM and OTN switching also showed strong growth year-on-year.

“We’ve been hearing operators say ‘no more SDH/SONET spending’ for years. This is misleading, because what they really mean is no more spending for platforms specific to just that technology. They are eager to deploy CPO products that provide Ethernet and SDH/SONET on a converged platform,” explained Kline.


Chinese vendors benefitted the most from the 2Q13 uptick. ZTE had its strongest quarter ever, Ovum says, although it wasn’t enough to push it past market leader Huawei. The two companies rode a continuing surge in Asia-Pacific, where annualized spending reached an all-time high of more than $6 billion. The strength of the North American market helped Alcatel-Lucent, Cisco, Ciena, and Fujitsu, Ovum adds.

“2Q13 global ON revenue results are consistent with our most recent annual forecast published in February 2013,” concludes Kline. “Ovum is projecting the optical networks market will exceed $17.1 billion by 2018, for a 2.7% CAGR from 2012. We project that all ON market regions will resume growth in 2013 except for EMEA; Ovum does not expect a big second half bounce to make up for the anemic first half in that region.”

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