LightCounting: Datacom market flew in 2013, telecom lagged

Market research firm LightCounting says the market for optical components and modules posted 9% growth for the year with total sales exceeding $4.2 billion. The company projects a similar growth rate for the total market in 2014, but says the growing top-line numbers hide a lot of volatility.

Market research firm LightCounting says the market for optical components and modules posted 9% growth for the year with total sales exceeding $4.2 billion. The company projects a similar growth rate for the total market in 2014, but says the growing top-line numbers hide a lot of volatility.

Some market segments almost doubled in 2013, while others declined by a third. Growth in annual sales of datacom optical products accelerated, reaching 20% in 2013, compared to 16% in 2012. However, the telecom optical components and modules market remains dormant, advancing by just 3% in both 2013 and 2012.

“It is possible that the telecom market will have a better year in 2014,” the company said in a statement. “LightCounting data suggests that the datacom market responds faster to changes in economic outlook than the telecom industry, which could lag a recovery by three-to-five quarters.”

The data were released as a preview to LightCounting’s "January 2014 Market Forecast Database."

Sales of Ethernet optical transceivers were up 37% in 2013, exceeding $1.3 billion, and will remain the largest market segment in 2014, although the growth rate is expected to moderate. Shipments of 100 Gigabit Ethernet modules will continue to ramp upwards in 2014, but growth in revenues will be modest, as competition among suppliers will push prices down.

Sales of 40 Gigabit Ethernet transceivers more than tripled in 2013, mostly due to strong demand from mega-datacenters, operated by companies like Google. However, LightCounting believes the market for 40GbE transceivers may be volatile in 2014, given that a small number of large customers are driving the demand for these products.

Optics continues to gain share in data center interconnects at the expense of copper, according to LightCounting. SFP+ 10 Gigabit Ethernet (GbE) SR optical transceiver sales grew 26% in 2013 as 10GBase-T (100-m reach copper cable modules) remained on the fringes. SFP+ active optical cables (AOCs) are starting to compete with direct-attach copper cables for 1m to 5m connections.

Sales of 10GbE products it should sustain the market’s growth in 2014, compensating for any potential volatility in the sales of other products.

The telecom market is a different story. Sales of 10G DWDM transceivers fell by 11% and 16% in 2012 and 2013, respectively, although the market researchers expect the sector to rebound in 2014.

The market is overdue for growth, according to LightCounting, which has previously said that operators would be wise to invest more, especially in 100G (see “Operators should overinvest in 100G says LightCounting”).

Deployments of 100G DWDM optics advanced significantly in 2013 and will continue next year, but these products remain too expensive for the broader DWDM market, LightCounting asserts. Current pricing of 100G DWDM transponders is about 30 times that of 10G DWDM transceivers. Nevertheless, 100G is already being deployed in long-haul and some metro applications, as it creates additional value for network operators. In long-haul networks, 100G is maximizing the transmission capacity of the fiber base today and future-proofing it for the next ten years. Aggregation of rapidly increasing numbers of 10G ports into 100G on core routers is another value that 100G optics bring to core networks.

The additional value of 100G in the broader metro DWDM market is harder to quantify. Financial companies like the low latency of coherent transmission, but apart from these financial transactions, there are few applications benefiting from low latency. Network operators with a limited fiber base in metro areas may choose 100G to maximize fiber utilization, but it is hard to imagine a shortage of fiber in the majority of metro areas. Network operators have mentioned that even some fiber cables deployed in metro areas during the telecom bubble of 1999-2000 remain underutilized.

Network operators selling 100G access lines to customers would justify having 100G in the metro. CenturyLink recently announced the first customer purchase of 100G connections – Digital Globe, a company specializing in high-definition mapping technology, which will use 100G connectivity to transfer massive amounts of data between its data centers. This is still a special case, despite an increasing number of data centers worldwide.

LightCounting believes that 100G will be a must-have technology in metro networks once 1G broadband access lines become commonplace and 10G becomes widely used in access aggregation. This is just starting to happen now, the company says, but it may take ten years for 1G/10G/100G lines to become widespread throughout access/aggregation/transport layers of metro networks, respectively.

For more information on optical components and suppliers, visit the Lightwave Buyers Guide.

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