Next-generation products to make inroads in SONET/SDH market

Next-Generation (NG) SONET and SDH equipment captured four percent of the nearly $20 billion SONET/SDH market in 2000. According to KMI's latest report, "SONET, SDH, and Related Next-Generation Equipment: Worldwide Markets for Transport Equipment, Digital Cross-Connects, Digital Loop Carriers, and Associated Modules," the NG portion of the SONET and SDH market will reach about 38 percent of the nearly $45 billion SONET/SDH market in 2005.

NG SONET and SDH equipment includes SONET and SDH-based platforms that can interface with multiple protocols and can aggregate lower bit-rate protocols to various higher bit-rate SONET/SDH and/or and DWDM signals. Michael Arden, an analyst at KMI covering the SONET/SDH market notes, "next generation equipment will be the key revenue segment of the SONET and SDH markets through the forecast period. New systems will be deployed with next-generation equipment, while the traditional SONET and SDH segments are relegated to filling capacity on existing networks."

The growth in NG equipment sales will come at the expense of traditional SONET/SDH equipment sales. This trend will be more obvious in the SONET market, where NG equipment will grow from less than $600 million in 2000 to more than $11 billion in 2005, about 47 percent of the total SONET market. Transmission systems at OC-48 will see negative growth starting in 2004, and OC-192 systems sales will see negative growth beginning in 2005.

In the SDH segment of the market, NG equipment will grow from more than $200 million to $5.8 billion from 2000 to 2005. NG equipment will account for 28 percent of the total SDH market in 2005. Traditional SDH equipment will have low to flat annual growth for the majority of the forecast, but it will remain positive growth through 2005.

The growth in bandwidth demand, new concepts in metropolitan network design, and trends in the type of traffic are all contributing to the strong growth in SONET and SDH markets. As fiber is increasingly deployed at the edge of the network, aggregation equipment, like NG equipment, will be needed to ramp signals onto higher bit-rate metro core, regional, and backbone networks. This will drive the migration to NG equipment. Deregulation in Europe is helping to keep the fiberoptic equipment market strong, as new competitors emerge for both national and regional/international network deployments. The demand for SDH equipment is strong in Asia, and particularly China, where telecommunications networks are in need of upgrading. Asia will be a strong growth area in the forecast period, as competition there increases, and new technology is embraced.

The KMI report also examines the growth in digital cross-connects. Associated with the growth in digital cross-connects is growth in SONET and SDH modules. As digital cross-connect matrixes become larger, more SONET and SDH optical interfaces are needed to fill input and output port capacity. This will help drive the SONET and SDH modules market.

Other types of equipment also require SONET and SDH interfaces. Besides NG equipment, other types of equipment will require interfaces with optical SONET and SDH. These include alternative transport protocols that need to be aggregated to core or backbone networks as well as switching and routing equipment, like Ethernet, optical cross-connects, routers, and digital loop carriers. The module market will grow from $3.4 billion in 2000 to $7.5 billion in 2005.

About KMI Corporation:

KMI Corporation, a provider of fiber optics market research offers reports on worldwide fiberoptics markets, bi-monthly newsletters, fiberoptics route maps, and conferences on global, regional, and undersea fiberoptics markets. Contact KMI Corporation at 401.849.6771, or visit www.kmicorp.com.