Worldwide markets for singlemode components to surge this decade

Feb. 1, 1996

Worldwide markets for singlemode components to surge this decade

Increasing at a compound annual growth rate of 22% from 1994 to 2000, the worldwide market for fiber-optic singlemode transmitter and receiver optoelectronic devices --in terms of unit volume --is expected to nearly triple during this period

Richard Mack

Kessler marketing intelligence Corp.

Worldwide sales of fiber-optic singlemode transmit and receive devices were $950 million in 1994 and $1.232 billion in 1995. This market is anticipated to grow at a compound annual growth rate of 20% through the year 2000, when sales are estimated to hit $3.097 billion. These forecasts are derived from the KMI Corp. study Worldwide Markets for Fiberoptic Singlemode Transmitter and Receiver Components.

The market figures include all communications sources used with singlemode fiber, such as edge-emitting light-emitting diodes, Fabry-Perot lasers, distributed feedback lasers and hybrid transmit modules, as well as corresponding detector and receiver products. The market total also includes duplex transceiver modules, which incorporate transmitter and receiver functions in a single package. Also included are laser sources used to pump the gain media in doped-fiber amplifiers, lasers and detectors used in instrumentation, and devices used in research and development laboratories.

When the unit quantities of sources, transmitters, detectors, receivers and duplex transceivers are combined, the resulting device totals were 1.61 million units for 1994 and 1.97 million units for 1995. This sum is projected to increase at a compound annual growth rate of 22% through 2000, when it should total 5.44 million units.

Worldwide market forces

The market for transmitter and receiver devices or modules is driven by sales of fiber-optic transmission equipment. And the market for transmission equipment is driven by the need to build or upgrade fiber-optic networks. Therefore, the market trends for fiber-optic transmitter and receiver devices or modules are linked to the trends in network deployments and installation budgets of public and private network operators or carriers.

In worldwide telecommunications markets, the major factors contributing to the strong growth in public network construction budgets include the following:

Emergence of competitive carriers for long-distance and local-access services. These carriers are both spurring new markets and forcing construction by established carriers. For example, the European Union telecommunications markets are scheduled to be opened to competition in 1998, and many countries are going to permit or encourage competitive carriers in the late 1990s.

Requirements for high-bandwidth transmission equipment associated with new services or potential new service revenue opportunities.

Efforts by developing countries to expand and modernize their national telecommunications infrastructures by installing interstate, interprovince, intercity, or metropolitan fiber-optic networks. These countries want to rapidly upgrade their telecommunications infrastructures as a key element in broader plans to expand their national economies and to increase international trade.

Trends in telecommunications network architecture to take advantage of fiber-optic and very-large-scale-integration technologies in transport and switching products. One example is the trend toward architectures that provide a redundant path for greater reliability or survivability. Another example is the trend to widespread use of large digital switches, necessitating the use of multiplexed, high-capacity fiber lines to haul traffic over greater distances.

In private networking markets, the driving forces contributing to increased demand for singlemode equipment include the following:

ATM networking standards and technology for high-performance on-premises networking.

Low-cost singlemode transmitter and receiver products, as well as low-cost interconnect products.

Telecommunications market

The telecommunications market, including fiber-in-the-loop, or FITL, networks, accounted for 63% of singlemode sources in 1994 and 1995. Telecommunications trunk and feeder, without fiber in the loop, accounted for 55% of singlemode sources in 1994. And telecommunications should dominate singlemode fiber optics through 2000, even though other applications will have strong growth in singlemode system deployments.

A growing element of the telecommunications sector`s strong unit demand will result from fiber-in-the-loop installations toward the end of the decade. These installations represent a high-volume market for singlemode transmit and receive components. If fiber-in-the-loop equipment is excluded, the telecommunications sector would represent 48% of singlemode source unit demand in 2000. But considering the lower average price of units for fiber-in-the-loop applications, the other telecommunications applications should total 62% of the source market in 2000.

Fiber-in-the-loop trends

As major network deployments approach completion after 1995, fiber-in-the-loop activities are expected to drop. These early deployments include two Bell Atlantic installations in New Jersey, Nynex`s installations in Brooklyn-Queens, and the Opal program funded by Germany`s Deutsche Bundespost Telekom. As these projects near completion, no other major lightwave network projects are planned for 1996. Consequently, a temporary dip in sales in this market sector is expected.

However, this market should resume growth in the late 1990s as the Bell regional holding companies and Japan`s Nippon Telegraph & Telephone Corp., or NTT, re-establish deployment programs for telephony and broadband services over fiber to residential customers. But even with these programs, the fiber-in-the-loop market does not represent a significant percentage of laser and detector sales because fiber-in-the-loop equipment manufacturers are engineering their systems to minimize optoelectronics costs.

For example, the trend in recent U.S. network deployments has been to maximize the number of homes served by a single optical network unit. This approach to using fiber in the distribution network shares the unit`s cost among more subscribers, thereby allowing an optical solution to "prove-in" at a lower cost per subscriber.

Furthermore, the source and detector units being designed-in for near-term fiber-in-the-loop systems are expected to have lower average prices. For example, uncooled, 14-pin dual inline package, 1310-nanometer, Fabry-Perot laser sources in high volume are soon expected to cost less than $100 per unit. This price represents a severalfold decrease in laser cost since the late 1980s, when uncooled lasers were first proposed for loop applications.

The number of lines served by telecommunications carriers with digital fiber-in-the-loop equipment--either fiber-to-the-curb, fiber-to-the-building, or fiber-to-the-home (also known as FTTC, FTTB, and FTTH, respectively)--is projected to reach approximately 4.5 million in the year 2000. This estimate means that the U.S. local exchange carriers, Japan`s NTT and other worldwide carriers will be ramping up to this number of homes from a level of about 0.5 million in 1994.

Worldwide, the telecommunications carriers and the cable-TV operators together will have installations of broadband networks serving tens of millions of homes annually in the mid- to late-1990s. Few of the cable-TV networks, however, are expected to be equipped to provide two-way services to customers initially, even though one-way or broadcast cable-TV networks incorporate a return path for network status and alarms.

Telephone companies and cable-TV companies in foreign countries should follow similar patterns of deployment but will lag behind their counterparts in the United States, probably by at least two or three years. The situation in other countries depends on regulatory, competitive, and economic factors. One exception is Canada, where new network deployment and service markets may track closely with those in the United States.

Telecommunications applications represent several high-volume market categories, including synchronous transmission systems (synchronous optical network, or Sonet, and synchronous digital hierarchy, or SDH) for trunk and high-speed access multiplexing, digital loop carrier, and low-speed asynchronous access multiplexing. A major contributor to the strong growth in transmitter/receiver sales for telecommunications applications through the year 2000 will be the use of high-cost, high-performance, and high-speed modules for trunk applications.

For Sonet/SDH systems, transmitters and receivers are projected to run at 2.5 gigabits per second or faster for intercity applications in almost all developed and developing countries. These systems and lower-bit-rate systems will also be used in metropolitan or short-distance network applications.

The digital loop carrier equipment segment of the telecommunications market is the largest in terms of laser unit volume in the mid-1990s. In 1994, for example, U.S. digital loop carrier equipment manufacturers took delivery of about 45,000 source or transmitter units. Of this volume, about 90% was for domestic installations. And the U.S. market for digital loop carrier equipment is calculated to grow annually at rates just under 10% per year into the late 1990s --a modest growth rate compared with other singlemode applications in telecommunications.

Cable-TV network distribution

Cable-TV industry transmission equipment accounted for just 3% of the singlemode source unit volume in 1994. And this percentage will increase to just 5% in the late 1990s, when the installation of cable-TV and hybrid fiber/coaxial-cable, or HFC, equipment reaches a peak.

The market for fiber-optic components in cable-TV and HFC applications is foreseen to display strong growth through 1997 and then to show moderate growth. This trend should result from a peak in expected installations by U.S. cable-TV operators, as well as the uncertainty in the use of HFC distribution by U.S. local exchange carriers, several of whom, for example, have begun high-volume installations of hybrid fiber/coaxial cable equipment for video and other services.

After 1997, interest in hybrid fiber/coaxial cable for local exchange carrier applications may wane as other fiber-in-the-loop equipment begins to prove in at lower costs, and because the local exchange carriers have more experience in planning fiber-in-the-loop and HFC deployments.

Furthermore, with the investment in digital switching reaching a peak in the mid- to late 1990s, for many major carriers, will have more resources to devote to outside plant and transmission technologies. u

Richard Mack is vice president at Kessler Marketing Intelligence Corp. in Newport, RI.

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