JUNE 29, 2009 -- The optical transceiver market contracted 20% quarter-over-quarter and 21% year-over-year, closing at $442 million in sales for Q1 2009, according to figures just released by LightCounting (search Lightwave for LightCounting). Decreasing demand due to the economic slowdown combined with rapid decline in average selling price and aggressive inventory reductions were the main reasons for the market contraction, the market research firm asserts.
The recession initially affected the Ethernet and Fibre Channel segments of the market in Q3 2008, since they are directly tied to corporate capital spending, says LightCounting. The telecom market, particularly the WDM segment, was hit the hardest in Q1 2009, as carriers pushed network projects out to the second half of 2009 and optical equipment vendors reported order delays, in a sharp response to the global market crisis. Sales of the FTTx modules have been the least affected by the recession so far, as FTTx deployments are usually long-term projects and partially funded by local governments, especially in Asia Pacific, Middle East, and Latin America, the report adds.
LightCounting expects Q2-2009 global transceiver sales to be flat to slightly up by 5%, as vendors report increasing order rates and depleting customer inventories. Notwithstanding a tempered quarterly increase in sales for some market segments, year over year decline will probably top 20% in Q2 2009.
With this forecast in mind, it may be too soon to tell yet whether the worst is over, the researchers say. However, imminent recovery is likely to follow a reverse pattern with Ethernet and Fibre Channel markets picking up first, SONET/SDH and WDM segments recovering 2-3 quarters later and FTTx showing a moderate growth through the whole period. Several vendors reported increasing sales of Ethernet and Fiber Channel modules in April and May, so there is a good chance that a tempered recovery in our sector is under way, LightCounting concludes.
LightCounting pointed to Gigabit Ethernet SFP+ transceivers as a bright spot. Sales of these modules are holding ground against the global economic crisis so far, as evidenced by the gradual shipment increases over the last two quarters. "A growing number of SFP+ line cards hitting the market will only accelerate the transition of SFP+ modules in 2009 and beyond -- due to their superior power consumption, smaller size and lower costs needed in data centers," said Enis Iplikci, LightCounting analyst.
Until recently, Cisco was on of the few OEMs pushing SFP+ through its Nexus series switches. However, other major equipment vendors have started releasing platforms with SFP+ line-cards. These companies include Juniper (EX 8216 Ethernet Switch), Extreme Networks (BlackDiamond 8900-series modules and Summit X650 switch), Force10 (ExaScale core switch/router), HP ProCurve (6600 Switch series), and Blade Network Technologies (RackSwitch G8124 Ethernet Switch).
Growing SFP+ shipments for SR, LRM, and LR applications over the last two quarters signals that SFP+ will be deployed as a key 10-Gigabit Ethernet transmission technology in 2009 and beyond -- especially in data center switches and blade servers due to its superior power consumption, smaller size, and cost, LightCounting adds.
The LightCounting June 2009 Optical Transceiver Market Sales Report provides a view of the quarterly changes taking place within the optical transceiver market. This report covers global quarterly transceiver sales by market segments and applications including a quarterly analysis of shipments of more than 100 product categories in SONET/SDH, Ethernet, Fibre Channel, DWDM/CWDM, tunable laser, FTTx, parallel module, and active optical cable markets from Q1 2008 to Q1 2009 by reach, data rate, form factor. This report also discusses profitability of transceiver vendors and offers an assessment of the global economy and its impact on transceiver market segments, prospects, and guidance for the second quarter and CY 2009.