Yes, confirms IHS Markit's Heidi Adams, senior research director, transport networks,the excitement around optical data center interconnect (DCI) is more than just hype. Sales of DCI gear, principally to internet content providers (ICPs) and enterprises, grew 49% in 2016 to reach $1.9 billion. And Adams expects that figure to expand at a five-year compound annual growth rate (CAGR) of 18% to hit $4.5 billion by 2021.
Adams notes that sales of purpose-built DCI systems represented only 8% of the market last year – but the $154 million spent on such platforms in 2016 represented a year-on-year boost of 285%. "Traditional" DCI equipment sales also grew strongly at 41% last year. As the graphic above illustrates, both segments should enjoy success during the forecast period, with the purpose-built equipment growing in market share to nearly 25%.
The data comes from IHS Markit's latest DCI, Optical Transport Network (OTN) and packet-optical hardware report, which shows both segments saw revenues expand as well – although OTN sales would have been even greater were it not for increased demand for such "OTN-free" systems such as the new DCI platforms and WDM-based equipment for CPRI fronthaul.
Despite the fact that sales of OTN-enable gear rose 8% to $10.7 billion in 2016, last year marked a reversal of OTN's dominance in WDM systems sales that should continue going forward, Adams expects. She notes that OTN transport and switching capabilities were de facto features within all new WDM equipment up until 2016. As a result, nearly 80% of all optical equipment revenue and 90% of all WDM equipment sales last year comprised OTN-capable equipment.
However, the rise of the ICPs as a market factor and the fact that they don't need OTN opens sales opportunities for systems without OTN capabilities. Adams therefore believe that the percentage of sales related to OTN-enabled optical equipment will peak in 2019 and decline thereafter.
Meanwhile, sales of packet-optical transport systems (P-OTS) grew 6% in 2016 to $2.2 billion. As such systems can play a role in DCI, Adams expects P-OTS sales to continue to grow during the forecast period.
The biannual IHS Markit DCI, OTN, and packet-optical hardware report covers worldwide and regional vendor market share, market size, forecasts through 2021, analysis, and trends for OTN transport and switching hardware, packet-optical transport systems, and data center interconnect equipment.
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