CIR: 40/100-GbE market to net $4.3 billion by 2016

JANUARY 15, 2008 -- While the initial demand for the new networking speeds will come from large data and switching centers, CIR believes that the impact of the IEEE's 40/100-Gigabit Ethernet standards will be felt throughout the network.

JANUARY 15, 2008 -- The IEEE's efforts to create 40- and 100-Gigabit Ethernets (40/100 GbE) will result in $4.3 billion in annual revenues by 2016, according to a new report from CIR. While the initial demand for the new networking speeds will come from large data and switching centers, CIR believes that the impact of these new standards will be felt throughout the network.

The report examines key trends, including the following:

No more fighting and no more SONET: CIR says the new Ethernet standards will mark the end of the "cold war" that has existed between the data communications and telecommunications industries since the 1980s. In the future, Ethernet will lead the way in terms of speed, offering the highest data rate formats available. The ITU will follow by encapsulating these formats into its own Optical Transport Network (OTN), which will gradually replace SONET/SDH. This new stability in the standards-making process will reduce the risk of investment in new chips and optical components needed for the next leap forward in networking to occur.

40 Gbits/sec brings the next network nearer: The near-term potential for next-generation networks has increased considerably now that the 40-Gbit/sec option has been introduced, since it can be built with today's laser and modulation technologies and existing MSAs, say analysts. There is already considerable pent up demand from power users in large data centers, high-performance computer environments, and Internet exchanges who today are using 10-Gbit/sec link aggregations (LAGs.) These users are expected to make a rapid move to 40 Gig server ports once these become available. According to CIR's report, the market for 40-GbE is expected to reach $3.1 billion by 2016.

It's all about servers: Although the new Ethernet standards will impact every segment of the network from long-haul to interconnect, the initial demand thrust is expected to come from servers, which will account for just over 40% of the 40/100 GbE market by 2016. Much of the current standards activity for next-generation Ethernet is being carried out with servers in mind.

Still seeking 100 Gbits/sec: Even with 40 GbE, there will still be a need for 100 Gbits/sec, especially for switch connections, which will represent half of the 100 GbE market in 2016.

Preparing for the next wave: CIR says that components and modules firms are preparing for the next wave in networking. Among the signs are 1) a new enthusiasm for InP-based optical integration; 2) a proliferation of new modulation schemes, most notably the recent introduction of PolMux DPQSK; and 3) serious discussion of new MSAs, especially the QSFP MSA, which CIR believes is the most likely candidate for both 40 and 100-Gig transceivers.

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