LightCounting: More transceiver consolidation, please

APRIL 7, 2008 -- The future profitability of the optical transceiver industry remains uncertain despite steady growth in revenues, according to the 2008 State of the Transceiver Industry Report from transceiver research company LightCounting (search for LightCounting). Low margins and fierce competition among optical component and transceiver vendors, selling into a consolidated optical networking equipment market, continue to limit profitability, the firm explains.

"Sales of the top ten optical transceiver vendors accounted for more than 80% of the total market in 2007, though the market remains fiercely competitive," states Dr. Vladimir Kozlov, founder, LightCounting. "Fragmentation of the market and diversity of optical technologies are partly to blame for this situation. No one supplier has managed to gain a solid presence across the entire market, yet every single one is trying to diversify. Focusing production on fewer products to improve profitability may not be a bad idea, given the looming economic recession in the United States."

"To date the optical transceiver industry has been largely unaffected by the disruption among carrier and system vendors because the carriers' network transformations -- such as next-generation OSS, service delivery platforms, and IP Multimedia Subsystems (IMS) -- are taking place in the network layers above transport," noted Dr. Roy Rubenstein, research director, LightCounting. "Inevitably, such change must have an impact, and though years of downturn have left technology and industry resources spread thin, if anything, the importance of optical transceiver players as fundamental network enablers will only grow in coming years."

The State of the Transceiver Industry Report's coverage includes optical transceiver industry dynamics, optical transceiver market structure, and the state of the telecommunications industry and its impact on the optical transceiver industry. The examination of industry dynamics spans several market segments including SONET/SDH, Ethernet, Fibre Channel, WDM, FTTx transceivers, and optical interconnects. The report also discusses profitability and diversification of transceiver vendors, their key customers, and suppliers. The report analyzes industry consolidation with sales data reported by leading transceiver vendors, presents different scenarios for imminent industry consolidation, and offers guidance to vendors involved in this market.

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