LightCounting: advanced optics boost 2016 market forecast

The market for optical components and modules has completed its sixth consecutive year of growth, with growth averaging 14 per cent in the period 2010-2015, according to the latest report from market research firm LightCounting.

The growth rate in 2015 was 15 per cent. Although this represents a slowdown compared to the previous year when the market grew 25 per cent, sales of optical components and modules are doing well compared to the rest of the optical hardware market.

Sales of optical networking equipment have remained stubbornly flat over the last few years and growth projections for this market are modest, the market research firm says.

The spending of the 15 leading network operators is set to drop in 2016, significantly in the case of the Chinese operators. LightCounting forecasts that capex will be down 7 per cent to $178 billion dollars in 2016.

Meanwhile, LightCounting’s Internet Index companies are expected to spend between $43 and $48 billion on servers, networks, and other infrastructure in 2016, up slightly from $42.6 billion in 2015.

“Sharp declines in sales of legacy hardware and increasing use of white boxes and pluggable optics by end users dampen future prospects for the equipment suppliers,” the company explains. “Demand from the cloud customers does brighten up the picture, but whether equipment suppliers can capitalise on this opportunity remains to be seen.”

In contrast, the demand for optical connectivity will remain strong despite the declining capex of telecom network operators and lower than expected growth in infrastructure spending by cloud companies. Optics will take on a larger slice of the connectivity pie as data rates go up.

The increasing complexity of high-speed optics also translates to higher product pricing, says LightCounting explains. This will boost the revenues of component suppliers, even while the advances offer cost reductions to end users in terms of dollars per gigabit of bandwidth.

A particularly bright spot in 2015 was sales of FTTx transceivers and bi-directional optical subassemblies (BOSAs), which were up by a staggering 58 per cent. However, the FTTx segment is subject to demand for these products in China, which tend to fluctuate wildly.

Excluding the FTTx and wireless segments, the global optical transceiver market was up 11 per cent in 2015, with a compound annual growth rate of nine per cent over the six-year period 2010-2015.

LightCounting projects that the overall market for optical components and modules will see 18 per cent growth in 2016 and 12 per cent CAGR over the next five years.

However, but this forecast hinges on the adoption rates of several next-generation technologies including 100 Gigabit Ethernet and 16G Fibre Channel optics, flex-grid wavelength selective switch (WSS) modules and 25G line rate active optical cables (AOCs) and embedded optical modules (EOMs).


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