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Optical comms market emerging first and fighting fit from Covid-19

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LightCounting has released an updated forecast for the optical communications market, which provides some tentatively positive and reassuring reading.

The Optical Communications Market Forecast is put together with inputs including an analysis of the business and infrastructure spending of the top 15 service providers and of the leading internet companies, as well as sales data from 2016 to 2019 for more than 30 transceiver vendors, including more than 20 vendors that shared their confidential sales information with LightCounting. 

Providing a backdrop, the report from the specialist industry analyst firm states that the market entered into 2020 with very strong momentum. 

Demand for DWDM, Ethernet, and wireless fronthaul connectivity had surged at the end of 2019, leading to shortages in the supply chain. In the first quarter of this year,  the Covid-19 pandemic forced factories to shut-down globally, which caused ‘a whole new level’ of stress on the supply chain.

Most component vendors understandably reported lower than expected revenues for Q1, and the guidance given for Q2 was uncertain. We started to see factories in China reopening early last month, with businesses in Malaysia and Philippines currently closed (at the time of going to press). Businesses based in Europe and North America are also beginning to reopen. 

LightCounting’s market forecast for sales of optical transceivers, works on the assumption that the industry will reopen in the second half of the year, with suppliers of optical components and modules returning to full capacity by Q4. 

Demand for optical connectivity in telecom networks and data centres is even stronger now than at the end of last year, but some network and data centre construction projects are being delayed because of the pandemic. Transceiver suppliers will not be able to meet their original production plans for this year, but, said LightCounting, steep declines in product prices, which limited market growth in 2018-2019, will likely moderate in 2020.

A modest growth in sales of optical transceivers is anticipated this year, with 24 per cent growth in 2021 to satisfy demand for more bandwidth across many applications. Sales of optics for wireless fronthaul and backhaul will increase by 18 per cent and 92 per cent, respectively, driven by 5G upgrades in China, which remain on target for this year. 

Sales of FTTx products and active optical components will grow by double digits in 2020, also driven by deployments in China. Ethernet and DWDM market segments will return to double digit growth in 2021 to catch up on delays of this year.

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