Showing posts with label Lightcounting. Show all posts
Showing posts with label Lightcounting. Show all posts

Wednesday, October 2, 2019

LightCounting: High Speed Ethernet Optics Report

The market for Ethernet optical transceivers is expected to decline by 18% in 2019, which will be the steepest decline in the recorded history of this market, according to a new report from LightCounting.

Global sales of Ethernet optical transceivers increased by 16% CAGR in the period from 2004 to 2018, including a 5-year streak of 27% CAGR in 2012-2017. This accelerated growth was driven by deployments of optics in mega datacenters. The growth streak was started by Google deploying 10GbE transceivers in 2007-2008 and gained scale in 2012-2017 with the adoption of 40GbE and 100GbE transceivers.

LightCounting suggests that this market segment will post a 22% CAGR in 2019-2024, after a reset in 2019, driven by sales of next-generation products and continuing demand for 100GbE optics.

Several factors contributed to a slowdown in the market growth last year and a decline in 2019:

  • Transition to next-generation products takes longer than expected,
  • 100GbE prices reached new lows in Q1 2019 and reset expectations for the pricing of the next-generation products,
  • The slowdown in Cloud spending on optics deployed inside mega datacenters.
  • There is a lot of economic uncertainty related to escalating trade war between China and the US. The trade war has already impacted the economy in China and Chinese Cloud companies have lowered spending on high-speed optics as a result. More conservative infrastructure spending of US-based vendors aligns to the uncertain macro-economic situation.

https://www.lightcounting.com/News_100119.cfm


Thursday, July 18, 2019

Top 5 Clouds account for 65% of optical transceivers for data centers

Alibaba, Amazon, Facebook, Google and Microsoft accounted for more than 65% of all Ethernet transceivers sold for applications in mega data centers in 2018, according to a new report from LightCounting.



This market segment grew by more than 50% in 2016 and more than 70% in 2017. However, the demand for optics from some of these key cloud customers started to slow down in the second half of 2018. The report cites several factors contributing to the slowing demand for optics from the cloud companies in 2019, including:

  • Excess inventory of 100GbE accumulated by the end of last year.
  • Transition to new switches based on Tomahawk 3 ASICs and some constraints in the supply chain related to it.
  • Uncertainty in continuing economic growth and escalating trade war between the US and China.
  • New regulations and penalties faced by the leading Cloud companies in the US and Europe related to data privacy and monopolistic practices of these very large vendors.

LightCounting says the first two issues in the list above are temporary and these may be resolved in the second half of 2019, but the third and especially the fourth one may limit growth of the largest cloud companies in the years to come.

Nevertheless, LightCounting expects that demand for optics from the cloud companies will return to growth in 2020-2024. Sales of new products including 100GbE DR1, 200GbE, 2x200GbE and 400GbE DR4 (including 4x100GbE) modules will lead this growth. Several new DWDM and AOC products will contribute to this trend.

https://www.lightcounting.com/News_071819.cfm


Tuesday, July 11, 2017

LightCounting sees demand for DCI as mega data centres go metro-regional

LightCounting forecasts in its latest Mega Datacenter Optics report that there will be growing demand for high bandwidth interconnectivity as Alibaba, Baidu and Tencent move to a distributed network of data centres in metro areas due to restrictions on building larger facilities in China, while mega data centres operated by the big western cloud companies are transforming into metro-regional clusters.

More specifically, LightCounting notes that Amazon recently disclosed that it operates 25 data centres interconnected with 3,500 fibres in Ashburn, Virginia, while Facebook has expanded its mega data centres by building new facilities near to existing ones, and Microsoft has announced it intends to build more metro and regional data centres to reduce the time involved in planning new facilities.

The research firm states that most of these facilities will be interconnected using DWDM technology, thereby expanding the market opportunity for suppliers of data centre interconnect (DCI) equipment to the cloud companies. Such customers are expected to be early adopters of 200 and 400 Gbit/s DWDM technology.

In terms of vendors, LightCounting notes that Cisco recently introduced the term 'fog computing', referring to adding compute and storage capabilities in facilities located closer to enterprises to facilitate migration of private data centres to the cloud. Meanwhile, Equinix and other colocation providers are increasing their business with enterprise customers as they migrate to the cloud.

In addition, cloud companies are beginning to use colocation data centres to extend reach closer to the end users. LightCounting notes that storage (or caching) of popular videos in local data centres or the central offices of service providers was necessary to meet rising demand for video on demand, while new applications such as SnapChat and Instagram are creating the need to support these applications locally to reduce the load on long haul networks.

The research firm adds that in the future applications such as self-driving cars and IoT will require the use of edge data centres to deliver low latency performance. All of these requirements are driving a transition in the way data centres are deployed and operated.

Tuesday, June 20, 2017

LightCounting: 100G QSFP28 up 40% to >$250m in Q1

LightCounting, in its latest Quarterly Market Update Report, finds that demand for 100 Gigabit Ethernet optical connectivity from operators of mega-data centres is continuing to exceed supply, and estimates that sales of QSFP28 SR4, PSM4, CWDM4 and LR4 transceivers rose 40% in the first quarter to over $250 million.

The research firm reports that overall sales of Ethernet, SONET/SDH, CWDM/DWDM, Fibre Channel, FTTx, wireless fronthaul transceivers and active optical cables (AOCs) and embedded optical modules (EOMs) declined 5% sequentially in the first quarter, but increased 15% year on year. It forecasts that weak demand for optics in China will result in a further 3-5% decline in the sales of these products in the second quarter, with sales of tunable lasers, modulators and coherent receivers set to decline by 20% or more.

More specifically, LightCounting reports that suppliers of optical components and modules experienced a sharp fall in orders from Huawei and ZTE in March 2017, after ZTE reached a settlement with the U.S. government relating to an investigation into violations of export sanctions to Iran. It notes that the investigation, launched in 2016, could have restricted ZTE's access to optics from U.S.-based suppliers, so that the vendor may have accumulated excess inventory of such products.

While Huawei was not formally charged with such violations, the research firm believes that it may also have started to build up reserves of key components from U.S. suppliers to avoid potential disruptions. When the settlement was reached, both companies may have started to use components from their reserves and reduced purchases of new products.

LightCounting states that if this view is correct, demand for optics in China would be expected to return shortly as excess inventory is depleted. It adds that there were signs of rising demand for optical components in June, which is expected to continue in July and August.

LightCounting notes that ZTE and Huawei both reported higher sales of optical networking equipment in the first quarter and issued strong guidance for the current quarter. It also cites Chinese service providers as making ongoing investments in optical networking even as overall capex is reduced in 2017. Additionally, there are multiple new projects scheduled for the second half of the year in China.


Finally, LightCounting reports that shipments of 200 Gbit/s DWDM ports reached a new record in the first quarter, while DWDM solutions enabling 400 Gbit/s transmission on a single wavelength are an area of focus. In addition, the development of 200/400 Gigabit Ethernet transceivers is also underway.


Wednesday, May 31, 2017

LightCounting reports optical component supplier profitability up to 9% in '16

In its latest State of the Optical Communications Industry report, market research firm LightCounting finds that in 2016 profitability for optical component and module suppliers rose substantially to 9%, compared with around 2% in 2015 and 0% in 2014, having previously dropped from 5% in 2010 to negative 2% in 2012, recovering to 2% in 2013.

LightCounting reports that the sales-weighted average profitability of publicly-traded optical component and module suppliers reached 9% in 2016, exceeding the average net profitability of communication service providers (CSPs) and suppliers of networking equipment, their main customers. Meanwhile, profit margins reported by Internet content providers (ICPs) and semiconductor IC vendors remained higher in 2016 at around 17% and 13% respectively.

The research firm notes that many ICPs have recently become customers of optical component and module vendors, which contributed to the financial improvement for the segment.

In monetary terms, aggregate net income for the publicly-traded optical component and module vendors tracked by LightCounting progressed from a $22 million loss in 2014 to a $72 million gain in 2015 and positive $422 million in 2016, driven by large increases at vendors Acacia, Finisar, Lumentum and Oclaro.

LightCounting states that of the ten companies that were operating independently in 2016, nine reported positive net income for the calendar year, while NeoPhotonics essentially achieved breakeven. In addition, Applied Optoelectronics and Innolight reported significant profits, with most of their business conducted with the cloud companies.

Meanwhile, profitability for the network equipment vendors declined by 26% in 2016 to around 9% from 12% in 2015, having risen steadily from 5% in 2012. Lower mobile network spending with the completion of major LTE deployments in China and North America in 2015 was the main factor affecting revenue growth.

More specifically, LightCounting reports that the largest changes in net income by vendor were reported by Nokia (with a $2.4 billion change) and Ericsson ($1.4 billion change), both of which are heavily dependent on mobile RAN equipment sales. Cisco and Brocade also reported significant declines in net profits of $500 million and $232 million, respectively, while Arista and Ciena bucked the trend and reported higher net income in 2016.

The research firm notes that demand for 100 Gigabit Ethernet optics exceeded supply in 2016, limiting price reductions and competition and helping optics suppliers to reach record profitability, with a number of vendors also reporting record revenue for multiple quarters in 2016.


However, LightCounting forecasts that weak demand for optics in China will lead to slower market growth in 2017, negatively affecting supplier's profitability, although demand from cloud companies is expected to remain strong, helping to keep profits significantly above breakeven in 2017. It also expects profitability to improve further in 2018 with the return of demand in China.

Wednesday, May 17, 2017

LightCounting expects Ethernet transceivers to drive silicon photonics market

LightCounting, in a research note on the silicon photonics (SiP) market, has reiterated its forecast for the product segment based on updated projections for sales of Ethernet and DWDM transceivers, specifically finding that while the share of SiP products in the total market has not changed significantly the product mix has, and noting that the success of SiP will be more dependent on Ethernet transceivers and less on DWDM modules.

LightCounting notes that projection for sales of active optical cables (AOCs) and embedded optical modules (EOMs) have not changed since its AOC-EOM report of December 2016, with demand for AOCs in early 2017 consistent with forecasts, although stating that the EOM market was very slow in the first quarter. However, it expects Intel to start shipping SiP-based EOMs in 2018 to support its latest supercomputer project.

The research firm notes that EOMs and co-packaged optics/ASICs were key topics at OFC 2017. In particular, supporting its long term forecast for SiP-based EOMs LightCounting cites Ayar Labs, which announced its first product - SiP-based EOMs – designed to sit adjacent to complex ASICs to enable connectivity with network interface cards. The first chip is designed to support 3.2 Tbit/s of capacity. Such SiP-based solutions are able to operate at the high temperatures required for EOM applications.

In terms of optical transceiver technology, LightCounting reports that in 2016 the market of over $6 billion was largely made up of InP devices, split roughly equally between discrete and integrated InP products and accounting for around $4.5 billion of the total. The SiP market segment accounted for around $500 million, with the remainder accounted for by integrated and discrete GaAs devices.

In 2017, the SiP-based optical transceiver market is forecast to rise to around $700 million, in a total market of approximately $7 billion, growing to just over $1 billion in 2019 and around $2.2 billion by 2022, when the total optical transceiver market will reach around $11.5 billion.

LightCounting observes that while SiP technology has been proven in terms of technical performance, it remains to be seen whether it can help the optical components industry move towards sustainable profitability.


The research firm notes that in this context the performance of Acacia has been encouraging, although the company's products are neither high volume nor low cost. In addition Luxtera, whilst a privately held company, is believed to have had a good 2016 and likely gaining share in the PSM4 segment based on the first quarter earnings report of Applied Optoelectronics.


Tuesday, May 2, 2017

LightCounting reports record optical networking market in '16

Market research firm LightCounting finds in its latest Optical Communications Market Forecast report that while demand for optical networking equipment, modules and components attained record levels in 2016, the market was weak in the first quarter of 2017.

LightCounting reports that Huawei led the market in terms of growth in 2016, but significantly reduced purchases of optics in the first quarter of 2017 and forecasts that this weakness is likely to continue in the current quarter. However, the research firm believes that this a temporary slowdown in the optical market.

Looking at data for overall capex of the Top 15 service providers globally, LightCounting notes a sharp decline in Asia in 2016 due to lower spending by the big three Chinese operators, while spending in the U.S. and Europe remained stable versus 2015. Even so, 2016 was a record year for optical communications equipment revenue, which typically accounts for around 10% of service provider capex.

China

China Mobile was the largest consumer of optics in 2016 and added 30 million FTTH subscribers and deployed more than 50,000 ports of 100 Gbit/s DWDM optics into its core network. In addition, upgrades of China Mobile's metro and metro access networks drove demand for 10 Gbit/s optical components and modules. LightCounting notes that while some upgrade projects were completed in 2016, many are ongoing.

The research firm also cites a presentation by China Mobile at OFC 2017, in which the operator said that traffic growth rates in its network rose from 46% in 2013-14 to 88% in 2015-16, compared with a growth global rate of around 30%. Therefore, China Mobile, along with China Telecom and China Unicom, are expected to continue their high levels of spending to address above average traffic growth. LightCounting states that the capex-to-revenue ratio for Chinese service providers is around 25%, compared to 15% for all other operators.

LightCounting estimates that deployments of 100 Gbit/s DWDM ports in China in 2016 translate to a 70% increase in network bandwidth, and predicts that Chinese service providers will increase bandwidth in DWDM networks by a further 40% in 2017. However, it believes that deployments will increase in 2018 to keep pace with traffic growth.

Cloud DCI

Regarding DWDM deployments in the cloud/data centre interconnect (DCI) and enterprise segments, LightCounting observes that while this is a relatively small market in terms of total bandwidth, it is growing much faster that the service provider segment. As a result, bandwidth demand from cloud companies connecting data centres is expected to be very high in 2017.

LightCounting notes that Amazon and Facebook report that traffic inside their data centres is increasing by 100% annually. While growth in traffic between data centres is expected to be slower, based on the rate of construction of new data centres the research firm predicts 100% bandwidth growth for DCI traffic 2017. This increase in DWDM bandwidth demand for cloud DCI is expected to compensate for lower demand in China.

Friday, March 31, 2017

LightCounting Forecasts Optics Sales to top 4 ICPs

LightCounting, in its latest High-Speed Ethernet Optics report, finds that demand for Ethernet optics from leading Internet content providers (ICPs) continues to rise, with sales to the Top 4 ICPs - Amazon, Facebook, Google and Microsoft - forecast to increase from $0.5 billion in 2016 to $1 billion in 2017 and nearly $2 billion by 2022, representing around 30% of the global market for Ethernet transceivers.

LightCounting notes that supply shortages for 100 Gigabit Ethernet optics limited market growth in 2016, as vendors worked to ramp production. The research firm projects that, based on estimated manufacturing capacity for the leading suppliers of optics in 2017, demand will continue to exceed supply until 2018. Meanwhile, it expects volume shipments of 200 and 400 Gigabit Ethernet transceivers for applications in ICP mega-data centres will commence in 2019 and 2021, respectively.

Broken down by technology, LightCounting forecasts that the 40 Gigabit Ethernet segment will continue to decline having peaked in 2016, while sales of 100 Gigabit Ethernet solutions will continue to grow rapidly and peak at around $1 billion by 2019. For the 200/400 Gigabit Ethernet segment, it projects that sales will ramp from 2018 to reach around $200 million in 2019 and approach $1.2 billion by 2022.

LightCounting's forecast is based on a correlation between the growth rate of traffic inside mega-data centres and the bandwidth of optical transceivers sold into the market segment, while Amazon and Facebook recently stated that traffic in their facilities is increasing at a rate of around 100% per year.

Meanwhile, data on transceiver sales indicates that the top 4 ICPs increased bandwidth of optical connectivity by 70% in 2016, which is consistent with reported shortages in supplies of 100 Gigabit Ethernet optics. For 2017, LightCounting expects that bandwidth will increase by 90% as supply chain shortages moderate.

For the period 2018 to 22, LightCounting's projections assume that traffic growth in mega-data centres will decline gradually, while ICPs will find ways to use optical connectivity more efficiently. Even so, the research firm predicts that the global market for Ethernet optics will increase by 18% annually and exceed $6 billion by 2022.

http://www.lightcounting.com/News_033017.cfm

See also