Optical Components Market

Transcription

1 Optical Components Market ECOC Market Focus 2017 Kevin R. Lefebvre, Ph.D. Principal Analyst Ovum

2 State of the Nation Increase in Data Centers Increase in Mobile 2 Ovum TMT intelligence informa

3 Shipments volume (mn) Optical network drivers continue to catalyze performance and scale 300 4K UHD Growth 80% TV Sets 4K UHD TV 4K of Total Sets 60% % % 0 0% K Video Cloud services Optical Network Growth CRAN to 5G Strong growth for cloud SPs MCC AWS Annualized revenue run rate ($bn) Web-scale networks Web-scale Ecosystems IoT Source: Nokia On a rolling 4Q basis, both Optical networks & components are an uptick 3 Ovum TMT intelligence informa

4 Revenue ($USD bn) Revenue ($USD bn) Leading CSP & ICP Revenue Growth Leading CSP Revenue Growth Leading ICP Revenue Growth $800 $800 $700 $600 $500 $400 $300 $200 $100 KDDI China Unicom SoftBank Comcast China Telecom NTT Group China Mobile Verizon AT&T $700 $600 $500 $400 $300 $200 $100 Baidu Alibaba Tencent Facebook Microsoft Google Amazon Apple $ Leading group of CSPs has grown at a 4% CAGR since 2009 $ Leading group of ICPs has achieved a 4X revenue growth since 2009 Represents a shift in the monetary power within the industry 4 Ovum TMT intelligence informa

5 Revenue ($mn) Submarine optoelectronics market forecast Current build drivers continue momentum More ICP ocean crossing builds New latency optimized routes led by ICP consortium for data center interconnect To Asia and intra Asia connectivity continues to grow Asia Pacific due to geography of islands and peninsulas and due to limited international terrestrial connectivity options More diverse path routes Cable replacement Upgrade business continues steady on existing cables Coherent technology enables more bandwidth for older cables $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $- Subsea Optoelectronics Forecast by region North America EMEA Asia Pacific SCA Subsea growth prospects strong based on additional cables and capacity fill on all existing cables 5 Ovum TMT intelligence informa

6 OC market takes a temporary slide The OC market has taken a step back. China builds in mobile, access, and core networks has slowed in there development Expectations is that China builds will pick up next year In 1Q17, the market reduced by -4.8% sequentially but a 10% increase compared to the year-ago 1Q16. The telecom datacom and access declined by 6% 4% and 3% respectively from 4Q16 Margins are still high but declining Gross margins declined to 30% from a peak of 32% in 3Q16 and 4Q16. Operating margins declined to 12% from their high of 13% in 4Q15. The global OC market is still going strong and after this temporary slump, Telecom, Access and Datacom will pick up and move forward. 6 Ovum TMT intelligence informa

7 Quarterly market share: competition is great Themes Capacity constraints and expansions are ongoing Finisar, Lumentum, Applied Optoelectronics, Neophotonics, Oclaro, etc Demand for Datacom transceivers outweighs supply ROADMs/Metro/Provincial Expansion/China Encouraged by the interest in ROADMs in China but slow to start Verizon is moving ahead with metro expansion Expect CFP2-ACO to pick in China and transition to QSFP Cloud and content providers announces new builds and 100G Microsoft s $680m facility in West Des Moines, Iowa is set to be completed by May 2018 Apple will spend $1 billion to double the size of its data center east of Reno, NV May 2017 Equinix announced the acquisition of 29 Verizon data center colocation facilities April 2017 Applied Optoelectronics 4% Fujitsu Optical Components 4% NeoPhotonics 4% 3Q16-2Q17: $9.8bn market Other 38% II-VI 4% Acacia 5% Finisar 15% Lumentum 8% Sumitomo 6% Oclaro 6% Accelink 6% China, North America, data center, 100G, 200G, flexgrid are still all market drivers Market is divided amongst several players 7 Ovum TMT intelligence informa

8 Telecom losses share to datacom, access steady Decrease in PON revenue but Major upswing in optical component (OC) FTTx PON revenues due to next-gen PON deployments and plans. The PON OC market is forecast to exceed $2.3bn in 2021 when next-gen PON OC revenues will represent more than 90% of total revenues Datacom 100G is here, now and growing rapidly Driven by 100G client side transceivers MACOM has enabled 1.6 million 100G transceivers in 1H17 higher than expected Telecom: CFP2 ACO/DCO Finisar, Neophotonics, Acacia, Fujitsu, Lumentum, Oclaro Mix of 60/40 of DCO/ACO with ACO having limited life span due to the complexity of integration with increasing baud rates 8 Ovum TMT intelligence informa

9 Telecom: sharp decline but future is bright China provincial deployment has slowed CFP2-ACO will pick up and eventually give way to QSFP Finisar Reduction of revenue from Chinese customers by 18% Expects to sell hundreds if not thousand WSS into each China Provincial Oclaro Expect coherent to grow 400G line Side is growing Lumentum Expect revenue to soften as Chinese customers continue to burn off inventory until first quarter of fiscal 2018 Shipped first of several new advanced ROADMs specifically designed for China 9 Ovum TMT intelligence informa

10 Datacom: 100G is flying off the shelf MACOM Data Center was up 29.7% this quarter and 300% year over year Enabled 1.6 million transceivers in 1H17 Finisar 10OG QSFP-28 Transceivers revenue increased 30% over the prior quarter Oclaro QSFP28 sales doubled in Q4 Lumentum Revenue from 100G QSFP28 transceivers nearly doubled sequentially in the fourth quarter. Applied Optoelectronics Data center revenue in the second quarter grew 141% 10 Ovum TMT intelligence informa

11 Access: Set for growth Large 10G PON network upgrades are underway this year with additional upgrades planned through OC PON revenues are forecast to exceed $2.3bn in 2021 up from $1.2bn in Ovum TMT intelligence informa

12 Margins are starting to slid downward Margins are still high but turned downward High margins due to New products yielding higher margin Shortage of supply Larger volumes Photonics Integration High margins allow for Product innovations Re-engineering Risk that margins will continue to decrease 12 Ovum TMT intelligence informa

13 Component supplier s everyday challenges A lot of component suppliers and more coming Large raw material suppliers but optical component suppliers have low volumes Internet Content Providers Optical Network Vendors Carriers Public Photonics Integration New Materials: e.g.metamaterial 13 Ovum TMT intelligence informa

14 Wheel of Client Module Fortune: 14 Ovum TMT intelligence informa

15 Datacom 15 Ovum TMT intelligence informa

16 Data Center Market Watch: 100G market-the switch has turned on 100G orders in 2016 and took flight in 2017 Ovum expects web-scale greenfield data center to deploy 100G fabric The market is supply constrained Retro-fit in the existing base is a sizeable opportunity WAN traffic: Pbps Transceivers Intra-DC (000 s) Servers: millions Data center space: Millions square feet Capex $billions Next generation data centers Server ports 10Gbps 25-50Gbps 100Gbps Server footprint Intra-data center switch fabric WAN DCI traffic 1 server = 1RU 40Gbps, TOR-Leaf- Spine 10G-100G 4 servers per Sled Gbps, TOR-Leaf-Spine 100G-200G-400G- 400G+ X servers per Sled 400Gbps, TOR bypass Terabits and beyond Web-scale core Data Center builds continue into 2017 and next generation data center architectures begin to deploy 16 Ovum TMT intelligence informa

17 Revenue ($bn) Data Center Interconnect: A growing portion of the WDM market 2016 WDM Market: $11.7bn 2016 DCI Application: $3.4bn Other WDM applications 71% DCI Application 29% Global DCI Forecast by region North America EMEA Asia Pacific SCA Subsea $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $ Data center interconnect projected to be a major driver of optical network growth As the world shifts to the cloud model In dark fiber constrained regions, CSPs have a significant opportunity Asia Oceania DCI growth projected to exceed the global average 17 Ovum TMT intelligence informa

18 100G Transition to PAM4 DR1 Next couple of years 100G PSM4 will continue to grow 100G CWDM4 to continue to grow Small volumes of PAM4 DR1 ~2020 timeframe we see a shift from CWDM4 and PSM4 to PAM4 Cost is key! PAM4 could be <$200 which would be challenge for CWDM4 to get there BUT (!) PAM4 has to be price competitive Flattening of 100G volumes due to 400G Don t forget about 200G if 400G is delayed 18 Ovum TMT intelligence informa

19 400G is coming to take over 100G will continue to grow for the next couple of years 200G will provide a transition to 400G Timing is key!!! 400G will ramp up fast, taking market share from 100G Timing is key!!! Delays in 400G will allow 100G and 200G to last longer 19 Ovum TMT intelligence informa

20 Optical Components Market Summary Seeing downturn continue but expect upward trend in 3Q17 Technology continues to lead: Flexgrid the new norm CDC will begin with leaders and diffuse in time More Photonics Integration Coherent migration down towards data center Intra data center 100G is ramping up and will continue Questions are being asked on where is 400G and 800G and when will determine 200G rollout Client side CFP2-ACO and CFP2-DCO arepicking up WAN 100G at scale, 200G beginning and ramping Expansion of capacity is ongoing Margins are decreasing but still high 20 Ovum TMT intelligence informa

21 Appendix 21 Ovum TMT intelligence informa

22 Appendix Methodology The data for this report was collected through supplier surveys and interviews. In addition, the forecast was crosschecked with Total OC Forecast Spreadsheet: and the DCI is reshaping optical networks and fueling component demand report. Further reading Total OC Forecast Spreadsheet: , TE (November 2016) 40G, 100G, and 200G OC Forecast Spreadsheet: , TE (November 2016) Market Share Spreadsheet & Analysis: 3Q16 Optical Components, TE (December 2016) DCI is reshaping optical networks and fueling component demand, TE (September 2016) Author Kevin Lefebvre, Principal Analyst, Optical Components Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at consulting@ovum.com. 22 Ovum TMT intelligence informa

23 Copyright notice and disclaimer The contents of this product are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa Telecoms and Media Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this product are the trademarks, service marks or trading names of their respective owners, including Informa Telecoms and Media Limited. This product may not be copied, reproduced, distributed or transmitted in any form or by any means without the prior permission of Informa Telecoms and Media Limited. Whilst reasonable efforts have been made to ensure that the information and content of this product was correct as at the date of first publication, neither Informa Telecoms and Media Limited nor any person engaged or employed by Informa Telecoms and Media Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard - readers assume full responsibility and risk accordingly for their use of such information and content. Any views and/or opinions expressed in this product by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa Telecoms and Media Limited. 23 Ovum TMT intelligence informa