According to market-related survey data, sales of optical modules for large data centers in 2018 are likely to offset the decline in demand for system applications from telecom operators. Therefore, the overall decline in optical module sales in 2018 will
According to market-related survey data, sales of optical modules for large data centers in 2018 are likely to offset the decline in demand for system applications from telecom operators. Therefore, the overall decline in optical module sales in 2018 will be limited to less than 3%. Meanwhile, LightCounting, a market research firm, also points out recent growth opportunities in its latest report.
Market research companies point out that in the past two years, the demand for software telecommunications modules by Chinese systems companies such as Huawei and ZTE has weakened. Both companies suffered losses from excess inventory in 2017, but our optical module suppliers pointed out that even if these inventories were reduced, demand did not increase. Of course, the dispute between ZTE and the U.S. Department of Commerce is also one of the reasons. ZTE is expected to cut its spending on optical modules by nearly 20% to 30% this year due to the US ban. LightCounting believes that the ban has had a ripple effect on global network construction because operators are waiting to see what the end will be.
At least partly because of ZTE's experience, the two systems companies and the Chinese government have implemented a policy to further build and develop domestic optical technology capabilities, the market research company said. These policies certainly do not bode well for optical module suppliers seeking a major rebound in the Chinese market.
However, cloud networks and large data center operators should continue to be a powerful source of revenue for optical modules. Demand for Fiber 100GE Ethernet modules remains strong (although prices have fallen), while some operators have begun to deploy faster devices. For example, Google has begun to launch a 2*200GE optical module, which is expected to continue deploying next year. Overall, LightCounting predicts that cloud operators'demand for 200 GbE, 2*200 GbE and 400 GbE optical modules will grow from $2.3 billion in 2018 to more than $6.8 billion in 2023. The market research company pointed out that the announcement of mass production of Tomahawk 3 Ethernet switches also helped to promote this trend.
There are other potential growth areas, of course. The demand for optical modules such as FTTx, wireless networks and optical interconnection is also strong. Applications such as 5G should boost demand for 25G and WDM forward optical devices; in fact, sales of such devices have begun to increase this year. Broadly speaking, WDM is a growing application. LightCounting said it has improved its sales forecast for CWDM and DWDM modules in 2019 - 2023, partly because shipments of 10G CWDM optical modules have exceeded expectations this year. Meanwhile, the bulk shipment of 100G DWDM module will begin early next year.
LightCounting regards the improvement of WDM market as a new round of upgrade cycle of DWDM system. LightCounting points out that strong sales of pumped lasers in fiber amplifier applications since the second half of 2017 are evidence of this potential event. So far, the surge in sales of Wavelength Selection Switches (WSS) modules is another sign that the market is picking up.
Overall, all the above factors are enough to show that optical module sales will begin to return to normal next year.
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