Doubling down on its statement last week that this year’s forecast for optical transceiver sales is “not great” (see “2020 optical transceiver sales expectations ‘not great’ but rebound likely quick: LightCounting”), LightCounting says that the current pandemic-induced recession will dampen purchases of Ethernet optical transceivers enough to reduce the strength an expected 2020 rebound. The market research firm currently is still forecasting a bit of an uptick this year in its latest High Speed Ethernet Optics report (see chart above), but uncertainty regarding the depth of the recession and how long it will last makes LightCounting researchers cautious.
Ethernet optical transceiver sales declined overall in 2019, mainly because of a very week six months to start the year (see “Ethernet transceiver sales to decline 18% in 2019: LightCounting”; the market research firm now states that sales declined 17%). LightCounting notes that the market picked up in the second half, even setting a quarterly record in the fourth quarter. This momentum had led to expectations that 2020 would see a significant improvement in Ethernet transceiver sales.
That was before the COVID-19 coronavirus appeared – first and strongly in the world’s largest market, China. Citizens there are now going back to work, including in factories that produce Ethernet optical transceivers. The Chinese government has made networking infrastructure projects for 5G and cloud data centers a priority. LightCounting describes the demand for Ethernet optical modules from Alibaba, Baidu, Bytedance, Tencent, and many other data center operators in China as “very strong.”
Meanwhile, as the pandemic has spread, the demand for the services mega data center operators elsewhere in the world supply has increased, making such companies essential businesses free to conduct business as close to normal as possible. That includes investing in their infrastructures. LightCounting currently expects sales of 2x200GbE and 4x100GbE modules to Google and Amazon will continue to climb this year, for example.
While all this would seem to be optimistic news for Ethernet optical transceiver suppliers, LightCounting believes that even data center operators and telecommunications services providers will not prove permanently immune to an overall economic slump. And when their revenues inevitably dwindle, they’ll spend less on infrastructure – perhaps choosing only to add capacity to existing networks rather than build new ones. This factor could dampen the demand for optical transceivers operating at greater than 100 Gbps, LightCounting theorizes. Therefore, the lifecycles of legacy products, including 40GbE and 100GbE, will be extended by a year or so, says the market research firm. However, newer versions of 100GbE transceivers, such as DR1 and FR1, will do well in this context, the analysts believe.
The High Speed Ethernet Optics report analyzes the impact of growing data traffic and the changing architecture of data centers on the market forecast for Ethernet optical transceivers, particularly high-speed modules. It includes projections for sales of these products in 2020-2025. The report offers a forecast for more than 50 product categories, including 10GbE, 25GbE, 40GbE, 100GbE, 200GbE, 2x200GbE, 400GbE, and 2x400GbE, sorted by reach and form factors. It provides a summary of technical challenges faced by high-speed transceiver suppliers, including a review of the latest products and technologies introduced by leading suppliers.