Light Counting released the latest optical communications market forecast report, pointing out that the global optical transceiver module market in 2017-2018 will be another low-growth year after 2019 after two consecutive years of lower-than-expected growth. However, the market CAGR for the 20-year period between 2003 and 2024 reached 14%, as shown in Figure 1 below. What are the drivers of this growth?
Figure 1 | Global Optical Transceiver Module Sales for 2003-2024
Light Counting believes that the reason is not complicated, and it can be seen in the short term from 2019 to 2020:
- China and the United States will reach a trade agreement in 2019;
2, 5G deployment will advance as expected, pulling the demand for wireless pre-transmission and back-transmitting optical devices;
- Next-generation Ethernet modules, including 2x200GbE, 4x100GbE and 400GbE, will enter the batch phase in 2020, while the Ethernet market price will fall to their historical average.
The final point is the most critical factor for market growth in 2020-2024. Ethernet has become the largest segment of the optical transceiver module market, compared to 45% of the total market share in 2016, and is expected to reach 64% in 2024.
Demand for 100GbE Ethernet optical transceiver modules is still very strong in 2017-2018, but the sharp drop in prices has limited sales revenue growth. The left table in Figure 2 shows the standard average price trend per gigabit cost for the overall Ethernet segment in 2016-2024. The table on the right shows the change in price declines in 2011-2024.
Figure 2 | Standardized ASP and Average Price Reduction for Ethernet Optical Transceiver Modules
The standard average price of Ethernet optical transceiver modules has dropped from $6/Gbps in 2016 to $3/Gbps in 2018. Although the price decline in 2020-2024 has stabilized, the standard will still fall to more than $1/Gbps in 2024.
The price decline in 2018 reached 37%, surpassing the 33% decline in 2011. The standard ASP fell even more sharply, although new higher-rate product shipments entered the high-volume phase. In history, there have been cases such as 10GbE in 2011, 40GbE in 2014, and rapid decline in 100GbE prices in 2017-2018. Will the history of 2020-2024 repeat the same kind of things?
The problem is that there are many different types of next-generation products in the current product roadmap. For example, Google is deploying 2X200GbE SR8 and FR8 optical transceiver modules, Amazon plans to use 4×100 DR4, and Facebook is still stuck at 100GbE and plans to use 200GbE next. Other cloud service companies, as far as Light Counting knows, have not yet finalized their deployment plans.
The Light Counting report also presents a new analysis showing an increase in the proportion of unmounted optical transmitters (or dark fibers) in 2017-2018, which are used in the pre- and post-transmission markets.
