LightCounting released its May 2021 report on the state of the optical communications industry.

The global optical communications industry supply chain may be divided into two, and most of the production will be carried out outside of China and the United States, where labor costs are too high. Mature industries are often dominated by three large companies. This “three rules” increases the stability of the market, because if company C becomes too aggressive, company A and company B can unite.

Chinese optical suppliers began to transfer some of their manufacturing to other Asian countries to avoid US tariffs and continue to support their customers in the United States. Huawei and many other Chinese companies on the “US Entity List” are investing heavily in the development of local optical and electronic supply chains. An industry insider interviewed by LightCounting commented that “the entire country (China) is working around the clock to ensure that Huawei has enough IC chips.” The optoelectronics industry roadmap formulated by China a few years ago is more important than ever.

By 2020, most Japanese and American suppliers have withdrawn from the market, and the ranking of Chinese suppliers represented by InnoLight has improved. The list now includes Cisco, which completed the acquisition of Acacia in early 2021 and also completed the acquisition of Luxtera in a few years. Huawei is now also included because LC changed its policy of excluding modules manufactured by equipment suppliers from its analysis. Huawei and ZTE are currently the leading suppliers of 200G CFP2 coherent DWDM modules. ZTE is close to the top ten in 2020, and it is very likely to enter the list in 2021.

Cisco and Huawei have the ability to take the lead in forming two independent supply chains: one for manufacturing photonics in the United States and the other for manufacturing in China.