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Profitability of Optical Component Suppliers - CIOE 2012
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Profitability of Optical Component Suppliers - CIOE 2012

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At the China International Optoelectronic Exhibition 2012, our LightCounting analyst team presented this market research data. It highlighted the profitability (or lack thereof) of optical component …

At the China International Optoelectronic Exhibition 2012, our LightCounting analyst team presented this market research data. It highlighted the profitability (or lack thereof) of optical component suppliers.

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  • 1. Profitability of the optical component suppliers (or lack of it) Dr. Vladimir Kozlov LightCounting, LLC September 2012LIGHTCOUNTING 10/30/2012 1Market Research on High-Speed InterconnectsDatacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 2. About LightCounting Products and Services • Market Update and Forecast Reports • Quarterly and Annual sales databases • Focus reports on • 40/100G interconnects • AOCs • 10GBASE-T • Continuous Information service • Consulting projects• LightCounting reports and service products are designed to help executives plan and run their businesses. We support decision making based on facts and data.• Our research covers the entire supply chain including components, modules, and networking equipment suppliers, service and content providers. LIGHTCOUNTING 2 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 3. The Industry Supply Chain Cash flowProducts and Services LIGHTCOUNTING 3 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 4. Is this Industry Profitable? Average Annual Net Margin = (net profit/ total revenue) Companies 2008 2009 2010 2011 Content Providers 12% 16% 16% 14% Service Providers 6% 10% 12% 8% System Vendors 5% 5% 8% 6% IC Vendors 10% 9% 22% 20% OC and Module Vendors 2% -4% 3% -1% Content Providers and Communication Semiconductor Suppliers (IC Vendors) are the most profitable … on averageOptical component and module vendors are only profitable when the demand exceeds supplyState of the Industry Report: http://www.lightcounting.com/2012_SOTIR.cfm LIGHTCOUNTING 4 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 5. Optical Component and Modules suppliers are mostly in the red Annual Net MarginOC Vendors 2008 2009 2010 2011 - Emcore sold VCSELAccelink 16% 13% business to SumitomoEmcore –12% –23% –8% –24%Finisar 6% 4% 10% 4% - NeoPhotonicsJDSU 6% 1% 1% 2% received investmentsNeoPhotonics 2% –8% from RusnanoOclaro 1% –3% –12% –21% - Oclaro and OpnextO-Net 28% 20% mergedOplink 7% 12% 12% 19%Opnext 1% –15% –17% –16% - O-Net and Oplink haveAverage 2% –4% 3% –1% the highest margins LIGHTCOUNTING 5 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 6. Investors had very high expectations from the optical technology you like Would to come to a party with us? LIGHTCOUNTING 6 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 7. Who is controlling the market?• MSAs • 10G optics• Price mark-ups • AOCs • Vertical Integration • Low cost datacenters • Aggressive pricing • 100G interconnects LIGHTCOUNTING 7 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 8. What is the problem with optics?• Is this industry too young? (90% of business in photonics have less than 100 employees)• Are the customers too powerful?• Is the technology hard to scale?• Too many competitors?• Too many vendors offering contract manufacturing services? LIGHTCOUNTING 8 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 9. Strategies for success• Scale and diversification (Finisar, Oclaro)• Unique capabilities (very few, Infinera?)• Intellectual property protection (Avago/Emcore, Finisar/Source Photonics)• Manufacturing excellence (Contract Manufacturers)• Innovation (very long term strategy) LIGHTCOUNTING 9 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 10. Consolidation is very slow Market shares of optical transceiver vendors 50% 45% 40% 35% 30% Top 3 25% Top 4-6 Top 7-10 20% Rest 15% 10% 5% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012LIGHTCOUNTING 10Market Research on High-Speed Interconnects 10/30/2012Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 11. Diversification of optical transceiver vendors Generalists Specialists LIGHTCOUNTING 11 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 12. Revenues of top ten Chinese vendors $1,000 $800 Total Revenue ($M) $600 $400 $200 $0 2006 2007 2008 2009 2010 2011Data accounts for sales of the following vendors: Accelink, Eoptolink, Gigalight,HG Genuine, Hi-Optel, Hi-Sense (HBMT), O-Net, Sunstar, WTD, and Wuxi-ZTE. LIGHTCOUNTING 12 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 13. How does the future look like? You never knowLIGHTCOUNTING 13Market Research on High-Speed Interconnects 10/30/2012Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 14. Datacenter Cabling in the “Marketing” Brochures LIGHTCOUNTING 14 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 15. The Yellow WallLIGHTCOUNTING 15Market Research on High-Speed Interconnects 10/30/2012Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 16. Ethernet transceiver market $900 $800 $700 $600 1 GigESales ($M) $500 10 GigE $400 40 GigE 100 GigE $300 $200 $100 $- 2008 2009 2010 2011 2012 2013 2014 2015 2016 LIGHTCOUNTING 16 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 17. Bandwidth distribution “To move up the value chain of profitable services, provider must deploy ample network bandwidth, end to end” Leping Wei, China TelecomNetwork Bandwidth 10 Tbps 20 Mbps 1 Tbps 1 Mbps Customer Premises Core Network Network LIGHTCOUNTING 17 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 18. Distribution of aggregated bandwidth Major upgrades will be necessary.Aggregated Network Bandwidth This will be a major opportunity for suppliers 1-20 Mbps x number of customers 1 - 10 Tbps x Number of fiber lines Customer Premises Core Network Network LIGHTCOUNTING 18 Market Research on High-Speed Interconnects 10/30/2012 Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 19. Telecom transceiver market SONET/SDH CWDM / DWDM FTTx Wireless Infrastructure $1,200 $1,000 $800 Sales ($M) $600 $400 $200 $- 2008 2009 2010 2011 2012 2013 2014 2015 2016LIGHTCOUNTING 19Market Research on High-Speed Interconnects 10/30/2012Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
  • 20. Thank you www.lightcounting.comLIGHTCOUNTING 10/30/2012 20Market Research on High-Speed InterconnectsDatacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.

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