The optical transport equipment market grew in 2015 despite declining telecom capex. Demand for 100G and FTTx equipment drove growth in optical components. Ethernet and WDM equipment sales increased in 2015 and are forecast to increase further in 2016, especially DWDM equipment as carriers transition to higher speeds. The overall optical transport market is forecast to continue rapid growth through 2020 to meet increasing bandwidth demands.

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Fiberstore (FS.COM) | 2015 Review & 2016 Forecast to Optical Transport Equipment Market
Although telecom capex is down and equipment sales increase slowly in 2015, optical transport
equipment market still got a strong increase in the past year. Among all the factors having impact on
optical transport equipment sales increase, demand for wavelength division multiplexing (WDM)
systems plays an essential role. For this reason, Dell’Oro Group, the market research firm, forecast
the optical transport equipment market will hit $15 billion by 2020. Now, this article may review
and analyze 2015 optical transport equipment market conditions and give some forecast about
2016 optical components market.
Strong Demand for 100G and FTTx Drives Optical Component Growth
LightCounting published a report which aimed at analyzing 2015 optical transport equipment sales
situations in December 2015. The following graphic from this report summarizes the growth in
service provider capex, equipment and component vendor revenues, for the first 9 months of 2015
compared to the same period in 2014. From this chart, we can clearly see that telecom service
provider capex is down in 2015 compared to 2014. This phenomenon was mainly assigned to
completion or tapering down of some large deployment projects around the globe, such as the
China Mobile’s LTE deployment. Besides, weakness in European and Japanese currencies also
contributed to the decline in service provider’s capex. However, mega-datacenter operators on the
other hand increased spending by 9%. Although it seems positive, LightCounting thinks it is smaller
than the double-digit growth rates they are used to seeing for this group.
2015 Review & 2016
Forecast to Optical
Transport Equipment
Market

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Fiberstore (FS.COM) | 2015 Review & 2016 Forecast to Optical Transport Equipment Market
We can also see from graphic that equipment maker revenues grew a scant 3% in the datacom
segment, while the telecom segment is down a percent. Computer hardware makers continue to
make inroads in the data center equipment segment, while on the telecom side, Huawei’s and ZTE’s
market shares gallop upward, but those of other incumbents languish. Besides, keen interest in
software defined networking (SDN) and network function virtualization (NFV) may also be a factor
in dampening equipment demand. What’s more, seen from the chart above, it is worth noting that
2015 sales growth among optical component companies through September 30 was a much better
than equipment level, with datacom up 18% and telecom up 3%. One of the main reasons for this is
the growing adoption of 100G components, which carry a higher price tag than slower speed
devices. Strong demand for 100G and FTTx optics in China is likely to continue in 2016, as Chinese
service providers are catching up on many delayed projects.
Ethernet and WDM Equipment Sales Experienced High Growth in 2015
In LightCounting’s report, there is another chart (below) which shows 3Q 2015 sales growth for the
main product categories. From this chart, we can see that Ethernet and WDM equipment are the
two largest segments in terms of revenues, and both grew at a respectable and healthy rate. Optical
interconnects continued to show rapid growth. FTTx also experienced high growth, driven by an
acceleration of China’s broadband plans. The wireless segment on the other hand was down
considerably, but LightCounting think it was to be expected given the extraordinary amount of LTE
gear deployed by China Mobile in 2014. Besides, LightCounting’s market forecast report also
showed that total optical transceiver market grew 25% in 2015, which is a very strong finish for the
year. From all the above data, full-year 2015 industry revenues just set a new record high. But we
can forecast that in 2016 optical transport equipment sales will continue grow rapidly, because
some private companies such as Fiberstore grow really faster than the industry average and win
market share from the larger public vendors.
DWDM Equipment Sales Will Increase Rapidly in 2016
2015 was a good year for suppliers of 100G dense wave division multiplexing (DWDM) optics and
transponders. LightCounting estimate that the total number of 100G DWDM ports shipped in 2015
will be close to 150,000, just above their forecast published in August 2015, shown in figure below.

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Fiberstore (FS.COM) | 2015 Review & 2016 Forecast to Optical Transport Equipment Market
As carriers all over the world move away from legacy SONET/SDH technology and deploy DWDM
infrastructures that can support 40G and 100G speeds, the strength of the DWDM market is more
and more apparent. As a result, many analyst firms see the DWDM market will grow significantly
faster than the overall optical hardware market. And LightCounting’s expectations for 2016 range
from a moderate growth of 30% to a more radical 50-60% increase, indicated by the dashed lines in
figure below.
Conclusion
From the Dell’Oro Group’s report published on February 23, 2016, the optical transport equipment
market grew 10 percent year-over-year in the fourth quarter of 2015, propelling market revenue to
just under $4 B for the quarter and over $13 B for the full year, and the WDM metro revenue
growth outpaced all the other optical technology segments. In 2016, as the number of Internet
users expands, bandwidth per user is increasing, putting enormous pressure on core backbone
networks and metro networks, and with the transition from 2.5G to 10G and from 10G to 40G and
now 100G optical channel rates, high-speed optical transport equipment market especially WDM
equipment market will have an infinite growth potential.

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Fiberstore (FS.COM) | 2015 Review & 2016 Forecast to Optical Transport Equipment Market
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Notice: This document is for informational purposes only and does not set forth any warranty, expressed or
implied, concerning any equipment, equipment features, or service offered or to be offered by Fiberstore.
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