Ovum predicts global optical networks market will exceed US$17.5bn in 2018 as 100G surges

Melbourne, 13 November 2013 – The optical networks (ON) market will exceed US$17.5bn by 2018, for a 3.1 percent CAGR from 2012, predicts global analyst firm Ovum. An exceptionally strong 2Q13 has signaled the beginning of a spending bounce-back.  2Q13 was the strongest quarter in the last six and was the 7th highest quarter in the last 10 years.

In a new forecast analysis*, Global ON is projected to be up 1.1 percent in 2013 compared to 2012 based on positive growth forecasts for North America, SLTE, Asia-Pacific and South & Central America.

“Ovum’s 9.1 percent growth projection for North American ON sales in 2013 signals a solid bounce-back year after two years of non-growth” says Ian Redpath, Analyst, Network Infrastructure and author of the report.  “Network core investments are resuming and 100G is being deployed in volumes. The North American tier-1 communications service providers (CSPs) and cable operators are investing in their core network to support all traffic types. ”

Meanwhile, submarine line terminating equipment (SLTE) sales are projected to achieve modest growth of 3.3 percent after four long down years. In the Asia-Pacific region, strong growth in China, with help from the ASEAN-5 countries (Indonesia, Malaysia, Philippines, Thailand, and Vietnam) and Australia and New Zealand (ANZ), will mitigate projected market declines in Japan and India. Ovum’s growth projection for Asia-Pacific ON in 2013 is 3.1 percent.

South & Central America (SCA) ON revenues are projected to grow by 1.6 percent for 2013. ON spending in SCA has achieved a new level, passing the $1bn mark, and Ovum is projecting that level will be maintained as the SCA economies continue to grow and diversify.

The Europe, Middle East & Africa (EMEA) region unfortunately remains mired in an economic malaise. “We expect 2013 ON sales to come in at a dismal negative 9.6 percent versus the 2012 level,” says Redpath. “Spending has been down in four of the past five years, and under-investment in the region is becoming more acute. At some point, the CSPs will have to resume buying to make up for this prolonged period of under-spending.”

 The major technology trend for the forecast is the ascendancy of 100G, whose revenues exceeded 40G sales for the first time in 2Q13. 100G spending was up 233 percent for 1H13 compared to 1H12, achieving US$1bn in revenue for 1H13, while 40G was down 24 percent for 1H13 compared to 1H12, with revenue dropping below US$1bn level to US$942mn.

“Nearly all new large-scale, long-haul optical networks designed and deployed today will be 100G. 100G has assumed the lead position and will not yield within our forecast period. Two positive market trends are emerging at the same time. The first is a need for the CSPs to refresh network technology after a long period of running core networks hotter and delaying investment. The second major trend is the maturity of 100G technology to the point where CSPs have begun deployments at scale. 100G is in the right spot at the right time,” says Redpath.

“Ovum’s most likely forecast scenario to 2018 projects strong positive growth in North America. Modest growth is projected for Asia-Pacific as a whole, with strong growth for ASEAN-5 and ANZ, moderate growth for China, and low growth for Japan and India. The growth expectations for Europe are a mixed:  down in 2013, modestly positive in 2014, and then more vigorous gains for 2015 and beyond,” concludes Redpath.