1H-2016 Optical Infrastructure Delivers Strong Long Haul and Optical DCI Growth
Optical DCI expected to contribute over $1.5 billion in 2016 with total Optical infrastructure projected to finish the year at $14.0 billion
ACG Research has released its 1H-2016 worldwide Optical infrastructure and worldwide Optical Data Center Interconnect (DCI) forecast. The forecast runs through 2020. The worldwide Optical infrastructure market is predicted to grow from $13.3 billion in 2015 to $17.9 billion by 2020. Purchases of Optical DCI equipment are expected to grow from $1.03 billion in 2015 to $4.15 billion in 2020. ACG Research predicts growth in all geographic regions.
Optical infrastructure demonstrated its usual seasonality with q-q decline in Q1 and q-q growth in Metro and Long Haul in Q2-2016. Buoyed by the surprising resilience in the MSPP market, the legacy Optical segment took a pause from its regular q-q decline and remained flat in Q2-2016. For 1H-2016 Metro optical produced 5.2% growth while Long Haul delivered 23.0% growth versus 1H-2015. APAC and in particular China led optical spending growth in the first half of the year. We look for North America and chiefly the Metro market to increase optical spending in 2H-2016 and into 2017. When combined with the 15.8% decline in legacy Optical infrastructure spending in 1H-2016, total Optical infrastructure managed positive 6.9% growth in 1H-2016 vs. 1H-2015. Looking forward, ACG Research is adjusting upward its Long Haul optical CAGR to 8.3% with LH revenue going from $4.6 billion in 2015 to $6.9 billion in 2020 and slightly reducing its Metro optical CAGR to 9.3% with Metro optical going from $6.1 billion in 2015 to $9.6 billion in 2020.
Optical DCI equipment revenue exceeded $400 m in 2Q-2016 and appears on track to exceed $1.5 billion in revenue in 2016 with an annual growth rate in excess of 50%. Optical DCI revenue is projected to grow at a 32.1% CAGR from 2015 to 2020. The fundamental underpinnings of DCI growth remain strong and were further confirmed in primary research ACG conducted in 1Q-2016 (2016 DCI Survey and Report): increases in data center bandwidth, increases in service requirements for data center interconnectivity and increases in the number of data centers worldwide. Over the forecast, ACG predicts the Metro Optical DCI growth rate will exceed Long Haul Optical DCI, and SFF Optical DCI appliances will grow at a faster rate than multi-slot Optical DCI chassis-based solutions, although multi-slot chassis solutions will remain dominant throughout the forecast. A series of new entrants to the SFF Optical DCI appliance segment including Ciena Waveserver, Fujitsu 1Fininity, Adva CloundConnect, Cisco NCS 1002, Coriant Groove G30 have joined the market leading Infinera Cloud Xpress. In addition, pluggable 100G DWDM optical modules such as Inphi’s QSFP28 PAM-4 module have been announced and are being trialed for DWDM connectivity in the sub-80km metro-DCI space. The new product entrants and pluggable solutions are increasing competition and keeping downward pressure on prices, especially in the SFF Optical DCI appliance segment.
Additional growth drivers beyond DCI for Optical infrastructure over the forecast include: accelerating 100G/200G+ coherent optical upgrades, mobile front-haul, 5G mobile backhaul and bandwidth expansions, multi-layer encryption/security and transport/multi-layer SDN.