March 18, 2021

LightCounting publishes its March 2021 Quarterly Market Update

Most companies in our orbit have published year-end 2020 financials by now, and LightCounting’s summary and analysis of Q4 results was published today in our March 2021 Quarterly Market Update.

Among the Top 15 Communication Service Providers (CSPs), nine provided capex guidance for 2020, and the total is up 11% compared to 2020. The biggest increases in planned 2021 spending are by AT&T, up 14%, and Telecom Italia, up 46%, after unusually low spending in 2020 due to COVID-19. Verizon guided for flat capex but then said it would spend an extra $10 billion over the next three years to ensure rapid deployment of 5G in its newly won spectrum.

Spending on 5G RAN gear lifted revenues of equipment suppliers in Q4 2020, summarized in the table below, including estimates for Huawei. However, sales of optical transport solutions declined sharply with Ciena and Infinera reporting declines in Q4 sales. Both companies commented on weak demand from CSPs in North America, offsetting growth in other markets. In contrast, Huawei reported strong shipments of DWDM ports, confirming strong demand for optical transport equipment outside of North America.

Global sales of DWDM optical components and modules were strong in Q4 and up 7% the whole year of 2020. The market growth was sustained by deployments of legacy 10G CWDM/DWDM optics and new 200/400G DWDM modules. Strong demand from Cloud companies contributed to growth in this segment.

Overall sales of optical components companies were just slightly below the record level set in Q3 2020, and optical transceiver sales as measured by our vendor shipment survey were also down from the record set in Q2 2020. Growth in sales of DWDM and FTTx transceivers was offset by a sharp decline in demand for wireless fronthaul optics. Sales of legacy Ethernet optics and AOCs also declined slightly, but shipments of 2x200G and 400G products continued to ramp. An updated forecast for sales of Ethernet transceivers in 2021-2025 will be released on March 31st, along with High Speed Ethernet Optics Report.

The Top 15 Internet Content Providers (ICPs) had a bang-up Q4, with sales up 30% and spending up 47% year-over-year. Among the top 5, guidance on spending plans for 2021 included statements like these:

““We expect a return to a more normalized pace of ground up construction and fitout of office facilities which translates into a sizable increase in CapEx in 2021. Servers will continue to be the largest driver of spend on technical infrastructure.” – Alphabet

“Infrastructure will remain a healthy part of our investment. [Our] AWS business is growing at a rapid clip, in usage and in revenue. We’re expanding regions globally and have a lot of upside... We definitely do not want to run out of capacity” – Amazon

“We expect 2021 capital expenditures to be in the range of $21-23 billion, [versus $17 bn in 2020] driven by data centers, servers, network infrastructure and office facilities. Our outlook includes spend that was delayed from 2020 due to the impact of the pandemic on our construction efforts.” – Facebook

Expect a sequential increase to our capex [in Q1 2021] as we continue to invest to meet growing global demand for our cloud services” – Microsoft

Rounding out the top 5 ICP spenders, Alibaba previously announced a $28 billion multi-year spending plan covering a variety of technology development and infrastructure initiatives.

Datacom equipment vendors continued to face headwinds to growth, with group sales down 3%, although Arista and Juniper bucked the trend, growing sales 17% and 5% respectively.

More information on the report is available at: https://www.lightcounting.com/products/qmuq320/


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