March 30, 2018

LightCounting Releases High-Speed Ethernet Optics Report

It is still an exciting time for the industry, but the race to higher speed optical transceivers is starting to feel like a marathon. Shipments of 100GbE devices reached close to 2.9 million units in 2017 and are expected to exceed 5 million in 2018. Yet, it does not feel like a party for suppliers. Vendors are scrambling to maintain decent profitability as pricing declined faster than expected last year. Some of the 100GbE demand disappeared as buyers had placed duplicate orders. The development of 400GbE products requires a lot of investment, but customers are unlikely to purchase these products until the pricing is “right.”

The figure below shows the correlation between the introduction of first switching silicon and early shipments of Ethernet optical transceivers with 2 km reach – popular in datacenters. The figure includes our forecast for 400GbE, shown as a solid green line. The dashed green line shows a very unlikely scenario in which 400GbE shipments would retrace early shipments of 40GbE (with a 6-year delay).

Our projections for 400GbE shipments follow a simple argument that it will retrace shipments of 100GbE for data center applications, which picked up in 2016 - two years after the first 32x100G Broadcom Tomahawk switching silicon was sampled. With the 32x400G Tomahawk3 ASIC sampling in December 2017, first volume shipments of 400GbE will start in December 2019, making a real difference in 2020.


An alternative argument is that 40GbE started shipping two years after 64x10G switches were introduced, so 400GbE has to begin shipping in 2018, two years after the release of 64x100G Tomahawk2. This is very unlikely because of the complexity of 400GbE optics and the new silicon required. Production of 40GbE optics was mostly co-packaging of mature serial 10GbE technology elements. 100GbE optics today use 4x25G optics, and serial (single wavelength) 100G optics are just starting to become viable. This also will be the first time that PAM4 optics and electronics will be used, which is another hurdle for suppliers of optics, electronics, and even test equipment.

At OFC in March 2018, live demos of 400GbE optical transceivers were shown, but many of these demos had been put together a day or two before the show, since the first PAM4 chips did not function well and the second version was not available until the last minute. It will take a year to debug PAM4 chips and switching silicon and move it to volume production, even if the optics were ready now. The customers seem to understand they will need to wait.

One of the changes in this forecast update is a reduced forecast for 200GbE, which was originally expected to offer an early alternative to 400GbE, tracing the dashed green line in the Figure. Support for QSFP56 modules from equipment manufacturers has declined sharply in the past six months, despite remaining interest from enterprise customers. Google remains the only customer for 2x200GbE OSFPs that we know about. However, Google has not commented on our latest forecast, but suppliers are starting to lose enthusiasm about the potential opportunity for these products.

High-Speed Ethernet Optics Report analyzes the impact of growing data traffic and the changing architecture of data centers on the market forecast for Ethernet optical transceivers with a focus on the high-speed modules used in data centers. It leverages extensive historical data on shipments of Ethernet modules combined with extensive market analyst research to make projections for sales of these products in 2018-2023. The report offers a comprehensive forecast for more than 50 product categories, including 10GbE, 25GbE, 40GbE, 50GbE, 100GbE, 200GbE, and 400GbE transceivers, sorted by reach and form factors. It provides a summary of technical challenges faced by high-speed transceiver suppliers, including a review of the latest products and technologies introduced by leading suppliers.

The report is based on confidential sales information and a detailed analysis of publicly available data released by leading component and equipment manufacturers along with considerable input from industry experts.

Table of contents and sample database of the report is available at: LightCounting clients who have pre-ordered the report can log into to access the report.

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