LightCounting releases an updated Optical Components forecast
The optical communications industry entered 2020 with a very strong momentum. Demand for DWDM, Ethernet, and wireless fronthaul connectivity surged at the end of 2019, and major shifts to work-at-home and school-at-home in 2020 and 2021 due to the COVID-19 pandemic created even stronger demand for faster, more ubiquitous, higher reliability networks. While supply chain disruptions continued, the industry was able to largely overcome them, and the market for optical components and modules saw strong growth in 2020 and 2021, as shown in the figure below.
We believe the transceiver market is on track for another year of strong (17%) revenue growth in 2022, after increasing by 9% in 2021, and 17% in 2020. Demand for optics is strong across all market segments, and continuing bottlenecks in the global supply chain probably created some extra demand (over-ordering) and certainly moderated price declines, contributing to higher-than-expected growth in 2021 sales and an increased forecast for 2022-2027, illustrated in the figure below.
The latest forecast projects a 12% CAGR in 2022-2027, not very different from the 13% CAGR in the forecast published in October 2021. Strong sales of DWDM and Ethernet optics accounted for most of the gains last year and these segments are projected to lead the growth in 2022-2027. Sales of optical interconnects, mostly Active Optical Cables (AOCs), will also increase at double digit (10%) CAGR over the next 5 years. Wireless fronthaul is one area of weakness, with price declines coupled with cyclical declines in unit shipments resulting in negative sales growth.
The waterfall chart below shows changes in the forecast for aggregated 5-year sales, compared to the one published in October 2021. Two methodology improvements made in 2022 account for some of the changes. These are:
The Ethernet forecast was updated in March 2022 in conjunction with the publication of our High-Speed Ethernet Optics report, and is unchanged since then. It is above the October 2021 forecast due to increased volumes for 400G, 800G, and 1.6T products.