LightTrends Newsletter

LightCounting publishes its September 2022 Quarterly Market Update

With all companies’ earnings now reported for Q2 2022, the results show that the optical components industry continued to benefit from strong demand, despite supply issues constraining sales for many. Mostly positive guidance was given for Q3, despite ongoing supply issues.

At the top of the food chain, CSPs and ICPs both reported increased capex compared to the same quarter in 2021. However, the growth rate of capex for both groups has has been slowing down over the past several quarters, as shown below, and it would not be surprising to see flat to negative capex in Q3 and Q4 of this year.

Although CSPs as a group saw capex grow 5% in Q2 2022 compared to Q2 2021, there were big differences among individual companies. Some saw very high growth (China Unicom +94%, China Telecom +51%, AT&T 25%, Verizon 10%), and others cut capex by double digits (France Telecom -24%, KDDI -14%, NTT -21%, Softbank -13%, Vodafone -19%). 

Variations in spending growth among ICPs were less pronounced, with Alphabet, Microsoft, and Netease growing capex by double digits y-o-y, and six of the top 15 reducing capex y-o-y, but only one cutting by double-digits (VIPShop -19%).

Equipment makers collectively also had year-over-year sales growth in Q2, with telecom networks companies up 13% and datacom gear vendors up 9%.  But with such large variations in spending growth or decline among CSPs and ICPS, it’s no surprise that individual equipment makers also reported a wide range of sales growth.

Network equipment makers reporting sales growth in the double digits included Adtran, Fiberhome, Huawei Carrier Networks (estimated), Infinera, and ZTE Carrier division. Sales decreased y-o-y at ADVA, Ciena, Ericsson, and Fujitsu and were basically flat at Nokia and Ribbon. Ciena in particular reported a significant loss of sales due to supply issues.

Datacom equipment vendors were an equally mixed bag, with Arista, Dell, IBM Systems, and Lenovo reporting double-digit sales growth over Q2 2021, while six of top 15 were flat or declined. Arista managed another new record of $886 million, growing sales 56% higher than in Q2 2021.

Optical components vendors as a group saw reported company sales grow 6% y-o-y, and 3% sequentially. Year-over-year double digit sales growth was reported by Accelink, Broadex, CIG, HGG, and Innolight.

New vendor survey data for Q1 and Q2 2022 released with the report shows that optical transceiver sales overall fell in Q1 and then recovered in Q2 to rise above $2 billion again, nearly beating the record sales of Q4 2021. Sales of Ethernet transceivers also fell in Q1 and picked up in Q2, reaching slightly above $1.2 billion, but below the record set in Q4 2022. Among telecom segments, DWDM sales reached new heights, topping $450 million, while FTTx and wireless transceiver sales remained steady.

Semiconductor makers as a group had the best results of the six segments we track, with another sales up 17% y-o-y, although shy of the record set in Q1 2022. Of the 13 companies in this group, ten reported double-digit y-oy- growth and eight set new sales records. Intel’s Datacenter Group was the exception sales decreasing y-o-y.

LightCounting’s Quarterly Market Update (QMU) is a detailed analysis of the most recent quarter reported by companies in the optical communications industry. It consists of a PowerPoint slide deck and Excel workbook with quarterly sales for many companies in the industry, including CSPs, ICPs, network equipment markers, and optical and semiconductor components vendors. The QMU also contains the latest results of LightCounting’s proprietary optical transceiver vendor shipment survey, with units, prices, and revenues of more than 150 transceiver product types.

The Quarterly Market Update is available to LightCounting clients at: www.lightcounting.com