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IPoDWDM represents a $1.6B Component Opportunity by 2026

BOSTON (August 31, 2023) – Metro WDM equipment spending will soon be disrupted by a transition to pluggable optics used in routers, according to the recent Impact of IPoDWDM report from Cignal AI. IPoDWDM is a 20-year-old concept, but new factors such as the emergence of 400ZR, architecturally progressive hyperscale network operators, and changing traffic and network management trends will catalyze widespread deployment by 2026.

“IP-over-DWDM is poised to disrupt the Metro WDM equipment market and will shift some revenue and technical leadership to vendors of coherent pluggables,” said Kyle Hollasch, Lead Analyst for Transport Hardware at Cignal AI. “A significant amount of hardware spending will be displaced, but total spending on equipment and pluggables will continue to grow due to the new applications enabled by router-hosted pluggable coherent modules.”

This report is the last in a three-part Active Insight series, spanning detailed conversations over the past six months with network operators, equipment makers, and component manufacturers. The report series provides a qualitative and quantitative study of IPoDWDM’s role in shaping network operator spending and deployment trends. The results are based on a model combining Cignal AI’s comprehensive industry knowledge and revenue and port shipment database, including optical components, optical transport hardware, and service provider routers.

Additional Report Findings:

  • Most IP-over-DWDM modules deployed by hyperscale operators will drive new applications and architectures, but roughly half of these modules will replace traditional standalone hardware.
  • Total Cloud spending on traditional optical transport hardware will decline -5% annually through 2026.
  • IP-over-DWDM module revenue will more than offset this decline as 400ZR and 800ZR pluggables will represent nearly half of WDM transport spending by hyperscale operators.
  • Coherent modules used in IPoDWDM applications represent a $1.6B opportunity by 2026.
  • Service Provider optical spending will be flat through 2026 as a drop in Metro WDM spending due to IPoDWDM will offset growth in Long Haul.

About the Report

The “Impact of IPoDWDM series” is part of Cignal AI’s Active Insight research service. These reports provide real-time reporting on important developments in the optical market, including detailed analysis of key product trends, show reports, summaries of quarterly earnings calls, and vendor reports. This service is provided free of charge with subscriptions to Cignal AI’s Transport Hardware and Optical Component reports and is also available for purchase. You may view the archive of reports and can purchase them by contacting [email protected].

About Cignal AI

Cignal AI provides active and insightful market research for the networking component and equipment market and the market’s end customers. Our work blends expertise from a variety of disciplines to create a uniquely informed perspective on the evolution of networking communications.

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