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Traditional Service Provider Spending Remains Weak

BOSTON (February 22, 2024) – Cloud operator spending on optical transport equipment exceeded $750M in 4Q23 to close out a record spending year, according to the most recent Transport Hardware Report from research firm Cignal AI. However, traditional service provider optical spending remained weak in North America and EMEA and is not expected to recover until 2025.

“Fourth quarter optical spending was both a boom and bust story as Cloud Operators continued to expand their networks, whereas North American and European Service Providers continue to absorb accumulated inventory and are hesitant to spend in a challenging macro environment,” said Kyle Hollasch, Lead Analyst at Cignal AI. “But Chinese spending jumped as operators made good on their promise to commence new long haul WDM builds using the latest technology.”

Additional 4Q23 Transport Hardware Report Findings:

  • The worldwide optical market grew by 2% this quarter, but sales excluding China declined.
  • The worldwide routing market fell following a robust first half of 2023 in which it skyrocketed 16%. Cloud spending in North America now represents a quarter of the region’s routing spending.
  • Cloud operator spending on optical equipment in North America now outstrips spending by traditional service providers. Ciena was the primary beneficiary of this wave in 4Q23 and more than doubled sales to large hyperscale operators.
  • Optical sales in China surged to a quarterly record as Tier 1 carriers, led by China Mobile, began long-haul buildouts based on 400G QPSK wavelengths using Gen120P optics and 6THz C+L band line systems. Optical sales in APAC ex-Japan and China were flat following five quarters of rapid growth.
  • Spending in RoAPAC (ex China and Japan) was flat after several quarters of growth. Spending remains elevated due to 5G spending in India, but this has likely peaked.

Live Presentation Available

Results from Cignal AI’s Transport Hardware Report are presented live each quarter by Lead Analyst Kyle Hollasch. Clients are welcome to register for a presentation on March 15th at 11 AM ET.

About the Transport Hardware Report

Cignal AI’s Transport Hardware & Markets Report is issued each quarter and examines optical and packet transport equipment revenue across all regions, customers, and equipment types. The initial analysis is based on financial results, independent research, and guidance from individual equipment companies. Hardware forecasts are reviewed and updated in the following weeks, along with spending trends by operator type.

The report examines revenue for metro WDM, long-haul WDM and submarine (SLTE) optical equipment, and access, aggregation, edge, and core packet equipment in six global regions. It also tracks equipment spending by end-customer market type, including traditional service provider, cloud/hyperscale, and enterprise/government network operators. Key market segments such as Compact Modular and Packet-OTN equipment as well as shipments of ROADMs are also included. Vendors in the report include Adtran, Alaxala, Ciena, Cisco, Ekinops, Fiberhome, Fujitsu, Huawei, Infinera, Juniper, Mitsubishi Electric, NEC, Nokia, Padtec, Ribbon, Smartoptics, Tejas, Xtera, ZTE as well as other vendors. A full report description, articles, and presentations are available on the Cignal AI website.

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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