Cignal AI Cuts 2018 EMEA Forecasts in Optical Hardware Report

Quarterly Shipments of Coherent 100G+ Ports Exceed 100,000 Units for the First Time

BOSTON – December 1, 2017 – Recent results and concerns regarding EMEA spending trends outlined in Cignal AI’s third quarter Optical Hardware Report have led the market research firm to cut 2018 forecasts for the region. On a more positive note, the report illustrated spending gains for metro WDM equipment in North America, with Cisco and Ciena benefiting from healthy year-over-year growth. The report also noted that coherent 100G+ port shipments exceeded 100,000 units globally for the first time this quarter – a remarkable milestone for the technology.

“Healthy sales of metro WDM in North America offset the continuing weakness in long-haul WDM,” said Andrew Schmitt, lead analyst at Cignal AI. “Among optical hardware manufacturer growth in North America, Cisco was on top. The company enjoyed double-digit year-over-year growth resulting from a massive ramp of shipments in the cloud and colo market as well as growth in NCS 4000 revenue.”

Cignal AI’s Optical Hardware Report is issued quarterly and examines optical equipment revenue across all regions and equipment types, including shipment information and guidance from individual equipment companies. Forecasts are based on spending trends by region and equipment type.

Additional report findings include:

  • EMEA revenue sinks, forecast lowered for 2017-2018 – In Q3, EMEA revenue dropped almost 20 percent year-over-year. Huawei experienced a very sharp decline in the region and provided negative guidance. Cignal AI reduced its forecast for EMEA for this year and 2018, based on weak spending trends among tier-1 customers.
  • Chinese revenue growth stalled in 3Q17, but overall spending growth for 2017 is still expected to be strong. However, Cignal AI cut its 2018 forecast for China based on ongoing uncertainty tied to regional spending.
  • Spending in the rest of the Asia Pacific (ROAPAC) remained elevated. Following a big leap in the second and third quarters of 2017, Cignal AI marked down the 2018 forecast in this region, predicting current spending levels will subside.
  • Central and Latin America spending continued to decline as large carriers in Brazil and Mexico cut back on capex. Based on conversations with vendors, Cignal AI expects this decline to resolve itself and a recovery to begin in 2018.

About the Optical Hardware Report

The Cignal AI Optical Hardware Report includes market share and forecasts for optical transport hardware used in optical networks worldwide. It analyzes and quantifies revenue for metro WDM, long-haul WDM, and submarine (SLTE) equipment in six global regions, and includes detailed port shipments by speed. Vendors examined include Adtran, ADVA Optical Networking, Ciena, Cisco, Coriant, ECI Telecom, Ekinops, Fiberhome, Fujitsu, Huawei, Infinera, Juniper, Mitsubishi, NEC, Nokia, Padtec, TE Connectivity, Xtera and ZTE.  Deliverables include an Excel database and PowerPoint summaries, plus Cignal AI’s Active Insight real-time news briefs.

Full report details, as well as other articles and presentations, are available by registering for a free account 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.

Contact Us/Purchase Report
Sales: +1 617-603-0750
Web: Contact us
Link to press release

3Q17 Optical Hardware Forecast

On November 21st, Cignal AI issued full optical equipment market share analysis for 3rd quarter 2017 (3Q17). This second report extends our analysis and summarizes forecasts and outlooks for the industry through 2021.

Subscribers to the Optical Hardware Report are able to download an excel file with actual results through 3Q17 along with detailed, up-to-date forecasts. A complete compilation of our 3Q17 market share and forecast analysis is available in both web format as well as .pdf format.

 

We made minor adjustments to our worldwide 2018 and longer-term forecasts; a detailed discussion follows.

Requires Optical Hardware subscription.

3Q17 Optical Hardware Results

Cignal AI has released its 3rd quarter 2017 (3Q17) optical hardware market share analysis, which includes a summary of revenue results for the quarter.

Summary

Global spending on optical network equipment dropped for a third consecutive quarter, led by a larger than normal seasonal decline in China and weakening trends in EMEA.

  • North American spending increased again quarter-over-quarter, with positive results reported by most vendors.  Spending on Metro WDM continues to grow at the expense of LH WDM.
  • EMEA revenue fell sharply though this was the result of weakness at larger vendors – smaller vendors performed better. As in North America, LH WDM bore the brunt of the decline.
  • Last quarter was the weakest YoY revenue growth recorded in China in over 4 years as momentum from 2Q17 spending failed to continue into the third quarter. Spending trends in the region remain difficult to predict.
  • Revenue in the rest of Asia (RoAPAC) eased following breakout results in India during 2Q17 though spending remains at historically high levels.
  • Quarterly coherent 100G+ port shipments broke 100k units for the first time on a global basis. 100G+ Port shipments in China were flat QoQ and are substantially up YoY

Subscribers to the Optical Hardware report can download an excel file with actual results through 3Q17. This Excel file contains only historical data, and is an interim release. A file with greater detail, including updated forecasts and additional analysis, will be available by November 27th, 2017.

Analysis of the market and its participants during 3Q17 follows.
Requires Optical Hardware subscription.

Netflix Accelerates Global Video Streaming with Infinera Cloud Xpress 2

Infinera announced that Netflix deployed the Infinera Cloud Xpress 2 to expand their delivery capacity for streaming videos.

“The Infinera Cloud Xpress was the first compact modular data center interconnect (DCI) platform on the market in 2014 and is an amazing technical and commercial success,” said Andrew Schmitt, lead analyst, optical at Cignal AI. “Infinera led the fast-growing compact modular DCI market from its inception – and still does with 38 percent share for the first half of 2017.”

Acacia 3Q17 Conference Call

Acacia mentioned data from our Optical Applications report during its third-quarter earnings conference call with investors on November 3, 2017. The company highlighted our unique work to measure and forecast demand for 100G+ coherent deployments at the edge of the network.

Raj Shanmugaraj – CEO

As cloud operators push data closer to the end user, the demand for coherent optical interconnects for distances below 100 kilometers is growing. Industry analyst firm Cignal AI projects that the demand for these edge coherent ports will grow at the rate of 53% in the next 5 years. We believe our high-capacity coherent solutions, like our AC1200, are particularly important in these edge coherent applications where low power consumption and space optimization are important requirements.

He went on to quote our briefing which focused on our coherent technology observations made at ECOC2017 in Gothenburg, Sweden. (full briefing here: ECOC2017 – Coherent 100G+)

Our CFP2-DCO product completed the qualification in the third quarter and is getting favorable reviews in the industry. One industry analyst commented in his ECOC coverage brief that our CFP2-DCO is, quote, “unrivaled in performance and power consumption.” As we mentioned during our second quarter earnings call, we have over 15 customers for our CFP2-DCO. Our customers and their end customers are in various stages of qualification or deployment with this product and we anticipate further sales growth as market conditions improve. In China, carriers have adopted DCOs like our CFP module and we anticipate that our CFP2-DCO module will build on the success of our CFPs in that market.

Full transcript at Seeking Alpha.

Inphi 3Q17 Conference Call

Inphi mentioned adjusting internal forecasts for 100G port growth during its third-quarter earnings conference call with investors on October 31, 2017.

Ford Tamer – CEO

We’ve taken down the number based on the latest Cignal AI and company estimate forecast. So you could see that we now have a number for 2017 of 301k ports growing to 376k ports by 2018. So we’ve tempered those numbers down, but as you could see, we still are positive on over 20% growth from 2017 to 2018.

Full transcript at Seeking Alpha.

Analysis: 1H17 Cloud and Colo Spending Slowdown

Cignal AI’s recent Optical Customer Markets Report discovered an unexpected weakness in 2017 optical transport equipment spending from cloud & colo operators (see Cignal AI Reports Unexpected Drop in Cloud and Colo Spending). This surprising trend was then further supported by public comments later made by Juniper and Applied Optoelectronics, prompting us to examine the situation in greater detail.

This detailed brief includes:

  • Cloud & colo spending as defined by Cignal AI
  • Analysis of quarterly spending trends by cloud & colo operators
  • Recent shifts in market share among equipment vendors to this market
  • Quantitative analysis of underlying causes of this slowing, including price compression and displacement by IPoDWDM via Inphi, Acacia, and Oclaro components

Requires Optical Customer Markets subscription.

Infinera Sets Two Industry-First Milestones for Optical Transport Technologies

Infinera published two papers at ECOC 2017 that set new milestones in terms of baud rate (100Gbs) and modulation density (1024 QAM). While these technologies are years away from commercial reality and deployment Infinera is demonstrating a continued commitment to the in-house development of photonic integration and the results it believes this can achieve.

“Infinera uniquely uses vertical optical integration to extract maximum performance from the optical transport network,” said Andrew Schmitt, Lead Analyst at Cignal AI. “The new levels of performance in baud rate and modulation schemes for terabit wavelengths exhibited at ECOC are a good example of how this approach can eventually result in production solutions with greater capacity and reach.”

Full company blog on the technology.

ECOC 2017 – China Observations

This is Cignal AI’s second ECOC 2018 brief, focused on news out of China.

Topics include:

  • China Inventory and 2018 Demand
  • Ciena Wavelogic AI Licensing Update
  • China ROADM Deployment Outlook
  • Huawei 100G+ Coherent Technology Roadmap

Our first brief, issued on October 3rd, focused on coherent 100G+ technology updates.

Requires Optical Active Insight subscription.

Cignal AI Reports Unexpected Drop in Cloud and Colo Provider Spending

Optical Customer Market Report Finds Ciena and Cisco Outperforming Peers in Cloud & Colo Market

BOSTON – October 12, 2017 – Spending on optical transport equipment by cloud and colocation providers dropped unexpectedly year-over-year, according to the most recent Optical Customer Markets Report issued by networking component and equipment market research firm Cignal AI. The surprising reversal in spending by Amazon, Facebook and Google is a result of aggressive price declines in the equipment market, the deflationary effects of 200G technology and more focus by cloud/colo providers on building inside the data center rather than between locations.

Market Share Gains/Losses YoY by Vendor

“The slow down in cloud and colo provider spending has been a surprise to equipment and component manufacturers, particularly since all forecasts for this market had anticipated continued growth,” said Andrew Schmitt, lead analyst at Cignal AI. “The supply chain is feeling an impact already, but once these 200G pricing reductions are digested in the market, spending will again be on the rise.”

Produced twice a year, Cignal AI’s Optical Customer Markets Report quantifies optical equipment spending by five key customer markets – incumbent, wholesale, cable MSO, cloud and colo, and enterprise and government. The current report covers spending through 1H17 and includes forecasts based on expected spending trends by customer market on a regional basis. The report also details equipment vendor market share for sales directly to the cloud and colo market.

Additional key findings in the 1H17 Optical Customer Markets Report include:

  • Ciena and Cisco are significantly outperforming their peers in sales to the cloud and colo market, even in the current challenging environment. Their gains reflect losses at ADVA, Infinera and Nokia.
  • Spending by incumbent operators in North America is durable and has remained consistent year-over-year.
  • Chinese cloud and colo spending is still very low as a percentage of total sales. This is attributable to regulatory issues, which prevent companies like Baidu, Alibaba and Tencent from building their own networks.

About the Optical Customer Markets Report

The Cignal AI Optical Customer Markets Report tracks optical equipment spending by end customer market type and provides forecasts based on expected spending trends by customer market on a regional basis. Deliverables include Excel file with complete data set, PowerPoint summary and Optical Equipment Active Insight.

The report includes revenue-based market size for all end customer markets across all regions, with market share for the cloud and colo segment broken out on a worldwide basis. Vendors examined include Adtran, ADVA, Ciena, Cisco, Coriant, Cyan, ECI, Ekinops, Fiberhome, Fujitsu Networks, Huawei, Infinera, Juniper Networks, NEC, Nokia, Padtec, TE Conn, Transmode, Xtera and ZTE.

Full report details, as well as other articles and presentations, are available to users who register for a free account on the Cignal AI website. If you have questions or are interested in purchasing the report, please contact us.

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.

Contact Us/Purchase Report
Sales: +1 617-603-0750
Web: Contact us
Link to press release

ECOC 2017 Market Focus Presentation

Andrew Schmitt’s presentation, entitled “Mapping the Future of Optical Deployments,” was one of several featured during this years ECOC Market Focus sessions in Gothenburg, Sweden September 18-20th.

The presentation highlights Cignal AI’s perspective on how different sectors of the market increasingly demand more specialized solutions. It also highlights the weaknesses of the much-discussed “Optical Whitebox” as well as the strengths and weaknesses of hardware disaggregation. Finally, we warn those in the industry to beware of The Cult of Open.

Subscription not required – register an account with a corporate email address to read the summary and download the presentation.

Powerpoint (.ppt)

 

Requires Optical Active Insight subscription.

1H17 Optical Customer Markets Report

We’ve released the 1H17 edition of the Optical Customer Markets report. It provides insight into how much optical equipment different segments of network operators purchase:

  • Covers 4 global regions and five end customer types
  • Tracks shipments to Incumbent, Wholesale, Cloud & Colo (Datacenter), Cable MSO & Broadband, Enterprise & Government customers
  • Forecasts by region and category
  • Vendor market share for equipment sales to Cloud and Colo (Datacenter) customers
  • Follows strict methodology to reduce analyst subjectivity

Notable updates include:

  • Updated results for 1H17
  • Vendor market share of equipment sales to Cloud and Colo customers for 1H17
  • Updated PowerPoint report summary

Subscribers can download the latest Excel and PowerPoint files.

Report Details Excel PowerPoint

ECOC2017 – Coherent 100G+

ECOC is one of the most significant conferences in optical networking worldwide. This year’s conference was held in Gothenburg, Sweden, and the event was well attended by the engineering community, as the conference trends heavy on technology and light on marketing. We at Cignal AI like ECOC because it gives us another opportunity to converse with the folks directly responsible for charting the technical roadmap of upcoming optical systems.

In this first of several ECOC briefs, we share some of our findings on the changing trends in coherent optics. Subsequent briefs will explore China and client optics.

  • CFP2-ACO Outlook – The ACO market is going away; what this means
  • Silicon Photonics – Searching for the killer app
  • Inphi ColorZ – Moving downmarket to grow volume
  • 400G ZR – Examining investment risk and rewards
  • Acacia CFP2-DCO – Market Feedback

Requires Optical Active Insight subscription.

Inphi samples 16nm Polaris™ PAM4 DSP Product Family with Integrated EML and VCSEL Driver

Inphi announces samples of its latest Polaris PAM-4 DSP for inside the data center which. This is the PAM-4 engine that powers optical modules such as 200G QSFP28s and 400G CFP8s running FR8 signaling. The chip also integrates both single and multi-mode laser drivers, further reducing cost.

“Cloud operators are looking for every possible edge to reduce the cost of short reach optical connectivity. Inphi and its Polaris platform play a critical role in cutting the cost of 100G and making 400G an economically viable technology,” said Andrew Schmitt, founder and lead analyst at Cignal AI.

Semtech and Multiphy Demonstrate Single Lambda 100G Chipset for the Datacenter

Semtech and Multiphydemonstrate a single-lambda 100G solution at ECOC for DR4 modulation in a QSFP28. This included a single channel PAM-4 DSP from Multiphy, and modulator driver and TIA from Semtech.

“Single wavelength 100G is the ultimate solution for 100G in the data center, offering four times of fundamental cost improvement over existing 4x25Gbps solutions. This will be the preferred technology for high-volume applications in Cloud and colocation data centers,” said Andrew Schmitt, Founder at Cignal AI. “This new 100G chipset provides performance of greater than 2 km, effectively meeting all single mode needs for next-generation hyper-scale data centers.”

Cignal AI Issues Industry’s First Forecast for 400G Coherent WDM Shipments

Optical Applications Report Reveals Market Share for Coherent 100G Shipments and Rapid Growth in Compact Modular equipment for Second Half of 2017

BOSTON (September 18, 2017) – Cignal AI, a networking component and equipment market research firm, issued the industry’s first comprehensive analysis measuring the anticipated growth of coherent 400G WDM.  Forecasts in its recent Optical Applications Report estimate that this technology will account for almost one-quarter of all deployed WDM bandwidth in 2020. The Applications Report also predicts that revenue for equipment originally designed for the data center interconnect (DCI) market will reach $1 billion by 2019, as these systems become widely adopted outside of traditional DCI applications.

“Cignal AI has close relationships with equipment and component manufacturers, as well as end users, and these relationships give us a unique insight into the optical equipment market.  From this vantage point, we can forecast emerging technologies such as coherent 400G WDM usage,” states Andrew Schmitt, lead analyst for Cignal AI. “Pluggable 400G ZR modules should enter the market by 2019, and they will be the final nail in the coffin for 10G WDM networks.”

Produced twice a year, the Optical Applications Report examines market share through the first half of 2017 and provides forecasts in three key markets: 100G+ coherent WDM, compact modular equipment used for DCI and advanced packet-OTN switching hardware. Key findings in the report include:

100G+ Coherent WDM

  • 400G coherent WDM volume starts to ramp this year, led by Ciena deployments and then followed by other suppliers six to nine months later.
  • The introduction of small form factor 100G and 400G pluggable models will spur the largest optical market transformation since the “Optical Reboot” of 2012-2015 by virtually eliminating most 10G WDM deployments from the world’s optical infrastructure.
  • Both 100G and 400G coherent will be widely adopted at the edge of the network by the end of 2021.
  • Cisco is growing 100G port deployments faster than all other vendors in the market.
  • Despite widespread expectations to the contrary, Chinese coherent 100G port deployments grew at a healthy pace in the first half of 2017.

Compact Modular Equipment

  • Equipment originally designed for DCI applications is rapidly evolving into applications outside the datacenter. Incumbent, wholesale and cable operators will adopt these stackable systems with open software models to build disaggregated optical networks. Using “DCI” – which is an application – to classify an equipment type no longer makes sense. Cignal AI has changed its category name and definition appropriately to “Compact Modular”
  • Spending on compact modular equipment more than tripled in the first half of 2017, compared to the same period last year. Ciena, Cisco, and Infinera are the market share and technology leaders for this sector.

Advanced Packet-OTN Switching

  • Large incumbent operators continue to grow deployment of these systems. Despite its complexity, advanced packet-OTN switching remains the best approach for unifying many customers and applications on a single transport infrastructure.
  • Revenue for packet-OTN systems grew in the double digits in the first half of 2017, compared to the same period last year.
  • Verizon’s deployment of these systems is increasing and will affect vendor market share more materially in the second half of 2017.

About the Optical Applications Report

The Cignal AI Optical Applications Report includes market share and forecasts for revenue and port shipments for optical equipment designed to meet the needs of specific applications: 100G+ coherent, compact modular and advanced packet-optical switching hardware. Deliverables include Excel file with complete data set, PowerPoint summary and Optical Equipment Active Insight.

The report features revenue-based market size and share for the hardware categories and detailed port-based market size and vendor market share for 100G+ shipments. Vendors examined include Acacia, Adtran, ADVA Optical Networking, Ciena, Cisco, Coriant, ECI Telecom, Fujitsu, Huawei, Infinera, Inphi, NTT Electronics (NEL), Nokia and ZTE.

Link to press release

Full report details, as well as articles and presentations, are available to users who register for a free account on the Cignal AI website. If you have questions or are interested in purchasing the report, please contact us.

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.

1H17 Optical Applications Report

Our 1H17 edition of the Optical Hardware Applications report has been released.

The report contains details on the following areas:

  • Compact Modular hardware market share and forecasts
  • 100G+ Coherent port shipments vendor market share
  • 100G, 200G, and 400G+ Coherent and Direct Detect port shipments and forecast
  • Advanced Packet-OTN Switching market share and forecasts

This report includes significant updates and enhancements:

  • Initiated a coherent 400G port shipment forecast, estimating demand for 400G wavelengths in CY17 and beyond, including the upcoming 400G ZR pluggable format. The forecast also quantifies the emergence of coherent 100G in volume at the edge of the optical network. A more detailed written analysis sharing the assumptions behind this forecast will be published in the coming weeks. In the meantime, we welcome feedback on the quantitative forecast.
  • Renamed DCI Hardware category to “Compact Modular”. DCI is an application, not a hardware category, and these compact, modular chassis are being used in several applications, including DCI. As Incumbent, Cable MSO, and Wholesale operators evaluate and deploy these systems it is important that this category name better reflect the defining characteristics of these systems. A listing of the specific systems in this category can be found here.
  • Added 1H17 market share results for Compact Modular and Advanced Packet-OTN Switching equipment hardware. Also updated coherent port shipment market share to include vendor results for 1H17.
  • Compact Modular hardware forecast increased in 2017 and 2018 as result of discussions with vendors. This is a bottoms-up change with the risk that multiple vendors are double-counting the same opportunities.
  • Historical 100G+ Port Shipments adjusted to align with actual customer shipment data.

Current subscribers can download Excel and PowerPoint files.

Report Details Excel PowerPoint

2Q17 Optical Hardware Forecast

On August 20th, Cignal AI issued full optical equipment market share analysis for 2nd quarter 2017 (2Q17). This second report extends our analysis and summarizes forecasts and outlooks for the industry through 2021.

Subscribers to the Optical Hardware Report are able to download an excel file with actual results through 2Q17 along with detailed, up-to-date forecasts. A complete compilation of our 2Q17 market share and forecast analysis is available in both web format as well as .pdf format.

Excel PDF

 

We made substantial adjustments to our worldwide 2017 forecasts due to ongoing spending weakness in North America and EMEA as well as surprising strength in China; a detailed discussion follows.

Requires Optical Hardware subscription.

2Q17 Optical Hardware Results

Cignal AI has released its 2nd quarter 2017 (2Q17) optical hardware market share analysis, which includes a summary of revenue results for the quarter.

Summary

Global spending on optical network equipment increased slightly, led by increased spending in China and India.

  • Optical revenue in China is up 13 percent for the first half of 2017 as compared to the same period in 2016. The weak demand reported by component makers is a result of an ongoing inventory correction (primarily at Huawei), rather than a signal of weak end market demand.
  • Huawei and ZTE both reported record shipments of 100G coherent ports in China during the quarter. The companies also showed strong revenue performance in the region.
  • North American spending increased quarter-over-quarter. Consistent with earlier Cignal AI forecasts, North America is experiencing a shift in spending from long haul to metro WDM. Ciena and Cisco are the primary beneficiaries of the double-digit year-over-year growth in NA metro WDM. Both companies grew market share, and Ciena’s North American optical equipment revenue increased by 21 percent year-over-year.
  • Outside of China and Japan, the rest of the Asia Pacific (ROAPAC) countries experienced 20 percent year-over-year growth. This region’s growth was particularly fueled by India’s Reliance Jio, which is purchasing substantial amounts of equipment from Ciena and Nokia as part of an aggressive 4G LTE expansion in the country.
  • EMEA revenue dropped substantially, stemming from sharp declines in spending in the long haul WDM and submarine systems markets. Metro WDM spending remained flat year-over-year.
  • Growth in metro WDM spending is creating greater demand for higher speed coherent ports, which are evolving from 200G to speeds as high as 400G later this year.

Subscribers to the Optical Hardware report can download an excel file with actual results through 2Q17. This Excel file contains only historical data, and is an interim release. A file with greater detail, including updated forecasts and additional analysis, will be available August 25th, 2017.

Report Details Excel

Analysis of the market and its participants during 2Q17 follows.
Requires Optical Hardware subscription.