Impact of US Technology Ban on ZTE

On April 16, the United States Department of Commerce announced that ZTE would no longer be allowed to import American technology products. This order represents a reinstatement of a previous order first issued in March 2016 and creates many issues for ZTE, its customers, and suppliers.

While there is no shortage of media coverage of the ban, Cignal AI aims to provide you with unique insight. We have assembled our observations and conclusions on this remarkable event, and we share answers to some common questions we’ve received as it has transpired.

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OFC 2018 – Operator Perspectives

Each year at OFC, we have the valuable opportunity to hear from the network operators themselves to better understand their vision for the future network. This year, there were some excellent presentations and discussions involving operators from several network verticals – Incumbents, Cable MSOs, and of course the ever-expanding cloud and colocation operators.
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OFC 2018 – 400G Inside the Datacenter

When the conversation at OFC turned to short reach client optics, faster speeds were the central focus.  Several companies announced products and gave demonstrations of 400G capable technology. The 100G speeds and production ramp that had been such a hot topic at OFC 2017 had little follow-on during 2018.
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OFC 2018 – Coherent Technology

Trends in coherent technology generated enthusiasm among the participants at OFC 2018, and 400G ZR applications were of particular interest. Nokia and Infinera outlined next-generation coherent roadmaps, and Acacia and NTT Electronics showcased silicon fresh back from the fab. Many component companies announced smaller, lower cost devices to enable new WDM applications. In this report, Cignal AI examines OFC 2018’s coherent technology announcements and their implications.
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OFC 2018 – Compact Modular Equipment

Compact Modular Equipment took center stage at OFC 2018. News included speed upgrades to existing systems, the emergence of new switch/router variants, and open line systems designed to address the growing interest in optical hardware disaggregation.
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OFC 2018 – Consolidation

Each year, there is at least one announcement at OFC which surprises the industry. In 2016, the announcement was the introduction of Inphi’s ColorZ, while in 2017 it was news of Ciena choosing to license the Wavelogic DSP to module vendors. And yet, OFC2018 delivered a surprise that exceeded both: Lumentum will acquire Oclaro.
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Nokia PSE-3 Coherent Chipset

On March 6, 2018, Nokia announced its fourth generation coherent optical technology, the PSE-3, which continues the company’s strategy of developing coherent DSP processors in-house. Nokia is betting that these chips will differentiate the performance, price, and availability of its optical hardware products.

This Cignal AI report explores what makes the new PSE-3s different from off-the-shelf solutions and examines the question of whether or not vertical integration still makes sense in this market.

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Investor Call – Piper Jaffray Optical Event

Andrew Schmitt was the featured speaker on an investor call hosted by Troy Jensen of Piper Jaffray on February 21st. Forty-four participants listened in and posed their questions as Andrew gave his perspective on the latest events in the optical component and equipment market.

Topics during the call included:

  • Anticipated impact of China’s MIIT plan on existing component suppliers
  • The divergence in Chinese equipment revenue and supply chain
  • The market outlook for ROADMs in 2018
  • The 400G+ Coherent DSP and component outlook
  • The evolution of the CFP2-ACO and DCO market
  • Analysis of equipment companies outsourcing DSPs
  • Update on Inphi’s ColorZ, modulator driver, and PAM-4 business
  • Infinera’s market opportunity with the CX2 and ICE4 based products
  • North American CapEx in 2018 and optical equipment forecast
  • Ciena’s 400G market monopoly in 2018

Active Insight clients can access a summary of the key takeaways, a written transcript, an audio replay, and participate in Q&A.

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China’s 5 Year Optical Component Plan

China’s Ministry of Industry and Information Technology (MIIT) released a five-year plan in December 2017 outlining a roadmap for commercial and technological progress in a broad set of optical technologies. The 63-page document is in Chinese. The following Cignal AI report is based on a professionally translated version of the document and summarizes the section of the plan about the Chinese optical component industry.

The goals and objectives outlined in the plan are exceptionally ambitious and should concern incumbent component vendors. This document outlines strategic rather than rational economic objectives to catalyze market progress in Chinese component companies. Our interpretation is that this will increase the number of non-rational economic actors participating in the component market.

If executed, this plan will greatly increase the level of competition in an already fractured industry.  It will also reduce or in some cases eliminate access for western component vendors to the largest market for optical communications components in the world – China.

Electronic copies of the source MIIT document as well as the translated version of the section on optical components are available to clients for download.

Chinese PDF English PDF

 

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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.

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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)

 

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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

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China ROADM Deployment Outlook

After much of the world already transitioned to all-optically switched ROADM networks, Chinese network operators are preparing to follow suit. Most networks outside of China used optical switching as early as a decade ago, yet China chose to deploy massive electrical OTN switches instead, powered by technology from Huawei and ZTE. But now the writing’s on the wall; electrical switching can no longer scale to the sizes needed by China Mobile and China Telecom, and these operators are now moving forward with ROADM optical switching.

This transition will unfold with a different timeline than Cignal AI initially anticipated and we have updated our position on China’s 2017 ROADM deployment. Instead of pursing rapid deployment, Chinese operators will take a more conservative stand by minimizing the deployment of conventional ROADM architectures during 2017 and 2018.

In this report, Cignal AI examines what technology China has deployed to date, outlines changes in ROADM architectures, and explores the ripple impact on the optical component and semiconductor supply chain.
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Next Gen Optical Networking 2017

Andrew Schmitt’s keynote presentation, entitled “Ways to Achieve Network Openness“, kicked off the 2017 Next Gen Optical Networking event in Nice, France on June 20th. The presentation, which highlights Cignal AI’s perspective on the various directions network operators can take as they deploy networks in the near term, was also given at a Huawei event prior to the show.

Powerpoint (.pdf)

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OFC 2017 – Compact DCI Equipment

In our final OFC 2017 report we discuss new product announcements on purpose-built datacenter hardware and components, and share our thoughts on market developments.

  • Evolution of the compact DCI market, including recently published 4Q16 market share and adoption by new customers
  • New products and solutions, investigating announcements by Nokia, Fujitsu, and Juniper
  • Direct detect – one year later, the appearance of Ranovus, and network operator of the technology’s long term prospects

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OFC 2017 – Open vs. Closed Optical Networks

There was a new cult this year at OFC, the ‘Cult of Open.’ It formed from rising sentiment that the lack of interoperability of vendors in optical networks is a major problem and that the industry needs to embrace hardware dis-aggregation.

This is not a bad cult – it ignited a healthy debate that illuminates both the positive and negative aspects of open networks and closed single-vendor networks. But some members of the Cult of Open overlook an inconvenient truth – closed networks from one vertically integrated vendor can vastly outperform open networks in some cases. Cignal AI’s key takeaways concerning open optical networks and hardware dis-aggregation include:

  • Facebook’s Voyager Platform
  • Open ROADM and Line Systems
  • Benefits of Vertical Integration

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OFC 2017 – Coherent Technology

400G Coherent and Beyond
Ciena had a blockbuster announcement at OFC 2017, but there was plenty of other interesting news to feast on. Cignal AI’s key takeaways concerning coherent WDM include:

  • The outlook for 200G and CFP2-ACO volumes in 2017
  • Opinions on Ciena WaveLogic Ai Licensing
  • The roadmap review for 400G/600G & Acacia Pico
  • Sizing the risk and reward for the 400G ZR market

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OFC 2017 – Inside the Datacenter

100G and the Road to 400G

The transition to 100G network speeds inside the data center is underway at every major hyperscale operator simultaneously, creating major industry bottlenecks. Despite QSFP28 being supply constrained, component and equipment suppliers are also trying to align on the next generation format for 400G operation. Cignal AI’s key takeaways from OFC 2017 with regard to data center optics include:

  • Updates on QSFP28 supply and demand
  • Alternative facts on both sides of the Octal SFP (OSFP) vs. QSFP DD debate
  • Impact of QSFP28 on CFP/CFP2 client demand
  • 400G CFP8 and 200G QSFP observations and outlook

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Investor Call – OFC 2017 Takeaways

Andrew Schmitt provided key OFC 2017 takeaways during an investor call hosted by Troy Jensen of Piper Jaffray. Sixty-seven investors participated. Topics of interest included:

  • Impact of Ciena’s Wavelogic AI DSP Licensing
  • Outlook for Coherent Port Shipments in China During 2017
  • Market Outlook for CFP2-ACO/DCO and QSFP28 Markets
  • Potential Vertical Integration by Intel or InPhi
  • Timing of Metro Coherent and ROADM deployment in China
  • Chinese SARFT Capex Guidance
  • Roadmap for 400G and 600G Coherent
  • Observations on Infinera, Ciena, Acacia, Oclaro, and Neophotonics

Following is a summary of the key takeaways, as well as a full transcript of the discussion. Cignal AI clients can also listen to an audio replay.

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Ciena Wavelogic Ai and 400G Roadmap

This past October, Ciena announced its new coherent DSP, dubbed Wavelogic Ai. Ciena used the announcement to convey its coherent 100G+ roadmap and support for 400G. Ciena also hinted at important changes to its 100G+ business model as Wavelogic Ai is introduced to customer networks. These changes also cascade into the 400G component supply chain.

Wavelogic Ai doubles down on Ciena’s strategy of vertical integration of the DSP and optics, and extends it further into the control plane. The company continues to eschew the use of outside suppliers like Acacia, NTT Electronics, or Clariphy. We believe Ciena’s vertical integration is the company’s strategy for successfully competing with commodity hardware and dis-aggregated networks.
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