Cloud Spending on Optical Hardware – 1Q18 Update

In October 2017,  Cignal AI analyzed the occurrence of a slowdown in spending by cloud & colo operators and quantified the magnitude of its impact (see Analysis: 1H17 Cloud and Colo Spending Slowdown).

The report conclusions contradicted the common but inaccurate perception that spending by cloud operators such as Amazon, Google, and Microsoft on optical transport equipment was growing at a rapid rate.

This report has been enhanced with new analysis and updated vendor shipment data from 3Q17, 4Q17, and 1Q18 from equipment and component vendors.

This update includes:

  • A summary of cloud & colo spending definitions
  • Fresh analysis of changes in quarterly spending trends by cloud & colo operators through 1Q18
  • Recent shifts in market share among optical equipment vendors to this customer market
  • Quantitative analysis of underlying causes of flat spending, including continued price compression through 2018 and displacement by IPoDWDM via Inphi, Acacia, and Oclaro components.

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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 – 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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Analysis: 1H17 Cloud and Colo Spending Slowdown

Compact Modular Hardware Introduction Timeline

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

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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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