Dell’Oro Group published an update to the Optical Transport Five-Year Forecast report in January 2021
Although we continue to be concerned with the high level of uncertainties that exist due to the COVID-19 pandemic, we believe that the Optical Transport market will maintain its positive momentum for the next five years. This long term outlook is based, fundamentally, on the belief that bandwidth demand will continue to increase for many more years in the future as it has for the past decade—one that included the start of a pandemic.
This of course does not mean the Optical Transport market will grow unencumbered for the next five years. Because while bandwidth demand continues to grow, we anticipate the Optical Transport market will face challenges such as the three outlined here:
- When WDM technology reaches Shannon’s Limit, it will be increasingly difficult to drive down the average price-per-bit of bandwidth by increasing spectral efficiency. Yet, we forecast the average price-per-bit will decline at the same rate in the next five years as it did in the past five years.
- The entry of coherent 400 Gbps in a small form factor pluggable such as QSFP-DD opens the door for a change in architecture to IP-over-DWDM and away from traditional Optical Transport systems. Component manufacturers have already been trialing and sampling 400ZR pluggable optics in late 2020, and we think demand will be material by late 2021.
- In the past five-year period, much of the Optical Transport market growth was due to a couple high growth markets—China and data center interconnect (DCI). However, as history has proven many times, markets do not stay at a high growth rate forever. Will this be the case for China and DCI as well?
But even with these market challenges, we are optimistic about the future of Optical Transport and believe that the market for optical gear will rise for many more years. In this latest January 2021 publication, we are forecasting that the cumulative Optical Transport market revenue will be nearly $85 billion for the years that include 2021 through 2025.
Our growth projections are driven by the anticipated need for WDM systems in both metro and long-haul applications, which combined is expected to comprise nearly 98 percent of the total Optical Transport equipment market.
Within the WDM market, we expect the continuous drive to higher wavelength speeds to occur. Hence, while 100 Gbps coherent wavelengths contributed the majority of revenue before, we forecast the largest contributor will be 200 Gbps in the near term period, and then 400 Gbps in the outer forecast period. In all, we are forecasting 200+ Gbps wavelength shipments to grow at a five-year CAGR of 30 percent.
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