Cignal AI
Welcome to TRANSMIT, Cignal AI’s monthly newsletter keeping you up-to-date on important news and trends in the optical industry, our latest research, and noteworthy upcoming events.
After ECOC, Join Cignal AI at Oktoberfest in Munich
Cignal AI invites our clients to enjoy Munich in our 2nd annual Oktoberfest event on the afternoon of Thursday, September 27 (immediately following the conclusion of ECOC in Rome). We’ve reserved select tables for this iconic celebration, but seats fill up quickly so please RSVP to no later than August 28 to join us!
Examining the Evolution of Coherent Technology
Cignal AI offered a comprehensive analysis of the evolution of coherent WDM technology in a recent Active Insight report.

"The first commercial 100Gb/s coherent technology was a defining moment for vendors and the operator landscape; sparking greenfield deployments, launching the flexible-wavelength grid and making ROADM-based networks easier to use," said Andrew Schmitt, lead analyst for Cignal AI. "Now that we're eight years into this transformation, we feel it is important to identify each generation of coherent technology and track its evolution."
Key takeaways from the report include:
  • 3rd generation coherent has arrived and will account for almost all global coherent market growth starting in 2019.
  • Maximum speed alone is not a sufficient benchmark for success in the coherent market. Baud rate and system features better define coherent generations.
  • Historically, vertically integrated companies that design and engineer the coherent link end-to-end have been first to market and have captured most of the worldwide market share.
  • 4th generation coherent is only two years away and will address the massive metro-edge market. The introduction of 400ZR and lower speed derivatives will squeeze out 10Gb/s WDM deployments.
  • The transition to 5th generation coherent places greater importance on system-level engineering as the Shannon limit is reached and opportunities for improvement in the coherent DSP diminish.
Active Insight reports and articles are included with subscriptions to any of our quantitative reports. For more information or to become a client, contact us.
2Q18 Optical Hardware Tracker Updates Underway
Ongoing results for the second quarter are available in the Optical Hardware Market Share Tracker. Launched in May, this dynamic tool is exclusive to Cignal AI and provides real-time visibility of optical market results. The Market Share Tracker is updated on an ongoing basis as vendor results are reported and provides clients with the most current market data for accurate market analysis.

The Market Share Tracker is available to subscribers of Cignal AI's Optical Hardware Report, which issues quarterly. The latest Optical Hardware Report will be published by August 25 and will include all vendors and updated forecasts.
Cable MSO Spending Rises in North America
Cable MSOs were a bright spot in the recently released 1Q18 Cignal AI Optical Customer Markets Report. Spending in North America grew 30 percent and outpaced all other customer verticals, including cloud operators. Also noted was that though spending by incumbent operators on optical transport equipment increased in China, it continues to decline in North America and EMEA.

Other findings of the report were outlined in the press release and included:
  • Ciena and Infinera sales growth in the cloud and colo market came during a period of overall spending decline among these customers (see above chart).
  • Optical equipment spending by cloud operators has stalled, which contradicts the common perception that cloud operators like Amazon, Google and Microsoft are increasing spending on optical transport equipment. Growth in the cloud market has been inhibited by rapidly declining prices and the use of IP over WDM as a substitute.
  • One third of global spending on optical hardware is in Asia, with almost all coming from Chinese incumbent operators.
  • Cable MSO global spending grew 5 percent year-over-year in the first quarter.
Cignal AI’s Optical Customer Markets Report is issued quarterly and quantifies optical equipment sales to five key customer markets as well as equipment vendor market share for sales to cloud operators.
Interesting News
Faced With Crippling Sanctions, ZTE Loaded Up on Lobbyists
ZTE spent $1.5 million over three months to twist arms in Washington, D.C.

Introducing Acacia’s ZR Coherent Solutions
These are not 400ZR, but address the need for 100G 80km+ short reach solutions in a pluggable application. Acacia is in a great position to be a first mover in this market.

Infinera Announces Intent to Acquire Coriant
Buying Coriant for pocket change. $200 million + $50 million cash all in plus stock - total price $430 million. That's much less than a 1x revenue multiple, but the Coriant gross margins are really poor.

Qualcomm Ends $44 Billion NXP Bid After Failing to Win China Approval
This is bad. U.S. Treasury Secretary made a plea to China, and it was not accepted. The ZTE deal was expected to clear the decks for this. The Lumentum acquisition of Oclaro requires Chinese approval and this event is not a good leading indicator.

U.S. Lawmakers Cut Anti-ZTE Measure from Must-Pass Defense Bill
House Republicans drop the provision from Defense bill, which would have re-enforced the ZTE ban. Government contractors still prohibited from working with the company.

Amazon Denies it Will Challenge Cisco with Switch Sales
Well, it turns out the article was wrong in more ways than one.

Amazon Web Services Targets Cisco in Networking
Amazon considering selling the white box Ethernet switches it designed for internal use. Article claims price would be 70%-80% cheaper than comparable switches, but this is just not possible - Cisco doesn't get 80% margins on low-end switches.

Shortening the (DAA) Last Mile
Good article from Infinera on the cable MSO fiber deep opportunity.

China's ZTE Clears Hurdle to Lifting U.S. Ban
ZTE just needs $400 million in escrow and it's back online. Our forecast assumed mid-July resumption - looking safe, but who knows for sure.

China Raises Tariff Rates for Some U.S. Optical Fiber Products
Non-dispersion shifted optical fiber tariffs rising from 5-19% to 33-78%. Yes, there were already tariffs in place for American fiber.

Reliance Launches Fiber Broadband, After Disrupting India's Telecoms Market
It's trying to do FTTH in India - where many others have failed. If anyone can make it work, it's Reliance and Ambani.
Upcoming Events
August 2
ADVA Investor and Operator Webinar
Replay & Transcript 

August 20
Piper Jaffray Investor Dinner

September 24-26
Rome, Italy

September 27
Munich, Germany 

October 9-11
Las Vegas

November 5-7
Nokia Analyst Day
Murray Hill, NJ

Contact us to set up a meeting.
Optical Hardware
Analyzes market share and size for entire optical equipment market according to hardware-based features and capabilities. Includes 10/40/100G+ client and line port shipment numbers.

Optical Applications
Examines market share and size for portions of optical market addressing specific functions or customer applications, including compact modular and Packet-OTN switching equipment. Details market size and share for the 100G+ coherent and non-coherent market across multiple technologies and reaches.

Optical Customer Markets
Tracks the size of optical equipment market by six end customer types, including incumbents, cloud and colo, and wholesale. Includes vendor market share of the cloud and colo customer segment.

All Cignal AI clients also receive access to Active Insight reporting and analysis on notable events in the optical network market.
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