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.
Infinera: The Hard Work Starts Now
Infinera officially closed its acquisition of Coriant on October 1, 2018, in yet another example of smaller optical networking equipment vendors absorbed by larger competitors.
In a recent Active Insight report available to clients, we offered an in-depth examination of what lies ahead, post-acquisition, for Infinera. Infinera is a leading supplier of compact modular equipment (see chart below) and has the potential to be the leading vendor to cloud and colo operators. The acquisition’s upsides include an increased customer base and market share, improved economies of scale, greater Tier 1 access and – most importantly – the ability to close the technology gaps in the company's packet and software product lines.
Coriant's integration will not be an easy task for Infinera. The company faces challenges including decisions on legacy products at major carriers, the retention of current Coriant customers (who have different expectations from Infinera customers), technology integration across product lines, and significant distinctions in corporate cultures. These decisions must be made quickly and communicated clearly for the combined company to be a success, and there is not much margin for error.
Andrew Schmitt was a featured speaker during the OSA Industry Development Associates (OIDA) market update dinner during last month's ECOC 2018 in Rome. Andrew shared his thoughts on the transition to third-generation coherent WDM technology and its impact on the optical market with a group of 50 dinner invitees.
Scott Wilkinson Joins Cignal AI as
Lead Analyst for Optical Hardware
Cignal AI is excited to welcome Scott Wilkinson to the team as our lead analyst for the optical hardware market. His addition will broaden our coverage of the optical hardware sector and enhance our focus on emerging applications, such as cable and 5G mobile fronthaul and backhaul.
Scott has spent more than 20 years working in the telecommunications industry, where he gained experience in fiber-to-the-home, optical hardware, carrier Ethernet, MPLS and SDN/NFV-enabled networks.
Before joining Cignal AI, Scott held senior positions in product management and systems engineering for Hitachi Telecommunications, in technical marketing for MRV, and was a marketing director at ECI Telecom. Scott earned his Ph.D. in Electrical Engineering from the Georgia Institute of Technology.
Please add Scott to your email distribution and press lists. He can be contacted at firstname.lastname@example.org or 404-721-2115.
Cloud and Colo Optical Hardware Spending
Reaches Record Level
Optical equipment sales to the cloud and colo market grew rapidly and reached record levels in 2Q18, according to Cignal AI's just released Optical Customer Markets Report. Even though cloud and colo operators – including Amazon, Google and Microsoft – account for only a small part of total global equipment spending, they made nearly a quarter of all North American purchases during the quarter (see chart below).
Highlights of the 2Q18 Customer Markets report include:
Incumbent spending in China totals as much as the combined spending of all other incumbent operators worldwide. Outlays by EMEA incumbents increased again during the most recent quarter.
Cable MSO spending in North America continues to be very strong and grew both quarter-over-quarter and year-over-year.
Ciena led vendors in direct sales to the cloud/colo market on the strength of its WaveServer platform.
The newly combined Infinera/Coriant became the second largest supplier of optical equipment to these customers. Meanwhile, Huawei continues to grow its market share as a result of increased demand from Baidu, Alibaba and Tencent.
Compact Modular Optical Equipment Market on Track to Break $1 Billion in 2018
Compact modular equipment vendors reported record revenues in the second quarter of 2018 and are on pace to top $1 billion in revenue this year, according to Cignal AI's latest Optical Applications Report. Based on 2Q18 trends, Cignal AI has raised the calendar year 2018 forecast for 200G and 400G coherent port shipments and cut the 100G coherent forecast.
2Q18 Applications Report key findings include:
Ciena and Huawei were the fastest-growing vendors in the compact modular segment (see chart above). Ciena benefited from its third-generation coherent technology, while Huawei was lifted by greater adoption from Chinese cloud operators.
Incumbent network operators are using packet-OTN switching hardware to upgrade their transport networks. In North America, this segment grew 30 percent year-over-year as a result of more deployments by Verizon and other large incumbents. Growth was also significant in EMEA and India, where Nokia has taken significant market share.
Third generation coherent is gaining momentum, led by Ciena's 400G offering. We expect solutions from Acacia, Huawei, Nokia and NTT Electronics to reach the market within the next two quarters and challenge Ciena’s lead.
There is higher than expected demand for 200G and 400G speeds this year, a trend that is compounded by the growing adoption of 200G CFP2 DCO modules, allowing coherent technology to integrate with switches and routers.
In what has become an annual tradition, Cignal AI had the pleasure of celebrating Oktoberfest in Munich with several of our clients. Next year's event will be on September 27, 2019 so mark your calendar!
ADVA Brings the Telecom Infra Project’s Voyager Solution to Market
It is not clear that there is a significant difference between a white box optical device that is supplied by a vendor that “provides an open line system, network management capabilities and a full range of à la carte services” and a vendor-specific optical device with open interfaces. Now that ADVA has officially made this commercial, it will be interesting to see how the market reacts. It will likely have some success in the R&D market (where ADVA already has strengths), but not as much in other areas.
Ciena to Sell its Own Coherent Modules
The company is staffing up to expand into the components business. As pluggable coherent becomes standardized, multi-source, and technologically viable, doing so is an interesting strategy for a hardware vendor.
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.
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.
Contact us if you are interested in becoming a client