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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.
3Q18 Coherent Port Pricing Trends
In early January, Cignal AI released its Coherent Port Pricing Trends Report for 3Q18, which examines historical pricing from multiple vendors and the industry overall. Trend analysis is provided based on past performance and future expectations as the industry migrates to fourth-generation solutions (400ZR). This report is available to all current subscribers as part of Cignal AI's Active Insight service.

Vendors included in the report are ADVA, Ciena, Cisco, Coriant, Fujitsu, Huawei, Infinera, Nokia, and ZTE. All vendors tracked in the report shipped 200G-capable optics last year.
Other findings in the 3Q18 Coherent Port Pricing Trends Report include: 
  • Prices for 100G equivalent coherent optical ports have dropped exponentially (see chart above).
  • The cost of deploying new coherent bandwidth has been CapEx neutral.
  • The trend toward lower prices and converging component costs benefits vertically integrated vendors long term.
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Cloud and Colo Optical Slowdown Reverses, Spending Expected to Hit Record Highs in 2018
After a decline in 2017, spending on cloud and colo optical equipment bounced back in 2018, reached record levels in the third quarter and is on pace to top $1.4 billion worldwide for the year overall. Cloud and colo operators continue to be the fastest growing segment of the optical market, with double-digit, year-over-year growth in North America and EMEA and triple-digit growth in APAC in the third quarter, as illustrated in Cignal AI’s most recent Optical Customer Markets Report,
Other key findings include:
  • Ciena led equipment vendor market share for cloud and colo with more than 40% share in 3Q and over 30% share for the last 12 months combined. Huawei and Cisco tied for second place in 3Q, closely followed by the combined Infinera/Coriant.
  • Despite incumbent spending growth of less than 2% YOY worldwide, incumbent spending in APAC grew 10 percent and represented more than 35 percent of the total optical market in the 3Q. It is expected to decelerate in 2019, however, as double-digit growth cannot be sustained long term in this large market. Incumbent spending in North America is expected to continue declining as capital spending focuses on mobility and switched backhaul deployments.
  • Cable MSO optical spending continued to grow at a moderate pace into the third quarter, bolstered by double-digit growth in North America to support fiber deep architectures.
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Now Scheduling Meetings for OFC
Andrew Schmitt, directing analyst for optical networking, and Scott Wilkinson, lead analyst for optical hardware, will be presenting at the 2019 Optical Fiber Conference (OFC) in San Diego, March 4-7. Contact us soon to set up a meeting – last year Cignal AI logged 50+ meetings in 4 days. Meeting times fill up fast!

Stay tuned for the next Transmit newsletter in February, which will give a preview of both Andrew’s and Scott’s OFC Marketwatch presentations.
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Recent 3Q18 Optical Hardware Webinar Presentation Available
If you missed our December 13 webinar on the 3Q18 Optical Hardware Report, clients can access the recording and download the PowerPoint presentation. The webinar includes a summary of 3Q18 results, offers an analysis of regional and segment revenue trends and vendor results, and provides insights into segment and regional forecasts.
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Interesting News
Cisco Announces Intent to Acquire Luxtera
$660 million is a massive revenue multiple; it’s hard to see the value at this price.
 
Kaiam Explores Alternatives as U.K. Operations Go Into Administration
Unfortunate, particularly when this happens at the same time Luxtera is acquired at a huge valuation. Volume production matters when evaluating the efficacy of a revolutionary process.

Foxconn to Begin Assembling Top-End Apple iPhones in India
Pretty much every U.S. electronics company has efforts underway to relocate supply chains. This trend probably can't be stopped at this point, even if tariffs ended tomorrow.

White House Mulls New Year Executive Order to Bar Huawei, ZTE Purchases
These companies have negligible market share in the U.S. This move won't change anything - it is just twisting the tail of China.

T-Mobile, Sprint see U.S. Security Approval for Deal after Huawei Concessions
Now DT and Softbank appear to be stepping back. This trend is massively bullish for Ciena, Ericsson, Infinera and Nokia.
 
Infinera - Costs Associated with Exit or Disposal Activities
Files 8-K with $6 million to $8 million of restructuring charges and a statement that there is more to come in 2019.
 
Apple to Spend $10 Billion on U.S. Data Center Construction Over Five Years
Cisco equipment playing a role here.
 
Huawei Woes Multiply as France Risks Becoming Next Challenge
Headwinds increasing for Huawei in EMEA, tailwinds for Nokia, Ciena, Infinera
 
First 400G Transmission Across 6,600km Trans-Atlantic Cable Using Acacia Communications Module
Higher baud rate operation isn't just valuable for 600G; it can be more valuable for launching slower rates further. One wideband 400G lambda is cheaper than two narrowband 200G links.
Upcoming Events
January 21-25, 2019
Client Visits
Japan

March 4-7, 2019
OFC 
San Diego, Calif.

May 20-23, 2019
NGON
Nice, France

June 10-13, 2019
Cisco Live
San Diego, Calif.
Reports
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.

Active Insight reporting and analysis on notable events is included with any active report subscription.


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