Long-haul optical hardware deployment growth sets stage for fresh spending in 2019 - Analyst

March 7, 2019
Cignal AI's "4Q18 Optical Hardware Report" shows a "North American terrestrial turnaround as spending increases after eight consecutive quarters of decline."

After a weak 2017, long-haul WDM deployments rebounded in the fourth quarter of 2018 (4Q18) with growth of nearly 20 percent; bringing it up almost 8 percent for the year, according to the 4Q18 Optical Hardware Report from research firm Cignal AI. Growth was fueled by a reversal of almost two years of terrestrial spending decline in North America and a year-over-year surge in Japan.

“There have been several announcements of next-generation coherent optical system deployments leading up to this week’s OFC conference, and more are expected before the event concludes,” said Scott Wilkinson, Optical Hardware Lead Analyst at Cignal AI. “These new generations of coherent optical hardware will spur long-haul and SLTE spending increases, which we expect will continue into next year.”

Cignal AI’s Optical Hardware Report is issued each quarter and examines optical equipment revenue across all regions and equipment types. The analysis is based on financial results, shipment information, and guidance from individual equipment companies. Forecasts are based on overall spending trends for equipment types within the regions.

Key findings in 4Q18 Optical Hardware Report:

  • North America Rebounds – After eight quarters of declining revenue, North American terrestrial spending (excluding SLTE) turned positive in 4Q18, led by long haul and cloud & colo spending. Ciena saw double-digit growth in the region and was responsible for most of the turnaround, with ADVA posting a similar growth percentage. While 2018 was down year over year, modest growth is predicted for 2019.
  • Japan Posts Impressive Returns – A stronger-than-expected third quarter combined with a 4Q18 surge resulted in regional growth of nearly 45 percent year-over-year, led entirely by non-Japanese vendors. Nokia, Ciena and Huawei posted larger gains at the expense of traditional Japanese vendors Fujitsu, Mitsubishi and NEC. While spending was up double-digits in 2018, it is expected to normalize to single-digit growth for 2019.
  • EMEA Quarterly Spending Lags – Traditional EMEA fourth-quarter spending growth was not as large in 2018 as compared to previous years, resulting in a quarterly YoY decline. For the year, EMEA is up slightly and should grow well into 2019.
  • China Experiences SlowdownGrowth in China continued in 4Q18 but decelerated as more moderate growth becomes the new norm as large percentage gains cannot be sustained indefinitely. Nokia had a strong quarter, though Chinese sales are still dominated by the local vendors such as Huawei and ZTE. The loss of ZTE revenue in the 2Q18, however, resulted in flat Chinese spending for the year. Single-digit growth is expected into 2019.
  • CALA Returns to Growth – Recovering from a negative third quarter, CALA had a small increase in 4Q18. The region remained down in double-digits for the year.

In mid-2018, Cignal AI launched its Optical Hardware Market Share Tracker, which presents the quarter’s up-to-date market data, providing real-time visibility on individual vendors’ results as soon as they are reported to enable well-informed market analysis. With the 4Q18 results, Cignal AI debuted a new, interactive format that enables users to manipulate data online and see information in a variety of useful ways. The interactive Market Share Tracker is available to clients of the Optical Hardware Report.

The Cignal AI Optical Hardware Report is published quarterly and includes market share and forecasts for optical transport hardware used in optical networks worldwide. In addition to the interactive tracker, analysis includes an Excel database as well as PDF and PowerPoint summaries. Subscribers to the Optical Hardware Report also have access to Active Insight, Cignal AI’s real-time news service on current market events.

The report examines revenue for metro WDM, long-haul WDM and submarine (SLTE) equipment in six global regions and includes detailed port shipments by speed. Vendors in the report include Adtran, ADVA, Ciena, Cisco, Coriant, ECI, Ekinops, Fiberhome, Fujitsu, Huawei, Infinera, Juniper Networks, Mitsubishi Electric, MRV, NEC, Nokia, Padtec, Tejas, Xtera and ZTE.

Full report details, as well as articles and presentations, are available on the Cignal AI website.

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