EGHAM, England --Yes, there's light at the end of the downturn tunnel for optical transmission systems, but worldwide revenues in the recession-battered segment will not hit a new record high until 2003, according to a report from Dataquest Inc.
Revenues for optical transmission systems dropped 10% in 2001 to $30.3 billion from $33.8 billion in 2000, but sales in the segment are expected to grow 7.6% this year to $32.6 billion, said the research firm today. Dataquest is predicting a 10.4% increase in optical transmission systems revenues to $36 billion in 2003.
The slump in communications markets and weak economic conditions pulled the rug out from chip makers pursuing optical networking applications in 2001. The optical chip market was expected to grow 33% in 2001 due to high bandwidth Internet demand, but the recession caused this chip segment to contracted nearly 22% last year, according to the Semiconductor Industry Association last fall.
"While the optical transmission systems market in 2003 will be similar in size to the market in 2000, its nature will have changed significantly," said senior analyst Peter Kjeldsen with Gartner Dataquest's EMEA Telecommunications group. "Consolidation in the market will have changed the number of vendors and operators, and their relative strengths are likely to have changed as well.
"The drivers for this change include a continued increase in the demand for bandwidth, introduction of an optical layer to handle DWDM dense wavelength division multiplexing channels intelligently and a continued migration of the fiber optic technology towards the edge of the network -- most noticeably in metro networks," Kieldsen added.
Based on revenue, North America is the dominant region for optical transmission systems followed by Western Europe and Asia Pacific, said Dataquest. In terms of technology, SDH/Sonet dominates, with DWDM being second in size. The North American and Western Europe markets declined 19.6% and 2.3%, respectively, in 2001. The bright spot was the Asia Pacific market, which grew 18.8%, driven by an increase of 27.3% in China.
"The Chinese market is the obvious attraction right now," Kjedsen said. "But because it is so obvious an opportunity, many players will try to address this market, so the competition will heat up."
