New data released by telecom market research firm RHK shows the worldwide market for optical components used in terrestrial dense wavelength division multiplexing (DWDM) and optical networking applications will decline 11% in 2001 from spending levels recorded in 2000.
The decline is a result of excess inventory, a slowdown in network build-outs, and reduced spending by telecommunications carriers worldwide. Long term, RHK expects a return to growth in 2002, but at a more conservative rate than experienced in past years.
‘The dramatic fall-off in market revenues this year is the result of highly aggressive purchasing by system vendors last year,’ remarks John Lively, Director of Optical Components at RHK. ‘The hyper-growth equipment market we all witnessed showed security of supply meant everything. At the same time, systems OEMs had difficulty forecasting component demand accurately, and over-purchasing of components was almost inevitable.’
He adds, ‘We do believe that after the excess inventory is worked through the system this year, we can expect a more rational purchasing environment with solid double-digit growth rates into 2003 and 2004.’
The DWDM optical component market will grow from $5 billion in 2000 to nearly $14 billion by 2004. The growth will be driven by continuing deployment of new systems, an increase in the number of functions performed optically rather than electrically, and the introduction of higher-performance, higher-priced next-generation components.
Additionally, RHK projects different product groups will grow at different rates, as some carriers shift from deploying new networks and place more emphasis on adding capacity by lighting additional channels on existing networks. One product group expected to grow strongly is active terminal components, such as lasers and receivers. RHK expects this product category will grow from $2.7 billion in 2001 to $6.6 billion by 2004 as carriers light additional wavelengths.