IHS-Markit: 15% Drop in Global Optical Network Equipment Sales; Cisco and VMware are SD-WAN market leaders

  1. Optical Network Equipment Market:

IHS-Markit reports that the optical network equipment market slumped 3% in the third quarter from the same period last year.  Huawei was #1 in optical network sales, followed by Ciena, which ranked first in North America where Huawei isn’t permitted to sell its gear.

Highlights:

  • In the third quarter of 2017 (Q3 2017), the global optical equipment market declined 15 percent quarter over quarter and 3 percent year over year as North America, Latin America and EMEA (Europe, the Middle East and Africa) experienced significant reductions in spending; the Asia Pacific region was up 2 percent on a year-over-year basis
  • The metro wavelength-division multiplexing (WDM) segment was down slightly in Q3 2017 from the prior quarter but increased 3 percent from a year ago; long-haul WDM declined 9 percent year over year
  • Huawei remained the worldwide optical equipment market leader in Q3 2017; Ciena was the number-two optical equipment vendor by revenue globally and maintained its number-one position in North America

IHS-Markit analysis:

The worldwide optical equipment market declined 15 percent sequentially and 3 percent year over year in Q3 2017 as soft growth in the Asia Pacific region was not sufficient to offset the declines in EMEA, North America and Latin America.

Recent performance in some corners of the optical components market has many in the industry looking to the market in China and questioning whether it can sustain the high investment levels seen over the past 18 months. While China was indeed down sharply sequentially as is typical for the quarter, it did manage to stay in growth territory on a year-over-year basis. Recent bid activity in China indicates that further significant investments in backbone and provincial networks are still ahead.

In Q3 2017, the WDM equipment segment declined 15 percent from the prior quarter and was down 2 percent from a year ago. The metro WDM segment fell slightly quarter over quarter, but increased 3 percent year over year, supporting our view that this will be the main growth vector for the market moving forward. The long-haul segment sank 23 percent quarter over quarter and was down 9 percent year over year. Subsea revenue also declined both sequentially and on a year-over-year basis in Q3 2017.

Huawei remained the optical equipment market leader in Q3 2017 despite a significant seasonal drop in revenue both sequentially and year over year. Tepid spending in Western Europe was responsible for a large part of Huawei’s overall decline in the quarter. Ciena moved back up to the number-two position worldwide for Q3 2017. The company continues to be the dominant optical equipment vendor in North America, and it also made notable progress outside its home market in Q3 2017 with strong year-over-year gains in EMEA, Latin America and Asia Pacific.

Analyst Quotes:

“The metro WDM segment fell slightly quarter over quarter, but increased 3% year over year, supporting our view that this will be the main growth vector for the market moving forward,” report author Heidi Adams said.

“Huawei remained the optical equipment market leader in Q3 2017 despite a significant seasonal drop in revenue both sequentially and year over year,” Adams said. “Tepid spending in Western Europe was responsible for a large part of Huawei’s overall decline in the quarter.”

Ciena “continues to be the dominant optical equipment vendor in North America, and it also made notable progress outside its home market in Q3 2017 with strong year-over-year gains in EMEA, Latin America and Asia Pacific,” Adams added.

Optical report synopsis:

The IHS Markit optical network hardware report tracks the global market for metro and long-haul WDM and Synchronous Optical Networking (SONET)/Synchronous Digital Hierarchy (SDH) equipment, Ethernet optical ports, SONET/SDH ports and WDM ports. The report provides market size, market share, forecasts through 2021, analysis and trends.

References:

https://technology.ihs.com/597065/optical-network-hardware-market-cools-off-in-q3-2017

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Related article:

Optical Networks Booming in India

 

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2. SD-WAN Market:

IHS Markit offered a much more bullish assessment for software-defined (SD) WAN vendors.

Consolidation and acquisitions are well underway in the software-defined wide area network (SD-WAN) market as vendors race to include SD-WAN technology in their offerings. Following Cisco’s acquisition of Viptela, VMware carried out its own acquisition of VeloCloud, the SD-WAN revenue leader in the first half of 2017, for an undisclosed amount.

“VMware and Cisco have acquired the two SD-WAN market share leaders, making the SD-WAN market a two-horse race for the number-one spot,” said Cliff Grossner, PhD and senior research director/advisor for cloud and data center markets at IHS Markit.  “And we could see even more consolidation as vendors set out to add SD‑WAN to their capability sets, especially since the technology is key to supporting connectivity in the multi-clouds that enterprises are building.”

According to the IHS Markit Data Center and Enterprise SDN Hardware and Software Biannual Market Tracker, SD-WAN is currently a small market, totaling just $137 million worldwide in the first half of 2017 (H1 2017). However, global SD-WAN hardware and software revenue is forecast to reach $3.3 billion by 2021 as service providers partner with SD-WAN vendors to deploy overlay solutions — and as virtual network function (VNF)–based solutions become more closely integrated with carrier operations support systems (OSS) and business support systems (BSS).

“Currently, the majority of SD-WAN revenue is from appliances, with early deployments focused on rolling out devices at branch offices,” Grossner said. “Moving forward, we expect a larger portion of SD-WAN revenue to come from control and management software as users increasingly adopt application visibility and analytics services.”

More highlights from the IHS Markit data center and enterprise SDN report:

  • Globally, data center and enterprise software-defined networking (SDN) revenue for in-use SDN-capable Ethernet switches, SDN controllers and SD-WAN increased 5.4 percent in H1 2017 from H2 2016, to $1.93 billion
  • Based on in-use SDN revenue, Cisco was the number-one market share leader in the SDN market in H1 2017, followed by Arista, White Box, VMware and Hewlett Packard Enterprise
  • Looking at the individual SDN categories in H1 2017, White Box was the front runner in bare metal switch revenue, VMware led the SDN controller market segment, Dell held 45 percent of branded bare metal switch revenue and Hewlett Packard Enterprise had the largest share of total SDN-capable (in-use and not-in-use) branded Ethernet switch ports

Reference:

https://technology.ihs.com/597071/sd-wan-market-a-two-horse-race-between-cisco-and-vmware-ihs-markit-says

 

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