IHS Markit: Ciena tops the list of optical equipment vendors + Cignal AI’s OFC Preview

By Heidi Adams, executive director, network infrastructure, IHS Markit

Each year IHS Markit surveys service providers, in order to find out which companies they view as the leaders of the optical equipment market. The survey also explores their perceptions of vendors in key decision metrics, like pricing, total cost of ownership, technology innovation, research-and-development (R&D) investment, and product reliability.

Following are some of the key findings from this year’s survey:

Optical equipment vendor leaders:

In brand awareness, respondents perceive Ciena, Huawei, and Nokia as the overall leaders for optical transmission and switching equipment in 2018, with no change in the rankings from last year. These results are well aligned with positioning in the global optical network hardware market in the first three quarters of 2018, where Huawei, Ciena, and Nokia were ranked as the top three vendors by market share in this period.

Ciena was the most cited leader in optical DCI, with Huawei and Infinera tied for second place. Ciena also made significant strides this year in market perception for leadership in optical disaggregation, rising from third position in our 2017 survey to first-ranked position in 2018. Coriant (now Infinera), Huawei and Nokia all tied for second place.

Purchasing criteria:

IHS Markit survey respondents were also asked to identify the leaders in purchasing criteria, including pricing, technology innovation, product reliability, service and support and investment in research and development. The top three vendor selection criteria for optical equipment purchasing decisions in 2018 were, as follows:

  1. Product reliability
  2. Pricing
  3. Total cost of ownership

Ciena was the leader in 2018 for service provider perception of vendor leadership in product reliability, technology innovation, management software, and investment in research and development. Huawei topped the list for service provider perception of vendor leadership in pricing, total cost of ownership, solution breadth, and financial stability. Nokia was perceived as the leader in service and support for optical networks.

Optical Equipment Vendor Leadership Service Provider Survey – 2018

This survey explores how service providers evaluate and select optical transmission and switching equipment suppliers. It covers vendors installed and under evaluation and service provider opinions of vendors, including on key vendor selection criteria.


Cignal AI on OFC 2019–

400ZR Steals the Show:

No single topic at OFC will command as much attention as 400ZR, which is based on fourth-generation coherent technology and an OIF standard for coherent short reach DCI applications. Product development is well underway with over a dozen component and equipment companies spending in excess of $300M in this effort. The market for short reach coherent extends well beyond the DCI needs of Microsoft and Google. Derivatives (known as ZR+ or ZR plus) are emerging which are designed to meet the broader needs of network operators everywhere. ZR is the first coherent technology that will be both standardized and pluggable, and the emergence of ZR products will shake up the optical equipment landscape. One major impact is that 10G WDM will become obsolete in its only remaining stronghold- the edge of the optical network. The greater question is what role standalone optical hardware will play in the network as the performance and interoperability of coherent pluggables improve. Expect a cascade of activity at OFC from component and equipment companies as they uncover their ZR plans and demonstrate the latest optical engines, and some bombshell announcements and partnerships from the leaders in this space – Inphi, Acacia, Ciena, Cisco, Huawei, Nokia, and NTT Electronics.

While fourth-generation 400G products have been announced at OFC already for the last two years, 2019 is the year that these products start deploying for revenue. Starting in early 2019, third generation solutions from Acacia (via multiple hardware vendors), Nokia, Huawei, Fujitsu, and Infinera will join Ciena in live network deployments. Now that 400G is deployed, there will be multiple roadmap announcements at OFC seeking to leapfrog 400G and propose the next generation of coherent optical speeds. 600G is a given, but there will be 800G and perhaps 1Tbps announcements as well. Components suppliers and equipment manufacturers will show roadmaps to higher speed sixthgeneration coherent optical components in preparation for a 2020 introduction.

We expect Infinera to disclose more detail on its ICE6 R&D efforts and would not be surprised to hear Ciena talk about a successor to the Wavelogic AI now that competitive products are arriving in the market.

Disaggregation Continues, with Many Definitions: 

The disaggregation trend will continue to gain strength at OFC, but the definition will continue to change. Whereas the original concept was complete separation of switching transponders, ROADMs, and perhaps even components into separately manageable elements, now new solutions are starting to look more like traditional optical equipment. Compact modular systems, which are the most visible components of a disaggregation strategy, have moved from monolithic transponder or open line systems to more complex devices that can include switching and multiple functions in the same shelf. Some systems now even have modularity via cards (although they are called “sleds” rather than “cards”), making them look more like traditional systems in everything but physical dimensions. Several large operators are skeptical about disaggregation, while several others agree with the concept but consider current solutions too difficult to manage. Regardless, the industry-wide shift to disaggregation will accelerate as implementation becomes easier and better attuned to the needs of a wider variety of customers. General availability and customer announcements for 2019 are expected from several vendors, including ADVA, Cisco, Coriant, Fujitsu, and Nokia. In addition to the compact modular announcements,

Cignal AI Raises Forecast for Asia Optical Hardware Market while NA declined for 8th consecutive quarter

Optical hardware sales throughout Asia surged in 3Q18, fueled by double digit increases in China and Japan, and a turnaround in India, according to the third quarter 2018 (3Q18) Optical Hardware Report from research firm Cignal AI. With strong momentum expected to continue, we raised our estimates for Asia.

North America continued to decline for the eighth consecutive quarter, as weakness in the traditional operator market was not offset by strong sales to cloud and color operators.

“China bounced back more quickly than expected following the ZTE shutdown, and outside vendors Nokia and Ciena saw a triple-digit increase in Japan during the third quarter,” said Scott Wilkinson, lead analyst, Optical Hardware for Cignal AI. “RoAPAC contributed to the success in Asia as well. While we expected a slight slowdown this year there will likely be net increases for the year, driven largely by sales in India.”

Other findings in the 3Q18 Optical Hardware Report;

  • Ciena was the only vendor among the top 5 that grew revenue in North America, thanks to sales to cloud and colo operators.
  • EMEA saw double-digit growth during the quarter, and this momentum is anticipated to continue given traditional fourth-quarter spending increases.
  • An expected turnaround in CALA did not materialize, as spending in the region continued to decline.

Optical Vendor Summary Reports

A new feature of the Optical Hardware Report this quarter are Optical Vendor Summary Reports which examine in depth the most recent quarterly results and items of interest about vendors in the optical market. Reports this quarter cover ADVACienaFujitsuHuaweiInfinera/Coriant and Nokia.

About 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. The analysis includes an Excel database as well as PDF and PowerPoint summaries. Subscribers to the Optical Hardware Report also have access to Cignal AI’s real-time news briefs on current market events, Active Insight.

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.


IHS Markit: Data Center Interconnect (DCI) is Fastest-growing Application for Optical Networking

A significant driver for innovation in the optical market, data center interconnect (DCI) is the fastest-growing application for optical networking equipment, according to a new study from business information provider IHS Markit. Eighty-six percent of service providers polled for the Optical Network Applications Survey have plans to support DCI applications in their networks.

“Data center interconnect is enjoying a meteoric rise as the hottest segment in the optical networking applications space,” said Heidi Adams, senior research director for transport networks at IHS Markit. “Service providers are becoming increasingly invested in the DCI market, both for providing interconnect between their own data centers and for offering DCI services to internet content providers and enterprises. We estimate that service providers will account for around half of all DCI equipment spending in 2018.”

The optical data center equipment market reached $1.4 billion in sales in the first half of 2018, posting 19 percent year-over-year growth, according to IHS Markit. A key driver of the market is the compact DCI sub segment, which notched a 173 percent growth rate during this same time period.

“‘Compact’ DCI equipment is designed to fit within a data center environment from the form factor, power consumption and operational perspectives,” Adams said. “It’s optimized to meet the requirements of internet content providers like Google, AWS, Facebook, Microsoft and Apple.”

The top three vendors in the compact DCI sub segment are Ciena, Infinera and Cisco, who collectively account for three-quarters of the market.

Additional DCI highlights

  • Cost per port is the leading criterion among survey respondents for the selection of equipment for DCI applications.
  • 100G is the main currency for line-side DCI interfaces in 2018, declining in favor of 400G by 2021.
  • IHS Markit forecasts the total DCI market to grow at a 15 percent compound annual growth rate (CAGR) from 2017 to 2022, representing a higher rate of growth than the overall WDM market.

Optical Network Applications Service Provider Survey – 2018

This survey analyzes the trends and assesses the needs of service providers using emerging optical networking architectures. It covers data center interconnect, packet-optical equipment and software-defined networking for transport networks. For the survey, IHS Markit interviewed 22 service providers who have deployed packet-optical transport, optical DCI and/or transport SDNs or will do so in the future.

DCI, Packet-Optical & OTN Equipment Market Tracker

This biannual report provides worldwide and regional vendor market share, market size, forecasts through 2022, analysis and trends for data center interconnect equipment, packet-optical transport systems, and OTN transport and switching hardware.




Cignal AI: Record Cloud and Colo Optical Hardware Spending in 2Q18

by Andres Schmitt

Ciena Leads Sales to North American Cloud/Colo Operators; Huawei Sees Strong Demand from Chinese Cloud Giants

Sales of optical equipment to the cloud and colo market grew rapidly, reaching record levels in 2Q18, according to the most recent Optical Customer Markets Report issued by networking component and equipment market research firm Cignal AI. Cloud and colo operators such as Google, Microsoft, and Amazon still account for only a fraction of global optical equipment spending but were nearly a quarter of all North American operator purchases during 2Q18.

“While cloud and colo spending is still not near traditional telco demand for optical transport equipment, the balance is shifting. This is particularly true in North America, where cloud and colo operators now provide both technical and financial leadership to the supply chain,” said Andrew Schmitt, Directing Analyst at Cignal AI.

Released quarterly, the Optical Customer Markets Report quantifies optical equipment sales to five key customer markets – incumbent, wholesale, cable MSO, cloud and colo, and enterprise and government. The current report includes results through the 2Q18 and details equipment vendor market share for sales to cloud operators. Regional forecasts, based on expected spending trends by customer market, are also updated.

Additional key findings in the 2Q18 Optical Customer Markets Report include:

  • Incumbent spending accounts for the largest share of all optical spending in the market. In fact, incumbent spending in China is as much as all spending by other incumbent operators worldwide, combined. Outlays by EMEA incumbents increased again in the most recent quarter.
  • Cable MSO spending in North America continues to be very strong and grew both quarter-over-quarter and year-over-year.
  • Ciena led other vendors in direct sales to the cloud/colo market led by strength from the WaveServer platform. Also, newly-combined Infinera and Coriant became the second largest supplier of optical equipment to these customers. Huawei also continues to grow its market share as a result of growing demand from Baidu, Alibaba and Tencent.

About the Optical Customer Markets Report

The Optical Customer Markets Report tracks optical equipment spending by end customer market type and provides forecasts based on expected spending trends on a regional basis. Deliverables include an Excel file with complete data set, PowerPoint summary and Optical Equipment Active Insight.

The report includes revenue-based market size for all end customer markets across all regions, with market share for sales to the cloud and colo segment broken out on a worldwide basis. Vendors examined include Adtran, ADVA, Ciena, Cisco, Coriant, Cyan, ECI, Ekinops, Fiberhome, Fujitsu Networks, Huawei, Infinera, Juniper Networks, NEC, Nokia, Padtec, TE Conn, Transmode, Xtera and ZTE.

Full report details, as well as other articles and presentations, are available to users who register for a free account on the Cignal AI website.

About Cignal AI

Cignal AI provides active and insightful market research for the networking component and equipment market and the market’s end customers. Our work blends expertise from a variety of disciplines to create a uniquely informed perspective on the evolution of networking communications.

Addendum:  Data Center Interconnect (DCI) Market Share

Cignal AI: Compact Modular Optical Equipment Market to hit $1 Billion in 2018

Cignal AI Raises 200G and 400G Coherent Forecasts in Latest Quarterly Optical Applications Report

Editor’s Introduction:

Compact Modular Equipment is designed to address the growing interest in optical hardware disaggregation.  There’s a desire to build networks from modular components, which are not coupled to a particular vendor’s hardware or software.  The ability to run an optical network operating system (NOS) on any vendor’s hardware makes a tremendous difference in many ways.  Customers can now select network equipment from different sources and be assured that a shared, portable, open source, modular operating environment would allow this equipment to work together. The ultimate goal is to completely divorce the network operating system from all underlying hardware (line cards, chassis, etc.) as well as to separate applications from the operating system. The major benefit is greater flexibility and faster time to market. In traditional systems, a service provider is relegated to the vendor’s software update cycles, meaning that it can take a long time to introduce new service offerings. Disaggregation provides the agility to enable new offerings that roll out in days or weeks rather than months, and this is critical to establishing new revenue streams for major service providers.

Compact modular equipment vendors reported record revenues in the second quarter of 2018, according to the latest Optical Applications Report from networking component and equipment market research firm Cignal AI. This category measures hardware designed specifically for use in DCI, open & disaggregated hardware applications and is on track to top $1 billion in revenue this year. Cignal AI has raised its CY18 forecast for 200G and 400G coherent port shipments and cut its 100G coherent forecast.

“Operators are rapidly adopting second and third generation coherent technology as they seek to lower their cost per bit and achieve better performance. This has resulted in higher than expected demand for 200G and 400G speeds this year, at the expense of first-generation coherent,” said Andrew Schmitt, lead analyst for Cignal AI. “Compounding this trend is the growing adoption of 200G CFP2 DCO modules, which allows coherent technology to integrate with switches and routers more easily than earlier solutions.”

Further analysis is detailed in Cignal AI’s Optical Applications Report, which is released quarterly. The latest 2Q18 issue updates market share for the second quarter of 2018 and provides forecasts in three key markets: compact modular equipment, advanced packet-OTN switching hardware, and 100G+ coherent WDM port shipments.

Other key findings in the 2Q18 report include:

  • Ciena and Huawei Top Compact Modular Market Growth – In this record quarter, Ciena and Huawei were the fastest-growing vendors in the compact modular segment. Ciena benefits from its third-generation coherent technology, while Huawei was lifted by greater adoption from Chinese cloud operators. New entrant Nokia also grew share in its second quarter of serving this market.
  • Packet-OTN Market Grows with Incumbent Adoption – More incumbent network operators are using packet-OTN switching hardware to upgrade their transport networks. In North America, this segment grew 30 percent year-over-year as result of more deployments by Verizon and other large incumbents. Growth was also significant in EMEA and India, where Nokia has taken significant market share.
  • Third Generation Coherent Gaining Momentum – Even though the overall market slowed in 2Q18 as a result of ZTE’s shutdown, other vendors experienced healthy sales growth. Third generation coherent solutions are picking up steam with Ciena’s 400G offering doing well. Acacia, Huawei, Nokia, and NTT Electronics based solutions will reach the market within the next two quarters to challenge Ciena’s lead.

About the Optical Applications Report
The Cignal AI Optical Applications Report includes market share and forecasts for revenue and port shipments for optical equipment designed to meet the needs of specific applications: 100G+ coherent, and compact modular and advanced packet-OTN switching hardware. Deliverables include Excel file with complete data set, PowerPoint summary and Optical Equipment Active Insight.

The report features revenue-based market size and share for the hardware categories and detailed port-based market size and vendor market share for 100G+ shipments. Vendors examined include Acacia, Adtran, ADVA, Ciena, Cisco, Coriant, Cyan, ECI, Ekinops, Fiberhome, Fujitsu, Huawei, Infinera, Inphi, Juniper Networks, NEC, Nokia, NTT Electronics (NEL), Padtec, TE Conn, Transmode, Xtera and ZTE.

Full report details, as well as articles and presentations, are available to clients who register an account on the Cignal AI website.

About Cignal AI

Cignal AI provides active and insightful market research for the networking component and equipment market and the market’s end customers. Our work blends expertise from a variety of disciplines to create a uniquely informed perspective on the evolution of networking communications.

Contact Us/Purchase Report

Sales: sales@cignal.ai

IHS Markit & Cignal AI: Global Optical Equipment Market Down but EMEA Up

By Heidi Adams, senior research director, transport networks, IHS Markit


  • In the second quarter of 2018 (Q2 2018), global optical network hardware revenue totaled $3.5 billion, decreasing 7 percent on a year-over-year basis.
  • The global Q2 2018 optical equipment market net of China was down 3 percent year over year. China itself declined 17 percent year over year.
  • Wavelength division multiplexing (WDM) revenue totaled $3.3 billion in Q2 2018, up 9 percent quarter over quarter, but down 6 percent from a year ago.
  • Huawei remained the overall optical equipment market leader in Q2 2018, increasing its market share to a new high of 36 percent. Ciena moved into the number-two position, and Nokia dropped to third.

Our analysis

The optical equipment market continued to struggle in Q2 2018 due to the following factors:

  • Lower spending in China; ZTE shuttered major operations for most of the quarter
  • A big drop in submarine line terminal equipment (SLTE) spending
  • A slowdown in long-haul spending by tier-1 operators in North America

Even a healthy internet content provider (ICP) segment has not been enough to offset the spending declines of the major operators in North America. Europe, the Middle East and Africa (EMEA) remained flat year over year. The Caribbean and Latin America (CALA) saw sequential growth, but the region continued its overall year-over-year downward trend of diminishing network infrastructure investment. Meanwhile, in Asia Pacific, India remains very strong for optical spending and Japan is emerging as an area of renewed investment.

The WDM equipment segment increased sequentially but declined on a year-over-year basis – as did the metro and long-haul WDM sub segments. IHS Markit continues to view the metro WDM sub segment as the main growth vector for the market through at least 2022. Subsea-related optical equipment investment continues to be project driven and highly variable, with second quarter SLTE at half the level seen in the same period last year.

Looking ahead, IHS Markit forecasts a positive optical equipment market compound annual growth rate (CAGR) of 4 percent from 2017 through 2022.

Optical Network Hardware Market Tracker – Q2 2018

This report tracks the global market for metro and long-haul WDM and SONET/SDH equipment and SONET/SDH and WDM ports. It provides market size, market share, forecasts through 2022, analysis and trends.


Cignal AI Reports 2Q18 EMEA Optical Spending Offset Weakness in North America

by Andrew Schmitt, Founder – Cignal AI

Research firm Cignal AI released its second quarter 2018 (2Q18) optical hardware report, which identified sustained spending growth in the EMEA region despite the absence of major supplier ZTE. EMEA operators increased optical hardware spending 6 percent year-over-year (YoY), but a soft market persisted in North America, where slow spending by incumbent operators has not been offset by the spending of cloud operators, which remains flat.

“Spending on optical hardware in North America declined again in 2Q18, but the trend of big vendors performing relatively better continued,” said Andrew Schmitt, lead analyst for Cignal AI. “During the past two years, the top 3 optical equipment vendors in the region consolidated 10 percent of the market at the expense of smaller competitors. It’s becoming a much tougher fight for smaller optical equipment vendors in North America.”

Cignal AI’s Optical Hardware Report is issued each quarter and examines optical equipment revenue across all regions and equipment types. Shipment information and guidance from individual equipment companies are included, and forecasts are based on spending trends in each region and the equipment types within those regions.

Key Findings In 2Q18 Optical Hardware Report:

  • EMEA spending rose as almost all vendors reported growth in the region. Vendors continue to be optimistic on large incumbent operator spending. Ciena reached record high revenue in EMEA during the quarter, while Nokia also notably increased revenue, excluding SLTE equipment.
  • There was no return to growth for North America, as optical hardware spending continued its decline. Weakness is deeply concentrated among the smaller vendors, who experienced double-digit YoY revenue declines, while the largest vendors all grew revenue.
  • With the absence of ZTE in the market this quarter, China had a sharp drop in revenue. Yet Huawei reported all-time record high revenue in China. Carriers did not curb market activity until ZTE’s return contrary to our assumptions.
  • Japanese spending was very strong. Ciena and Nokia both performed well in Japan and offset revenue declines experienced by traditional Japanese equipment vendors Fujitsu and NEC.
  • Excluding ZTE, revenue in RoAPAC grew, though both Ciena and Nokia saw their revenue decline YoY for the first time in two years. Huawei reported strong growth in the market.

Optical Hardware Report Enhancements

Last quarter, Cignal AI launched its Optical Hardware Market Share Tracker. The Tracker captured this quarter’s most 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.

All Cignal AI reports use Excel-based pivot tables which enable clients to quickly and easily view specific market segments. These features are particularly useful this quarter as it allows YoY results for regions to be viewed with ZTE excluded from the calculation. The reports now include rolling 4 quarter analysis and allow clients to see vendor results in this format as well.

About the Optical Hardware Report

The Cignal AI Optical Hardware Report includes market share and forecasts for optical transport hardware used in optical networks worldwide. Analysis includes an Excel database and PowerPoint summaries, plus Cignal AI’s real-time news briefs on current market events, Active Insight.

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, Cyan, ECI, Ekinops, Fiberhome, Fujitsu, Huawei, Infinera, Juniper Networks, Mitsubishi Electric, MRV, NEC, Nokia, Padtec, TE Conn, Transmode, Xtera and ZTE.

Full report details, as well as articles and presentations, are available to clients who register an account on the Cignal AI website.

Cignal AI’s Optical Customer Markets Report: Optical spending up in China & NA; Down for cloud service providers & other regions

Cignal AI’s (Andrew Schmitt) latest  Optical Customer Markets Report states that spending growth by cable Multiple System Operators (MSOs) led all other North American industry verticals during first quarter 2018. The report also reveals that contrary to continued increase in China’s optical spending, incumbent network operator spending in North America and Europe, Middle East and Africa (EMEA) on optical transport equipment continues to decline.  Spending in North America grew 30 percent and outpaced all other customer verticals, including cloud operators.

Indeed, optical equipment spending by cloud operators has stalled due to rapidly declining prices and the use of IP-over-WDM as a substitute. Despite the downward trend, however, Ciena and Infinera continue to increase market share in the cloud optical network market.

“In North America, cable MSOs were the strongest performing customer market during the first quarter of 2018,” says Andrew Schmitt, lead analyst at Cignal AI. “Cloud operators are not increasing purchases of optical equipment, though common belief right now is just the opposite. The revenue growth from cloud operators experienced by Ciena and Infinera came at the expense of other vendors’ sales.”

Other key findings in the report include China being the largest source of optical hardware market growth, almost single-handedly representing the one-third global spending by Asia. Global spending by cable MSOs grew 5% year-over-year in the first quarter, with North America increasing 30%.

Other findings of the report were outlined in the press release and included:

  • Ciena and Infinera sales growth in the cloud and colo market came during a period of overall spending decline among these customers (see above chart).
  • Optical equipment spending by cloud operators has stalled, which contradicts the common perception that cloud operators like Amazon, Google and Microsoft are increasing spending on optical transport equipment. Growth in the cloud market has been inhibited by rapidly declining prices and the use of IP over WDM as a substitute.
  • One third of global spending on optical hardware is in Asia, with almost all coming from Chinese incumbent operators.
  • Cable MSO global spending grew 5 percent year-over-year in the first quarter.

Cignal AI’s Optical Customer Markets Report is issued quarterly and quantifies optical equipment sales to five key customer markets as well as equipment vendor market share for sales to cloud operators.


From a separate Cignal AI market research report, here’s the latest YoY Revenue % increase/decrease for various segments of the optical networking market by country or region and Grand Total:


Chart courtesy of Cignal AI

Cignal AI: Optical Hardware Spending Grows in Europe, Asia Pacific in 1Q2018; flat in North America

According to research firm Cignal AI, first quarter 2018 growth in optical hardware sales in the Asia Pacific region was fueled by additional increases in spending outside of China. Sales in the EMEA region also grew YoY, and larger equipment vendors express optimism about incumbent operators future spending. Cignal AI’s report also illustrates an ongoing a spending decline in the North American market, which has proved weaker than expected.

“The massive spending in China during 2017 has slackened during 1Q18, resulting in flat year-over-year growth. A precise determination of results for the region is complicated by the ongoing ZTE export ban and ZTE’s communication blackout,” said Andrew Schmitt, lead analyst for Cignal AI. “Meanwhile, North America continues to be weaker than expected in an aggressive pricing environment.”

Cignal AI’s Optical Hardware Report is issued each quarter and examines optical equipment revenue across all regions and equipment types. Shipment information and guidance from individual equipment companies are included, and forecasts are based on spending trends in each region and the equipment types within those regions.

Key Findings In 1Q18 Optical Hardware Report:

  • RoAPAC exceeds forecasts, while Chinese market softens.Optical hardware spending in China was flat year-over-year. Cignal AI estimates ZTE experienced a soft quarter even before the impact of the export ban. Outside of China, the RoAPAC continued to grow, with Huawei, Nokia, and Coriant as primary beneficiaries.
  • North American optical hardware spending remains weak. North American spending declined by nearly double digits YoY in the first quarter. Cignal AI expected the region to rebound in 2018 with the return of stabilized pricing. But aggressive pricing continues and may impact total spending levels for the entire year. Infinera was a bright spot in the North American market as sales of its new ICE3-based products helped lead a revenue turnaround for the company.
  • Optimism abounds in EMEA. Vendors are optimistic about ongoing spending trends in the EMEA region, particularly among the large incumbents. This bodes well for Nokia and Ciena; two companies well-positioned to take advantage of new market opportunities.

Real-Time Optical Hardware Tracker Now Available from Cignal AI

Cignal AI launched its new and unique Optical Hardware Market Share Tracker. The tracker provides real-time visibility on individual vendors’ ongoing results as soon as they are reported. This insightful tool gives Cignal AI clients the freshest, most up to date market data possible to enable well-informed market analysis.

About the Optical Hardware Report

The Cignal AI Optical Hardware Report includes market share and forecasts for optical transport hardware used in optical networks worldwide. Analysis includes an Excel database and PowerPoint summaries, plus Cignal AI’s real-time news briefs on current market events, Active Insight. The Hardware 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, Cyan, ECI, Ekinops, Fiberhome, Fujitsu, Huawei, Infinera, Juniper Networks, Mitsubishi Electric, MRV, NEC, Nokia, Padtec, TE Conn, Transmode, Xtera and ZTE.

Full report details, as well as articles and presentations, are available to users who register for a free account on the Cignal AI website.


Cignal AI: Strong 4Q-2017 Optical Equipment Growth in Asia, EMEA led by Metro WDM Gear

Cignal AI’s quarterly optical hardware report was published last week and includes results for almost all vendors in 4Q2017. Global spending on optical network equipment surged due to larger than usual seasonal growth in China and EMEA combined with continued elevated spending in rest of APAC (RoAPAC) = APAC x Japan and China.  However, North America and CALA regions each suffered a double digit decline.  Here are Cignal AI’s YoY % change from 4Q2016 to 4Q2017:

Key takeaways for the 4th quarter of 2017:

  • China – When compared to 4Q2016’s weak spending, 4Q2017’s Chinese spending was massive, with year-over-year revenue increasing 40 percent (see chart above) and reaching record quarterly levels. We expect further discussion with Chinese vendors to provide greater insight on what drove this surge.
  • EMEA – Carriers maxed out capex at the end of the year and spent 21 percent more YoY. Beneficiaries of this spending were Huawei and Nokia, while Infinera also reported significant EMEA revenue from a large North American cloud/colo vendor. Vendors believe that 2018 will be better and they expect incumbent operators to spend more.
  • Japan – Spending was up 13 percent YoY for the quarter. NEC and Fujitsu accounted for 80 percent of all optical equipment sold in the region in 2014, but by 2017 it has dropped to 65 percent, as vendors such as Huawei, Ciena, and Infinera made inroads in this market. Western vendors are encouraged, and now consider Japan an area of potential expansion.
  • RoAPAC – Nokia and Ciena had record revenue in RoAPAC during 4Q2017. Ciena’s revenue exceeded $100 million in the region, while Nokia’s nearly matched that of Huawei. Spending in India remained high, though Cignal AI is monitoring for the impact of the upcoming merger between Jio and Reliance.
  • North America – 4Q17 spending continued to slip on a YoY basis for the fifth consecutive quarter with all customer market segments spending at lower levels. Spending by cloud and colo operators has not returned to earlier levels. Multiple vendors also cited continued weakness at Level3/CenturyLink and AT&T, particularly on long-haul WDM equipment. We think AT&T’s spending will be depressed until the end of 2018 as the company prepares its new disaggregated hardware deployment strategy. Component vendors note that shipments used in metro WDM networks such as Verizon’s are trending up for next year.

Image result for optical network hardware market

“One of the biggest surprises in 2017 was massive spending growth in China. Despite slumping purchases from component manufacturers, Chinese optical vendors Huawei and ZTE reported record levels of revenue. A strong component sales rebound should be expected if this divergence was a result of excess inventory,” said Andrew Schmitt, lead analyst for Cignal AI.

Huawei, Nokia, Ciena, Cisco, and Infinera did very well in the EMEA region, according to the Cignal AI report. Huawei, ZTE, Nokia and Ciena all enjoyed a strong quarter overall, thanks in large part to the popularity of their Metro WDM systems and submarine line (undersea cable) terminal equipment (SLTE).

Additional highlights of results for the full year can be found in Cignal AI’s press release.



Separately, Research and Markets has published  “Optical Networking Opportunities in 5G Wireless Networks: 2017-2026” report.  According to a press release:


5G will create considerable new opportunities for the optical networking industry going forward in the 5G infrastructure; both backhaul and fronthaul. However, while optical links have been widely used in the mobile telephony industry for many years, revenue generation from optical networking in the 5G space will require carefully thought through strategies by the optical networking industry as a whole.

5G is poised to dramatically increase the use of fiber optics in some parts of the network, while actually reducing the use of fiber in others:

  • There is a vision of 5G as a converged fiber-wireless network in which short-haul, but very high bandwidth wireless connections will support high data rates, but with fiber almost everywhere else. 5G as it is currently evolving seems more willing than previous generation to make fiber optic deployments a central part of the network and any general standards that emerge. This makes 5G potentially a huge opportunity for the fiber optics industry – including the makers of modules and components as well as the fiber/cable manufacturers themselves.
  • The main beneficiary of the shift towards fiber in the 5G infrastructure will ultimately be NG-PON2. But for now this is really only being championed by one company; Verizon. XGS-PON will provide an interim solution, but the question is for how long?
  • On the other hand, 5G, with its high data rates, seems to imply fiber could present a significant challenge to long-held assumptions about the need for fiber-to-the-premises. This suggests that some of the fiber optic opportunities that have been baked into the product/market strategies of many optical networking firms may turn out to be wrong. A faceoff between 5G and NG-PON as service platforms seem likely in the long run.

5G deployment is currently at an early stage. There is no formal standard yet for 5G and there are many different visions of what 5G will ultimately look like. In particular, fiber opportunities will be impacted by the implementation of new approaches using C-RAN architectures and next-generations interfaces that move beyond CPRI. Fiber opportunities in the 5G infrastructure will also depend on the shifting boundaries between fronthaul and backhaul. The votes are still out on what type of 5G network will ultimately evolve and this will impact the size and growth of the 5G network’s need for fiber optics market accordingly.

In this highly uncertain environment, this report is designed to provide guidance to the optical networking industry and where and how 5G backhaul and fronthaul will present new opportunities over the coming decade.

Included in this report are:

  • An assessment of how current visions of 5G networks vary in terms of their impact on optical network products and fiber optics demand. How will optical links help to support the necessary bandwidth and latency for 5G networks? And what will the concept of an integrated wireless/fiber network mean in practice?

  • An analysis of the type of optical networking products that 5G will require. In this analysis we cover modules (by MSA, data rate, etc.), components and the types of fiber that would be used in an integrated wireless/fiber network. The report is particularly focused on the role of PONs – especially XGS-PON and NG-PON2 – in providing 5G infrastructure. It also examines how interfaces between fiber and base stations/hubs will evolve in the 5G network

  • A granular market ten-year market forecast of fiber optics-related opportunities flowing from 5G deployment. The forecast is provided in both unit shipment and market value terms. It is also broken out by type of transceiver product, cable type, data rate, network segment, country/region, etc.

  • Discussions and assessments of how leading firms in the module and component space are preparing for 5G deployment and what this says about who the fiber optics-related winners and losers will be

  • A discussion of how the deployment of 5G networks as residential broadband platforms will impede the planned use of fiber in the access network. In particular, the report will take a look at how optical networking firms can readjust their marketing strategies to new product and customer types as the 5G revolution takes hold.

Media Contact:

Laura Wood, Senior Manager

IHS Markit: Telecom Revenue +1.1%; CAPEX -1.8% in 2017

Despite unabated exponential growth in network usage, global telecom revenue is on track to grow just 1.1 percent in 2017 over the prior year, according to a new report [1] by business information provider IHS Markit.

Global economic growth prospects, meanwhile, are looking up. IHS Markit macroeconomic indicators point to moderate global economic growth of 3.2 percent for 2017, up from 2.5 percent in 2016, and world real gross domestic product (GDP) is projected to increase 3.2 percent in 2018 and 3.1 percent in 2019.

“Although the telecom sector has been resilient, revenue growth in developed and developing economies has slowed dramatically due to saturation and fierce competition,” said Stéphane Téral, executive director of research and analysis and advisor at IHS Markit. “At this point, every region is showing revenue growth in the low single digits when not declining, and there is no direct positive correlation between slow economic expansion and anemic telecom revenue growth or decline as seen year after year in Europe, for instance.”

China alone is tamping down global telecom capex in 2017:

IHS Markit forecasts a 1.8 percent year-over-year decline in global telecom capital expenditures (capex) in 2017, mainly a result of a 13 percent year-over-year falloff in Chinese telecom capex. Asia Pacific outspends every other region in the world on telecom equipment.

“Call it precision investment, strategically focused investment or tactical investment, but all three of China’s service providers — China Mobile, China Unicom and China Telecom — scaled back their 2017 spending plans, and the end result is another double-digit drop in China’s telecom capex bucket, with mobile infrastructure hit the hardest,” Téral said. “Bringing down capital intensity to reasonable levels of 15 to 20 percent is the chief goal of these operators.”

The virtualization trend:

A transformation is underway in service provider networks, epitomized by software-defined networking (SDN) and network functions virtualization (NFV), which involve the automation of processes such as customer interaction, as well as the addition of more telemetry and analytics with feedback loops into network operations, operations and business support systems, and service assurance.

“Many service providers have deployed new architectural options — including content delivery networks, distributed broadband network gateways, distributed mini data centers in smart central offices, and video optimization,” said Michael Howard, executive director of research and analysis for carrier networks at IHS Markit. “Nearly all operators are madly learning how to use SDN and NFV, and the growing deployments today bring us to declare 2017 as The Year of SDN and NFV.”

Data is the new oil, and AI is the engine:

Big data is becoming more manageable, and operators are leveraging subscriber and network intelligence to support the automation and optimization of their networks using SDN, NFV and initial forays into using analytics, including artificial intelligence (AI) and machine learning (ML).

“Forward-thinking operators are experimenting with how to use anonymized subscriber data and analytics to create targeted services and broker this information to third parties such as retailers and internet content providers like Google,” Téral said. “No matter their size, market or current level of digitization, service providers need to rethink their roles in the new age of information and reset the strategies needed to capitalize on this opportunity.”


Note 1.  The Telecom Trends & Drivers Market Report is published twice annually by IHS-Markit to provide analysis of global and regional market trends and conditions affecting service providers, subscribers, and the global economy. These roughly 40- page reports assess the state of the telecom industry, telling the story of what’s going on now and what we expect in the near and long term, illustrated with charts, graphs, tables, and written analysis. These critical analysis reports are a foundation piece for all market forecasts.

The reports include top takeaways on the economic health of the global telecom/datacom space; regional and global trends, drivers, and analysis for the service provider network sector in the context of the overall economy; financial analysis of the world’s top 10 service providers (revenue growth, capital intensities, free cash flow, debt level); regional enterprise and carrier spending trends; top-level service provider and subscriber forecasts; macroeconomic drivers; and key economic statistics (e.g., unemployment, OECD indicators, GDP growth). The reports are informed by all of IHS Technology research, from market share and forecasts to surveys with telecom service providers and small, medium, and large businesses.


The chart below from Bharti Airtel (India’s largest telecom company) shows that telecom industry revenue has declined in 2017 Q2, Q3, and Q4 with only Q1 showing positive growth.

Image result for pic of telecom revenue in 2017


Optical Network Equipment Vendors:

In a service provider survey report on Optical Networking and equipment vendors, IHS-Markit found Ciena, Huawei and Nokia as the three most popular optical networking equipment vendors. The report also highlighted Data Center Interconnection (DCI) is a huge growth opportunity.

IHS-Markit predicts DCI will be a significant driver for the optical equipment market, surging from 19 percent of overall equipment sales at mid-2017 to nearly 30 percent by 2021.

Ciena was deemed the top DCI vendor by 39 percent of those surveyed by IHS-Markit. Cisco, Coriant, and Infinera each garnered 36 percent of the votes.Last year Ciena reportedly won a DCI deal from rival ADVA Optical, which had a negative impact on ADVA’s operational results.

Ciena also topped the list of top (optical) transport software-defined networking (SDN) vendors, with 46 percent of those surveyed citing the company as a leader in the segment. Adams noted that while this market was still in its early days, Ciena’s continued integration of its Blue Planet software platform with its optical equipment products was driving differentiation in the market.

Cisco attracted the second most votes in terms of transport SDN leadership, followed by Nokia and Infinera.



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