Demand for optical transport DWDM equipment is forecast to exceed $17 billion by 2026, according to a new Dell’Oro Group report.
The $17 billion in revenue for dense wavelength-division multiplexing (DWDM) equipment represents the bulk of revenue for the total optical transport equipment market. Dell’Oro forecasts the total market to grow at a 3% compound annual growth rate (CAGR) to $18 billion by 2026 as a result of sales of DWDM systems delivering wavelength speeds over 200 Gbit/s.
“Although there is a ton of market turbulence, we do not see demand for DWDM equipment letting up,” said Jimmy Yu, Vice President at Dell’Oro Group. “In fact, the biggest issue is that demand seems to be growing faster than supply. Hence, even if a mild recession were to occur, we think the worst case scenario is that demand will align with supply sooner.
“Hence, we are projecting continuous growth for DWDM system revenues. The only difference over the next five years, compared to previous years, is that we are expecting more growth from DWDM Long Haul since IPoDWDM should lower the use of WDM Metro systems in data center interconnect,” added Yu.
Dell’Oro predicts that DWDM long-haul revenue will grow at a five-year CAGR of 5%. Over the same period, the research group forecasts that metro WDM revenue will grow at a CAGR of 3%.
Additional highlights from the Optical Transport 5-Year July 2022 Forecast Report:
- DWDM Long Haul revenue is forecasted to grow at a five-year compounded annual growth rate (CAGR) of 5 percent.
- WDM Metro revenue is forecasted to grow at a five-year CAGR of 3 percent.
- Capacity shipments each year are projected to grow at an average annual rate of 30+ percent.
- Spectral efficiency is expected to improve at an average annual rate of 9 percent.
Dell’Oro forecasts that DWDM long-haul system sales will grow faster than wavelength division multiplexing (WDM) metro system sales over this five-year period. While the DWDM market is experiencing quite a bit of “market turbulence,” demand is not expected to decrease, said Jimmy Yu, VP at Dell’Oro Group, in a statement.
Capacity shipments each year are projected to grow at an average annual rate of over 30%, according to Dell’Oro. The group also predicts that spectral efficiency will improve at an average annual rate of 9%.
Overall, the optical transport equipment market grew 2% year-over-year in Q1, largely from increased market growth in the Americas, according to another recent report by Dell’Oro. The war in Ukraine, COVID lockdowns, supply chain constraints and inflation all contributed to a decline in the optical transport equipment market in Europe, the Asia-Pacific and China.
Researchers at Omdia are also bullish about growth in the optical network market, which they project will exceed $20 billion by 2027. Analysts at Omdia forecast that the metro WDM market will exceed $9 billion by 2026.