Dell’Oro: Telecom equipment revenues to grow 5% through 2020; Huawei increases market share

Dell’Oro analysts say first half global telecom equipment [1.] revenues were up 4% YoY in 1st half of 2020, as 5G infrastructure investments offset declines due to the impact of the coronavirus pandemic.  The market research firm forecasts a 5% advance for the entire year.

Rollouts of 5G wireless, especially in China, were a primary cause of the first half increases, which benefit the entire supply chain, including telecommunications semiconductors.  China 5G spending surely helped Huawei increase its market share, despite U.S. sanctions.

Note 1. Dell’Oro includes the following types in the telecom equipment market: Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network, SP Router & Carrier Ethernet Switch

In the first half of 2020, double digit growth in mobile infrastructure offset declining investments in broadband access, microwave and optical transport and service provider routers and ethernet switches, Dell’Oro said. Statista analysts in June said 2020 telecom equipment revenues should nearly reach $50 billion.

Rankings of the biggest telecom equipment providers  remained the same in the first half of 2020, with Huawei dominating at 31%, followed by Nokia and Ericsson tied at 14% each, then ZTE at 11% and Cisco at 6%, according to Dell’Oro.

Huawei telecommunications market share 2020

Second quarter results were stronger than expected following a 4% decline in the first quarter. The biggest driver was a strong rebound in China across 5G Radio Access Network, 5G Core and other areas. Supply chain disruptions of the first quarter also stabilized in the second quarter, Dell’Oro said.

Additional key takeaways from the 2Q20 reporting period include:

  • Following the 4% Y/Y decline during 1Q20, the overall telecom equipment market returned to growth in the second quarter, with particularly strong growth in mobile infrastructure and slower but positive growth for Optical Transport and SP Routers & CES, which was more than enough to offset weaker demand for Broadband Access and Microwave Transport.
  • For the 1H20 period, double-digit growth in mobile infrastructure offset declining investments in Broadband Access, Microwave and Optical Transport, and SP Routers & CES.
  • The results in the quarter were stronger than expected, driven by a strong rebound in China across multiple technology segments including 5G RAN, 5G Core, GPON, SP Router & CES, and Optical Transport.
  • Also helping to explain the output acceleration in the quarter was the stabilization of various supply chain disruptions that impacted the results for some of the technology segments in the first quarter.
  • Shifting usage patterns both in terms of location and time and surging Internet traffic due COVID-19 has resulted in some infrastructure capacity upside, albeit still not proportional to the overall traffic surge, reflecting operators ability to address traffic increases and dimension the network for additional peak hours throughout the day using a variety of tools.
  • Even though the pandemic is still inflicting high human and economic losses, the Dell’Oro analyst team believes the more upbeat trends in the second quarter will extend to the second half, propelling the overall telecom equipment market to advance 5% in 2020.

Semiconductor officials are less optimistic for the rest of the year with SIA President John Neuffer recent saying “substantial market uncertainty remains for the rest of the year.”   Semiconductor sales were up 5% in July, reaching $35 billion, but dropped in early August, according to reports.

According to the Semiconductor Industry Association, about 33% of all semiconductors made (the largest category) are devoted to communications, including networking equipment and radios in smartphones.

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References:

Key Takeaways – The Telecom Equipment Market 1H20

 

https://www.fierceelectronics.com/electronics/telecom-equipment-revenues-to-grow-5-through-2020

 

 

 

Top Optical Network Equipment Vendors: Data Center Interconnect & Overall Market

Executive Summary:

Market research firms Dell’Oro and Heavy Reading disagree on who are the top optical network equipment vendors, especially for data center interconnect (DCI).  Obviously, the mega cloud computing/Internet service providers (Google, Amazon, Baidu, Facebook, etc) together account for the overwhelming market for DCI equipment purchased.  None of them disclose who their DWDM vendors are.  It’s well known that most of those mega cloud/Internet players design their own IT equipment (e.g. compute servers, Ethernet switches, Routers, etc), but they don’t design or build DWDM transport gear.

Dell’Oro Group DCI Market Analysis:

Ciena, Cisco and Infinera together command 85% of the disaggregated wavelength-division multiplexing field for DCI optical network equipment market segment, Dell’Oro Group estimates.

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–>This is a big surprise to this author as neither Nokia (via Alcatel-Lucent), Huawei (#1 overall optical network vendor) or ZTE are top tier according to Dell’Oro.  See two graphs below (“Other Voices” section), courtesy of Heavy Reading and IHS-Markit.

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Dell’Oro Group estimated that disaggregated WDM systems reached an annualized revenue run rate of $400 million, growing 225% year-over-year. This is partly because these systems are finding utility in the booming DCI market segment.

Jimmy Yu, VP at Dell’Oro Group, said that while the disaggregation concept is not new, service provider adoption in the data center segment is.

“In most—if not all—purchases, we found that these new systems were being employed in DCI across both metro and long haul spans,” Yu said in a press release. “So far, the largest consumers have been internet content providers that appreciate the platform for its simplicity, capacity, and power savings.”

Yu added that “based on second quarter results, where disaggregated WDM systems represented nearly one-third of the optical DCI equipment purchases made, we have to say that Disaggregated WDM systems are truly hitting the sweet spot for DCI.”

As wireline operators look to diversify their revenue mix, the DCI market has a compelling growth path driven by the consumption and distribution of various data forms over the public internet and private networks.

Outside of DCI, the overall WDM market, which consists of WDM Metro and DWDM Long Haul, grew only 2% year-over-year in the second quarter, says Dell’Oro. The research firm noted that growth was driven by strength in the Asia Pacific region, especially China and India.

The share of 100G WDM wavelength shipments going to DCI was 14% in the quarter, according to Dell’Oro.

About the Report:

The Dell’Oro Group Optical Transport Quarterly Report offers complete, in-depth coverage of the market with tables covering manufacturers’ revenue, average selling prices, unit shipments (by speed including 40 Gbps, 100 Gbps, and >100 Gbps).  The report tracks DWDM long haul terrestrial, WDM metro, multiservice multiplexers (SONET/SDH), optical switch, optical packet platforms, and data center interconnect (metro and long haul).  To purchase this report, call Matt Dear at +1.650.622.9400 x223 or email Matt@DellOro.com.

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Other Voices on Optical Network Equipment Market:

1.  Cignal AI:

Huawei and ZTE saw record shipments of 100-Gbps coherent ports in China during the second quarter of 2017 as well as strong sales in general throughout the region, reports Cignal AI. So what accounts for sour grapes from optical component houses? Inventory corrections at Chinese systems vendors, particularly Huawei, according to the market research firm.

“Demand for optical hardware in China is not slowing down, and equipment vendors are universally providing positive guidance for North America during the second half of the year,” said Andrew Schmitt, lead analyst for Cignal AI. “Operators around the world are shifting spending from long-haul to metro WDM, though this shift is materializing into gains for only a few vendors.”

Optical revenue in China is up 13 percent for the first half of 2017 as compared to the same period in 2016. The weak demand reported by component makers is a result of an ongoing inventory correction (primarily at Huawei), rather than a signal of weak end market demand.

2. IHS-Markit:

Huawei ranked first overall in combined market presence and market leadership in the recent Optical Network Hardware Vendor Scorecard released by IHS Markit.  Huawei received this assessment for its comprehensive performance on multiple benchmarks including reputation for innovation, market share momentum, and global market share.

There are over a dozen vendors around the globe that make and sell optical network equipment. The 10 vendors profiled in this Scorecard–ADVA, Ciena, Cisco, Coriant, ECI, Fujitsu, Huawei, Infinera, Nokia, and ZTE–were selected because they are the top revenue producers of optical hardware.

The Scorecard used concrete data and metrics, including market share, financials and direct feedback from buyers on innovation, product reliability, service and support to evaluate 2016 market performance and future momentum of the top 10 optical network equipment vendors.

IHS Markit optical network hardware vendor scorecard (Source: IHS Markit Optical Network Hardware Vendor Scorecard)

3.  Heavy Reading:

Market share estimates are based on DCI revenue contribution by Heavy Reading’s definition (not disclosed in the teaser briefing). Most vendors do not currently break out from their broader metro WDM revenue the portion accounted for by metro DCI deployments. A few companies did provide Heavy Reading with some general guidance on their revenue from metro DCI. The pie chart figure below shows Heavy Reading’s metro DCI equipment vendor share estimates for 2016.

Note that Adva has the top vendor market share and Cisco is not represented in the figure.

Excerpt

Source:  Heavy Reading

 

References:

http://www.delloro.com/news/disaggregated-wdm-systems-hitting-sweet-spot-data-center-interconnect-according-delloro-group

http://www.fiercetelecom.com/telecom/cisco-ciena-and-infinera-take-dominant-spots-data-center-interconnect-optical-segment-says

https://cignal.ai/2017/08/2q17-optical-hardware-results/

http://www.huawei.com/en/news/2017/8/Huawei-Optical-Network-IHS-Leader

http://www.heavyreading.com/details.asp?sku_id=3503&skuitem_itemid=1728

 

Top Optical Network Equipment Vendors: Data Center Interconnect & Overall Market

Executive Summary:

Market research firms Dell’Oro and Heavy Reading disagree on who are the top optical network equipment vendors, especially for data center interconnect (DCI).  Obviously, the mega cloud computing/Internet service providers (Google, Amazon, Baidu, Facebook, etc) together account for the overwhelming market for DCI equipment purchased.  None of them disclose who their DWDM vendors are.  It’s well known that most of those mega cloud/Internet players design their own IT equipment (e.g. compute servers, Ethernet switches, Routers, etc), but they don’t design or build DWDM transport gear.

Dell’Oro Group DCI Market Analysis:

Ciena, Cisco and Infinera together command 85% of the disaggregated wavelength-division multiplexing field for DCI optical network equipment market segment, Dell’Oro Group estimates.

……………………………………………………………………………………………………..

–>This is a big surprise to this author as neither Nokia (via Alcatel-Lucent), Huawei (#1 overall optical network vendor) or ZTE are top tier according to Dell’Oro.  See two graphs below (“Other Voices” section), courtesy of Heavy Reading and IHS-Markit.

……………………………………………………………………………………………………..

Dell’Oro Group estimated that disaggregated WDM systems reached an annualized revenue run rate of $400 million, growing 225% year-over-year. This is partly because these systems are finding utility in the booming DCI market segment.

Jimmy Yu, VP at Dell’Oro Group, said that while the disaggregation concept is not new, service provider adoption in the data center segment is.

“In most—if not all—purchases, we found that these new systems were being employed in DCI across both metro and long haul spans,” Yu said in a press release. “So far, the largest consumers have been internet content providers that appreciate the platform for its simplicity, capacity, and power savings.”

Yu added that “based on second quarter results, where disaggregated WDM systems represented nearly one-third of the optical DCI equipment purchases made, we have to say that Disaggregated WDM systems are truly hitting the sweet spot for DCI.”

As wireline operators look to diversify their revenue mix, the DCI market has a compelling growth path driven by the consumption and distribution of various data forms over the public internet and private networks.

Outside of DCI, the overall WDM market, which consists of WDM Metro and DWDM Long Haul, grew only 2% year-over-year in the second quarter, says Dell’Oro. The research firm noted that growth was driven by strength in the Asia Pacific region, especially China and India.

The share of 100G WDM wavelength shipments going to DCI was 14% in the quarter, according to Dell’Oro.

About the Report:

The Dell’Oro Group Optical Transport Quarterly Report offers complete, in-depth coverage of the market with tables covering manufacturers’ revenue, average selling prices, unit shipments (by speed including 40 Gbps, 100 Gbps, and >100 Gbps).  The report tracks DWDM long haul terrestrial, WDM metro, multiservice multiplexers (SONET/SDH), optical switch, optical packet platforms, and data center interconnect (metro and long haul).  To purchase this report, call Matt Dear at +1.650.622.9400 x223 or email Matt@DellOro.com.

………………………………………………………………………………………………………………

Other Voices on Optical Network Equipment Market:

1.  Cignal AI:

Huawei and ZTE saw record shipments of 100-Gbps coherent ports in China during the second quarter of 2017 as well as strong sales in general throughout the region, reports Cignal AI. So what accounts for sour grapes from optical component houses? Inventory corrections at Chinese systems vendors, particularly Huawei, according to the market research firm.

“Demand for optical hardware in China is not slowing down, and equipment vendors are universally providing positive guidance for North America during the second half of the year,” said Andrew Schmitt, lead analyst for Cignal AI. “Operators around the world are shifting spending from long-haul to metro WDM, though this shift is materializing into gains for only a few vendors.”

Optical revenue in China is up 13 percent for the first half of 2017 as compared to the same period in 2016. The weak demand reported by component makers is a result of an ongoing inventory correction (primarily at Huawei), rather than a signal of weak end market demand.

2. IHS-Markit:

Huawei ranked first overall in combined market presence and market leadership in the recent Optical Network Hardware Vendor Scorecard released by IHS Markit.  Huawei received this assessment for its comprehensive performance on multiple benchmarks including reputation for innovation, market share momentum, and global market share.

There are over a dozen vendors around the globe that make and sell optical network equipment. The 10 vendors profiled in this Scorecard–ADVA, Ciena, Cisco, Coriant, ECI, Fujitsu, Huawei, Infinera, Nokia, and ZTE–were selected because they are the top revenue producers of optical hardware.

The Scorecard used concrete data and metrics, including market share, financials and direct feedback from buyers on innovation, product reliability, service and support to evaluate 2016 market performance and future momentum of the top 10 optical network equipment vendors.

IHS Markit optical network hardware vendor scorecard (Source: IHS Markit Optical Network Hardware Vendor Scorecard)

3.  Heavy Reading:

Market share estimates are based on DCI revenue contribution by Heavy Reading’s definition (not disclosed in the teaser briefing). Most vendors do not currently break out from their broader metro WDM revenue the portion accounted for by metro DCI deployments. A few companies did provide Heavy Reading with some general guidance on their revenue from metro DCI. The pie chart figure below shows Heavy Reading’s metro DCI equipment vendor share estimates for 2016.

Note that Adva has the top vendor market share and Cisco is not represented in the figure.

Excerpt

Source:  Heavy Reading

 

References:

http://www.delloro.com/news/disaggregated-wdm-systems-hitting-sweet-spot-data-center-interconnect-according-delloro-group

http://www.fiercetelecom.com/telecom/cisco-ciena-and-infinera-take-dominant-spots-data-center-interconnect-optical-segment-says

https://cignal.ai/2017/08/2q17-optical-hardware-results/

http://www.huawei.com/en/news/2017/8/Huawei-Optical-Network-IHS-Leader

http://www.heavyreading.com/details.asp?sku_id=3503&skuitem_itemid=1728