CIR: OADM to Grow 52% Annually

CHARLOTTESVILLE, Va. -- The market for Optical Add/Drop Multiplexer (OADM) components and subsystems is expected to grow at an average annual rate of 52 percent from 2002 to 2006, according to a new report announced today by Communications Industry Researchers, Inc. (CIR). The new study, OADM Markets And Opportunities: 2002-2006, indicates that these devices offer significant opportunities. But, it warns that components and subsystems vendors must obey four key rules to succeed: * Don't overestimate the size of the market. Metro rings are being installed cautiously, and few service providers see the need to deploy more than three OADMs on a ring or long-distance point-to-point link. In contrast to some other firms, CIR research does not indicate a scenario in which abundant wavelength services will call for a large number of OADMs to be deployed. The worldwide OADM market will be worth hundreds of millions of dollars in a few years, not the billions that other forecasters have claimed, and the business plans of OADM suppliers should reflect these more modest expectations. * Be quick to market. Early design wins will be important for smaller OADM subsystems vendors. Well-entrenched players JDS Uniphase and Corning are currently both working very hard to become the OADM supplier-of-choice to the leading systems houses, and they are gradually shutting out other manufacturers from lucrative opportunities. Corning's OADM subsystem, for example, is already being used in Ciena's and Marconi's gear. However, even if the components powerhouses end up taking the lion's share of the OADM subsystems market, there will be growing potential for middle-sized OADM companies to act as second- source suppliers. * Stress stability. CIR research indicates that the large systems houses are increasingly reluctant to design in OADM subsystems from smaller manufacturers, fearing that they might disappear in a few months. Equipment vendors have told CIR that they are more likely than in the past to go to firms that have been around for a while, such as DiCon. Two major OADM subsystems providers -- Avanex and Oplink -- have recently combined to create a larger entity in which they hope customers will have greater confidence. * Stress cost advantage, not technology. The days are gone when novel technology alone can grab attention. System integrators are looking to lower costs and show their carrier customers how to decrease their costs as well. CIR has found that there are no established technologies of choice for reconfigurable OADMs as yet, so the market is wide open to new approaches that can provide large savings. CIR believes that current efforts to provide optically integrated OADMs should lead to significant cost improvements within a few years. OADM Markets And Opportunities: 2002-2006 provides five-year projections of OADM subsystems markets, broken down by access, metro and long-haul applications. These sectors are also broken down by technology type. In addition, the report provides forecasts of other components used in OADMs, notably light sources and amplifiers. Profiles of all leading OADM subsystems suppliers -- both established companies and start-ups -- are also included. Communications Industry Researchers Inc. (CIR)