Is it boom time all over again? Hardly. As the report's author Tom Hausken points out, thirty percent of a small number is still a small number. "We're bouncing off the bottom here," he says.
He continues: "The market will by no means return to the heyday of 2000 anytime soon. Even with 30 percent growth, we project component vendors' revenues in 2003 at $2.1 billion -- far below the $9.1 billion peak we saw in 2000." That forecast is similar to 1998 figures.
Although it's not detailed in the report, which confines itself to the 2003/2004 time frame, Hausken has also studied the long-range forecast. He predicts that shipments will jump in 2004 and then slow down, as the market finds a plateau. The market size in 2005/2006 will approach 2001 levels.
"The good news is it gets us up to a decent market size," he says. "The not-so-good news is the slowdown, because we see that the long-term growth of the industry has a limit."
Hausken says the bursting of the optical bubble has made it difficult to make and interpret forecasts like this one. The problem stems from excess inventory -- in 2000, the shipments of components overshot the mark, so shipments had to undershoot over the next few years in order to restore the balance. However, as he points out, when talking about inventory, "it makes a big difference if the product is at the customer's warehouse, or the supplier's. In one case it's counted as a shipment, in the other, it was booked as revenue a long time ago."
In more normal times, these two things -- products shipped and products deployed -- would be pretty much the same. However, in order to get an accurate picture of the market today, they have to be separated -- and that's what Hausken has done in his latest report. "I don't think that's been done before," he contends.
Unfortunately, this upturn in the market fortunes doesn't mean that component vendors are out of the woods yet. There may be more market to go around, but there are still too many vendors fighting for pieces of it. "It may be a more promising market, and it will have a significant impact for a few companies," says Hausken. "But many companies will still not make it."
Hausken didn't wish to share detailed financial information of the vendors in the report, but he did furnish us with a league table showing the top twelve components vendors in 2002 in order of market share:
Table 1: Components Vendors: Market Share 2002
|Top Twelve Components Vendors 2002|
|1||JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU)|
|2||Agere Systems (NYSE: AGR/A)|
|3||Corning Inc. (NYSE: GLW)|
|4||Alcatel Optronics (Nasdaq: ALAO; Paris: CGO.PA)|
|5||Furukawa Electric Co. Ltd.|
|6||Wuhan Telecommunication Devices Co. Ltd.|
|8||Agilent Technologies Inc. (NYSE: A)|
|9||Nortel Networks Corp. (NYSE/Toronto: NT)|
|11||Shenzhen Photon Technology Co. Ltd.|
|12||Oplink Communications Inc. (Nasdaq: OPLK)|
JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) heads the league, despite the fact that its revenues have fallen to roughly one quarter of its first-quarter 2000 level. That's because most of the other key players, such as Agere Systems (NYSE: AGR/A) -- since sold to TriQuint Semiconductor Inc. (Nasdaq: TQNT) -- and Corning Inc. (NYSE: GLW), have seen their revenues fall similarly.
What may come as a surprise to some is the inclusion of two Chinese companies -- Wuhan Telecommunication Devices Co. Ltd. and Shenzhen Photon Technology Co. Ltd. -- in the top twelve. These companies are making progress, particularly in passive components, because the workforce is skilled, yet labor costs are low (see US to China: Do You Copy?). And as the market becomes smaller, the share they contribute is more significant.
In Hausken's view, vendors like Agilent Technologies Inc. (NYSE: A), Finisar Corp. (Nasdaq: FNSR), and Optical Communication Products Inc. (OCPI) (Nasdaq: OCPI) are most likely to do well. These companies are focusing on specific product areas that haven't been so badly hit by the downturn, such as enterprise transceivers. Finisar, for example, has managed to double its revenues today (in its third quarter 2002) compared to where it was in its first quarter of 2000, he notes.
— Pauline Rigby, Senior Editor, Light Reading