Report: DWDM Growth Explodes
The news bodes well for leading makers of DWDM components, such as Corning Inc. (NYSE: GLW), JDS Uniphase Inc. (Nasdaq: JDSU), Fujitsu Ltd. (KLS: FUJI.KL), the Microelectronics division of Lucent Technologies Inc. (NYSE: LU), NEC Corp. (Nasdaq: NIPNY), Nortel Networks Corp. (NYSE/Toronto: NT), and SDL Inc. (Nasdaq: SDLI).
It also indicates good prospects for newcomers in the space, such as Avanex Corp. (Nasdaq: AVNX) and Oplink Communications (Nasdaq: OPLK). All of these vendors, RHK says, were among the 40 or so companies who contributed information for use in the forecast.
These makers of DWDM chips and subsystems also are among Wall Street's highest valued -- and most volatile -- stocks, though the correction underway in the financial markets has knocked some of the froth out of their valuations. Strong growth forecasts underscore the market's belief that these components are key to the future of optical networking.
The strong forecasts are being driven, RHK says, by increased demand for DWDM equipment and by a recent push to support data rates like 10-Gbit/s, in this gear. "Higher rates call for more complex components," says Jay Liebowitz, RHK's director of optical components. Among the new elements in demand are more powerful amplifiers and parts with more advanced dispersion management functions.
Enhanced components are forming strong submarkets. In 2001, for instance, RHK says Raman gain modules, 40-Gbit/s active components, and tunable lasers will start to appear in DWDM gear. By 2003, they'll comprise $4 billion of the overall DWDM components market.
Some component areas will show triple-digit growth year to year for the next several years, the firm says. Included in this category are tunable lasers, which will grow from a $280 million market in 2001 (up from this year's starting figure of $2 million) to $960 million by 2004.
The strong forecast for DWDM components is no surprise, but RHK admits its newly published figures are nearly 60 percent higher than original forecasts. "A year ago I stood up and gave a forecast of 80 percent growth for 2000," says Liebowitz. "People thought those figures were high. I was wrong. They were too low."
Liebowitz says the strong component figures don't necessarily reflect correspondingly high growth rates in DWDM gear. RHK says DWDM is set to grow between 50 and 60 percent next year.
He also acknowledges the DWDM elements are one part of a larger optical components market that includes Sonet/SDH chips, parts for undersea networking gear, cable TV kit, and other elements. He says RHK plans to have more comprehensive optical component figures in February 2001.
-- Mary Jander, senior editor, Light Reading http://www.lightreading.com