Are OADMs the optical future? A Light Reading report claims that the OADM market is growing 52% a year

August 2, 2002

4 Min Read
Report: OADMs Growing Strong

It wasn’t all that long ago that Optical Crossconnects looked as if they were the wave of the future. But that was before the world was turned upside down, and the market for equipment that can link together thousands of wavelengths all but fizzled out.

In a world where long-haul has become a dirty word, it would seem that more metro-friendly optical add/drop muxes (OADMs), which peel off streams of light signals from bundles of wavelengths passing through a node, have taken over and are paving the road to the optical future.

Despite the meltdown in the industry, the OADM market is actually growing in leaps and bounds, according to a recent report, published on Light Reading on Wednesday (see Optical Add/Drop Muxes). That report, written by Lawrence D. Gasman, president of Communications Industry Researchers Inc. (CIR), states that between 2000 and 2006, the OADM market is set to grow at an average rate of 52 percent a year.

But while that might seem like a big and promising number, it’s worth noting that the growth is starting from very small numbers, and Gasman expects the market to reach only about $265 million by 2006. While OADMs have been available for the last five years, it has only been for the past year or so that they have been the focus of growing interest at all levels of the optical value chain, according to the report.

Gasman also warns that it’s a confusing market, one in which no one player can expect to reap all the benefits. Today, there may be as many as 40 manufacturers that have OADM subsystems products, he writes in the report. In addition, “No carrier yet appears to be on the verge of spending very large amounts of money on OADM functionality.”

Some companies are, however, expected to fare better than others. The two main players in the market, and the winners for the time being, are Corning Inc. (NYSE: GLW) and JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU), with Corning taking the lead. These two companies are expected to benefit from the industry’s newfound emphasis on cost and stability in the face of the telecom depression. “[M]ost large system companies are happy enough with what JDS Uniphase, Corning, and a handful of established second-tier players are doing in this space,” Gasman writes. “Any OADM subsystem manufacturer that believes it can successfully compete on the basis of its ‘advanced’ technology is going to be sadly mistaken.”

To successfully compete in this market, Gasman says companies must emphasize their vintage and their stability, as well as the capex and opex savings their OADMs can provide. Among the companies expected to offer JDS Uniphase and Corning some competition are Agere Systems (NYSE: AGR), Avanex Corp. (Nasdaq: AVNX), Oplink Communications Inc. (Nasdaq: OPLK), and Alliance Fiber Optic Products Inc. (Nasdaq: AFOP).

For startups that have good products, but no vintage to boast of, Gasman suggests that their best bet is to OEM their products through larger components/subsystems firms.

There are indications, according to the report, that the OADM market will be carved up between those that choose to pursue the simple, low-cost, predominantly thin film filter (TFF)-based solutions, and those that want to take a more complicated, high-end route. To succeed, the first group will have to combine its cheap production with strong quality control. This, the report states, can be best achieved by American and Japanese companies with manufacturing plants in Asian countries like China and Taiwan.

With their huge resources, Corning, JDS Uniphase, and a few others can choose to pursue more sophisticated solutions. While most OADMs available today are fixed OADMs (FOADMs), which provide a specific wavelength to be added and dropped, these companies are moving into the emerging category of reconfigurable OADMs (ROADMs), which enable wavelengths to be selectively added and dropped through the use of software-controlled switching or tunable-filter mechanisms.

— Eugénie Larson, Reporter, Light Reading
http://www.lightreading.comWant to know more? The big cheeses of the optical networking industry will be discussing this very topic at Opticon 2002, Light Reading’s annual conference, being held in San Jose, California, August 19-22. Check it out at Opticon 2002.

Register now and save $500 off the registration fee. Just use the VIP Code C2PT1LHT on your registration form, and deduct $500 from the published conference fee. It's that simple!

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