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Optical IC Market: Rebound Ahead?

Good times might not be upon us quite yet, but if you’re an integrated circuit (IC) vendor, they’re coming. This is the message of a recent Cahners In-Stat Group/MDR report that predicts that the optical IC market will reach $1.8 billion by 2006.

The report, which was released on Monday, anticipates that optical networking and its supporting equipment components and ICs should start picking up towards the end of this year. Today the market brings in revenues of just over $1 billion. Between 2001 and 2006, the compound annual growth rate (CAGR) for the overall market will be about 11 percent, according to the report.




"It will grow steadily," says Eric Mantion, a senior networking technology analyst with In-Stat, and the author of the report. “Not in leaps and bounds. It’s a mature market.”

The increasing demand for high-speed capacity within the core of the public network, along with a geometric growth of the Internet, private IP networks, and business-to-business (B2B) e-commerce is what’s expected to drive the surge in IC revenues, according to the report. The market research company foresees optical networking as the norm for all but the last mile, and some proponents even feel that fiber will enter the last mile more extensively.

The steady climb in revenues seems, however, to have skipped 2002. Optical ICs are in a bit of a slump, which Mantion expects will reach its low point in the second quarter this year. The slowdown is due to the combined effects of lower demand, the semiconductor ASP decline, and a reduction in lead time before products are needed.

"People got burned by over-forecasting,” Mantion says. “Now [they] are waiting a little longer. [They still] have a lot of [leftover] inventory to burn through.”

The market turnaround should come towards the end of 2002, Mantion says, and 2003 is expected to see 3 percent growth in IC revenues compared to 2002.

IC vendors will benefit from the fact that so many of the industry’s advances rely on semiconductor technology, according to Mantion. As new networks are built and existing ones upgraded, they will have the opportunity to penetrate the yet untapped access and enterprise markets.

While all segments of the market are expected to grow, the report reveals that 10-Gbit/s Ethernet should experience a phenomenal growth rate. Short-range OC192’s growth rate will be quite healthy as well, although this is also the area that will see the greatest price erosion by the end of the forecast period, Mantion says. Long haul will continue to increase at the same slow, steady pace it is already demonstrating.

“There is thirst and hunger in the MAN for 10 Gig,” Mantion says, pointing out that while there is already plenty of capacity in long haul, MANs have a lot of growth potential. “There’s a drought going on there, with floods on both sides.”

The 10-Gbit/s Ethernet market is growing fastest, Mantion says, because it is better than Sonet for data, and data is growing faster than voice. Another reason this area is growing so quickly is that it didn’t exist in 2001. When you start with zero, the numbers are obviously going to seem really big, he says.

Major players in the optical IC sector include:

As the current production-grade ICs are completed, they will be sold into two major end-user markets, according to the report: module suppliers and communication equipment vendors. Of the two, Mantion says he expects modules to be the most likely long-term winner.

— Eugénie Larson, Reporter, Light Reading
http://www.lightreading.com
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vis 12/4/2012 | 10:50:04 PM
re: Optical IC Market: Rebound Ahead? Is it already the case that the costs of both components are the same? Then I agree that there is a smaller case for 10GE.

However: GigE still allows arbitrary level of multiplexing amongst the data channels flowing within, while OC-192c doesn't - which is good for bursty data traffic.

That said, there are far more reasons stemming from OAM&P, reliability, & prevalence to show OC-192c is better than 10GE.

comments?
optigirl 12/4/2012 | 10:50:04 PM
re: Optical IC Market: Rebound Ahead? Growing the fastest means nothing...... you can get 100% annual increases when you are starting out at next to nothing.
skeptic 12/4/2012 | 10:50:04 PM
re: Optical IC Market: Rebound Ahead? The 10-Gbit/s Ethernet market is growing fastest, Mantion says, because it is better than Sonet for data, and data is growing faster than voice.
---------------

What is the logic here? OC-192c and 10GE are
using almost identical components at similar
costs (to the vendor) right now. The differences
in practice are trival between the equipment.

And as far as "data" is concerned, data doesn't
flow any better on one vs. the other.
boozoo 12/4/2012 | 10:50:03 PM
re: Optical IC Market: Rebound Ahead? "However: GigE still allows arbitrary level of multiplexing amongst the data channels flowing within, while OC-192c doesn't - which is good for bursty data traffic.

That said, there are far more reasons stemming from OAM&P, reliability, & prevalence to show OC-192c is better than 10GE.

comments?"

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
However, with rapid acceptance and implementation of multi-link trunking with switching speeds of miliseconds, 10GE ethernet threatens to raise to the level of APS' reliability, without taking up 2x the bandwidth.
MLT is a superior technology that allows more economical N+1 kind of link redundancy schemes to be deployed.

Boozoo
Archimedes 12/4/2012 | 10:50:00 PM
re: Optical IC Market: Rebound Ahead? You know, I never understand references to the Optical IC market. I understand that there will be optical integrated circuits, and they may sell $xx worth in whatever year. But customers don't buy ICs. They buy products. They buy filters, and muxes, and switches, and transmitter, and modulators... If some of these are combined in ICs, then so be it. But customers are not out there looking to buy ICs. They care about cost and performance. You can put those products in the Optical IC category as a descriptor, but they don't belong there functionally.

So if you say, "Well, I build ICs, and there are going to be $1.8B in IC sales in 2006.." you are not talking about an adressable market.

What do you think?
skeptic 12/4/2012 | 10:49:55 PM
re: Optical IC Market: Rebound Ahead? However, with rapid acceptance and implementation of multi-link trunking with switching speeds of miliseconds, 10GE ethernet threatens to raise to the level of APS' reliability, without taking up 2x the bandwidth.
MLT is a superior technology that allows more economical N+1 kind of link redundancy schemes to be deployed.
------------------------------------

I dont quite agree. Multi-link trunking is not
unique to ethernet and there is no technical
reason it could not easily be done on POS
interfaces.

The economics of protection (sonet or not) come
down to how many links (m) are having their
bandwidth wasted protecting (n) links. The MLT
schemes are more flexable, but the amount of
links they save are dependent on the protection
scheme of the service provider.

If the service provider uses protect bandwidth
for other purposes, they always seem to start
to assume that the protect bandwidth is always
there for their non-protect application. It
never seems to work out right in practice.

tasmanian 12/4/2012 | 10:49:52 PM
re: Optical IC Market: Rebound Ahead? Whether it's better or not, 10GE modules are the cheapest and that will drive optical IC sales. Compare 10GE and OC-192 port prices right now. The big bulk of ports is going toward 1000BaseSX, why? It's so darn cheap. Customers are just waiting for 10GE prices to fall, and believe me 10GE ports will drop down to 4X or 5X the price of 1GE ports in no time... Sonet will still be about... what? 20X over 1GE.

The end of Sonet is near.
The_Holy_Grail 12/4/2012 | 10:49:51 PM
re: Optical IC Market: Rebound Ahead? I agree that'optical IC market' is vague and not clearly defined. If you include ICs used for all optical networking then those numbers quoted are quite low. What about custom ICs or asics used in the market segment? Every optical signal orginates & terminates into electronics. If you sum up the revenues from AMCC, PMCS, VTSS...etc, you see that their sums exceeds $1B. IMHO, the numbers quoted are low or do not clearly reflect what many will assume.

Just my 2c worth
The_Holy_Grail 12/4/2012 | 10:49:51 PM
re: Optical IC Market: Rebound Ahead? I agree that'optical IC market' is vague and not clearly defined. If you include ICs used for all optical networking then those numbers quoted are quite low. What about custom ICs or asics used in the market segment? Every optical signal orginates & terminates into electronics. If you sum up the revenues from AMCC, PMCS, VTSS...etc, you see that their sums exceeds $1B. IMHO, the numbers quoted are low or do not clearly reflect what many will assume.

Just my 2c worth
skeptic 12/4/2012 | 10:49:47 PM
re: Optical IC Market: Rebound Ahead? Whether it's better or not, 10GE modules are the cheapest and that will drive optical IC sales. Compare 10GE and OC-192 port prices right now. The big bulk of ports is going toward 1000BaseSX, why? It's so darn cheap. Customers are just waiting for 10GE prices to fall, and believe me 10GE ports will drop down to 4X or 5X the price of 1GE ports in no time... Sonet will still be about... what? 20X over 1GE.
-------------------
Yes, but keep in mind that any pricing difference
between the two is totally artifical. For the
equipment vendor, there is no cost difference
between an OC-192 and a 10GE. There is nothing
about the word "ethernet" in 10GE that changes
the base cost of production of the line cards.

1GE is different in that the performance is
around the OC-12 range and it can work inside
PCI bus architecutures. Your not going to find
a cheap bus architecture (or probably even a
cheap
switch) for 10GE. Maybe for infiniband or
whatever comes after, but I don't see anything
out there right now which is going to lead to
a rush of cheap 10GE stuff being produced.



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