Okay, I apologize for the bad pun, but it does seem like the Fiber Optic market is finally trending upward. I attended the OFC/NFOEC Conference in Anaheim in March and although a bit late, I’m glad that April came and I can describe some of the developments. I was impressed with many of the technology, product and market developments on display.
At the top level, this market segment has floundered, directionless for the past several years. After good growth in the middle part of the 2000’s, the overall optical market ran into trouble in 2009 as the global economy faltered. The result was a drop in revenue of about 15%. With the exception of a short-lived spike in 2011, the market has been relatively flat. This behavior is understandable, because upgrading, expanding or initially deploying an optical transport network is a capital-intensive exercise and the uncertain direction of many regional economies only adds to the challenge. The wildcard in this scenario however, is the seemingly insatiable desire to consume data.
We tend to focus on growth in the mobile data consumption that is enabled by the vast array of wireless devices we’ve all grown so dependent on, but that’s not the whole story. As I am fond of pointing out, even with mobile data roughly doubling every year from 2009 to 2016, it will only account for roughly 10% of the total in 2016. The other portion of data consumption comes from Internet, high-speed broadband, CATV and enterprise data applications. Even with the backdrop of a still uncertain economy, it is becoming clear that transport network upgrades are essential to ensure future data increases are feasible.
It appears operators are finally committing the capital resources and this looks likely to set up the overall optical market for steady future growth. At the component level, another interesting trend I observed is the rapid conversion to higher capacity networks. It appears 10Gbps systems are the workhorse of the network, with lower capacity systems all but disappearing. Another thing that seemed clear was that while 40Gbps systems will grow, they won’t represent as big an opportunity as originally thought. There are currently four modulation schemes used for these networks: optical duo binary, DPSK, differential quadrature phase-shift keying (DQPSK) and dual-polarization QPSK or DP-QPSK. While this lack of standardization allows suppliers to differentiate their designs, it does not allow for economies of scale and the cost reduction standardization usually entails. At the same time, the cost of 10Gbps systems has been dropping quickly. These factors seem to be leading operators to consider jumping directly from 10Gbps to 100Gbps networks, skipping 40Gbps in the process. It appears from the Marketing presentations and the products I saw, that 100Gbps system will see the fastest growth, by far! For more information on growth rates, segmentation, quantities and market values for optical transceivers, please look at Capacity Requirements Driving Fiber Optic Market.
The other big topic at the show was silicon photonics. This idea seems to divide the audience into two distinct and passionate camps. One says, “we’ve been hearing this now for years, but where are the production products?” The other camp is more than ready to discuss the benefits of silicon CMOS processes for cost and power reduction. One thing that appears to be different from the past is the dramatic increase in enterprise applications and “big data”. As server farms grow, so does the need for fast, cheap, low power, short-reach connections. This need seems very well suited to the capabilities of silicon photonics. While the technology doesn’t appear to meet the needs of every application, there is certainly a lot of development effort and it will be interesting to see how quickly silicon photonic circuits penetrate short-reach enterprise applications. Stay tuned!