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Optical components market set for growth in 2003

Market research firm Strategies Unlimited is predicting that the optical components market will grow by 30% year-on-year, reaching $2.1 billion.
The optical components market will finally see growth again in 2003, with a 30% year-over-year increase in dollar volume, according to a new report from Strategies Unlimited. The growth will come as inventories are finally depleted and as the market begins to see new system orders.

However, the market will still fall far short of the heyday of 2000, according to Tom Hausken, Optical Components Practice Director at Strategies Unlimited. "Even with 30% growth, we project component vendors revenues in 2003 at $2.1 billion, far below the $9.1 billion peak we saw in 2000," he said. "Nevertheless, this is welcome news for component providers."

During the recent telecom spending bubble, sales of products for optical telecommunication networks rose steadily, only to drop precipitously in 2001-02 as the bubble burst. Optical component manufacturers were affected even more than systems manufacturers, due to the huge inventories of components that had been accumulated during the bubble. By 2003, inventory burnoff will finally be complete, and growth is expected to resume.

The steep dropoff of business in the past two years has led to an industry shakeout. Established companies such as Agere Systems and numerous startups have already chosen to - or been forced to - leave the business. With a smaller number of players in the market, those who remain have a better chance of long-term survival.

Growth in this sector beyond 2003 will be more sustainable as the industry pursues more modest expectations. In 2004, carrier capital expenditures are expected to rise as new equipment is used to help meet carriers headcount reduction targets, as well as to fulfill continued growth in customer demand. Delays in new builds have had devastating consequences for suppliers, but equipment upgrades ultimately will be made, leading to gradual relief for the industry.

The report "Optical Networking Components - 2003 Market Outlook" takes a top-down look at the telecom industry, examining the revenues and capital expenditures of carriers, along with the current state of the optical equipment industry. It includes forecasts for 2003 and 2004 for the optical components market as a whole, as well as for individual components. The forecasts correlate aggregate "bottom-up" estimates of product sales with "top-down" worldwide trends in revenues, capital expenditures, and system build-outs to provide a more accurate picture of the quarters to come.

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