Opto fabs fill up as datacom sales approach $1bn
Increases in the speed of Fibre Channel and Ethernet datacom applications will drive sales of optical components for this market to $1.34 billion in 2011.
That's according Daryl Inniss at the research company Ovum-RHK. He expects average annual market growth of 11% from its current value of $728 million as Ethernet transceivers increasingly transition from 1 Gb/s to 10 Gb/s for local area network (LAN) deployment.
At the same time, Fibre Channel applications for storage area networks (SANs) are expected to increase in speed to first 4 Gb/s and, from 2009 onwards, 8 Gb/s.
Those speeds will be required to handle bandwidth-heavy applications, such as video delivery over IP networks.
Developments higher up the telecommunications food chain, such as the planned merger between Lucent and Alcatel, are being driven largely by the expected switch to IP delivery of all voice, data, text and video applications.
Companies such as Finisar are already witnessing strong demand for transceivers that are based on III-V optoelectronics, and wafer fab utilization is increasing accordingly. In recent years, Finisar has moved up from seventh place to second among the top-ten-ranked optical component suppliers for datacom applications.
Inniss says that while fab utilization rates generally remain in the 30-40% range, there has even been some recent talk of new fabs for some specific product lines. "However, there are still too many fabs on the whole," Inniss was quick to point out.
The growing datacom market should at least give fab-owning companies a chance to increase their utilization rates while demand for their in-house products remains comparatively weak.
A veteran of Bell Laboratories and JDSU, Inniss adds that the transition to 10 Gigabit Ethernet will begin to take off in 2008. That's when he expects to see deployment of modules and ports to cover 300 meter links over legacy multi-mode fiber.
But with many active players in the market jostling to supply the millions of transceivers that are required every year by customers such as Cisco Systems, component vendors must provide cost-effective solutions, warned Innis.
"While the market demand for higher data-rate transceivers presents excellent revenue opportunities for component suppliers," said the analyst, "I am worried that the challenging cost requirements create unhealthy financial positions for them."
"Furthermore, the market needs to define a form factor that gives vendors the opportunity to recoup the research and development invested to produce the high data-rate transceivers."
Full details of Ovum-RHK's annual datacom forecast are available via the company's web site.
