The first quarter of 2013 saw ZTE overtake Alcatel-Lucent in the global optical networking (ON) market, meaning that Chinese vendors now hold the top two spots for the first time. However, Ovum’s report on the market also noted that market growth remained sluggish despite growth in 100G.
“While it is not uncommon for the market to decline going into the first calendar quarter, the decline is worrisome as this is the fifth straight time the market has declined versus the prior year's quarter, and quarterly revenues are the lowest they’ve been in six years,” says Ron Kline, network infrastructure analyst at Ovum.
“On the bright side, 100G continued to show strong growth both sequentially and year over year. 100G port shipments in 1Q13 grew 41% and revenues grew 24% versus 4Q12, with annualized revenues surpassing $1bn for the first time. Twenty vendors shipped 100G for revenue in 1Q13 and more are slated to enter the market throughout the year. Guidance from vendors is cautiously optimistic, with good short-term visibility into order growth; long-term visibility remains cloudy.”
In addition to 100G, there was also a rise in sales of next-gen converged packet-optical gear, including OTN switching gear, compared to the same period last year. On the other hand, annualised 40G sales declined for the first time, indicating that vendors are pricing 100G more aggressively. Spending was down in the Asia-Pacific and EMEA regions, but up by around 15% in Latin America.
Ovum believes that the current downturn is being driven by a quickening in the shift in spending to non-IP/Ethernet aggregation equipment, faltering economic growth in Europe, and lower pricing due to intense vendor competition.
“We project that all ON market regions will resume growth in 2013 as carriers who exercised fiscal caution and deferred spending in 2012 restart their plans. Growth of IP, video, mobile data, and data centre expansions occurring in urban and more remote areas will be an ongoing catalyst for network footprint extension and capacity growth. Submarine network footprint and capacity will also expand in 2013,” concludes Kline.