Home > CIOE News > China's optical module and optical device industry analysis

China's optical module and optical device industry analysis

2021-04-19 15:53:50Source:CIOE

From the major investment and financing events in 2019-2020, the investment and financing events in the field of optical communication mainly occur in optical modules, optical devices and optical chips, which is due to the acceleration of the 5G industry bringing a new momentum to the optical modules, optical devices and optical chips market.

Some optical communication industry investment and financing events

Optical Modul

Optical module is one of the core devices of fiber optic communication system and the most important component of optical communication equipment, the main role is to realize photoelectric conversion. With the development of the Internet, data volume is growing exponentially and IDC construction is driving the growth of optical module market. On the enterprise side, Chinese optical module manufacturers are expected to further increase their global market share, and optical modules are in high demand by downstream operators. Overall, the growth rate of China's optical module market size is expected to catch up with the global.

An optical module, usually consists of optical transmitting device (TOSA, with laser), optical receiving device (ROSA, with optical detector), functional circuit and optical (electrical) interface. The application scenario of optical module is abundant and can be divided into telecom market and digital communication market, covering data broadband, telecommunication communication, data center, Fttx, security monitoring and smart grid, etc., among which the digital communication market has gradually grown into a major segment driving the growth of optical module market in recent years.

Stable fiber optic cable business, optical module share expected to increase

Fiber optic cable is the traditional advantageous field of China's optical communication industry, since 2017 fiber optic preform production capacity reached expectations, Chinese fiber optic companies’ shipments that occupy more than half of the global market. In 2019, despite the significant reduction in the unit price of optical fiber, the huge volume of fiber optic cable industry is still the segment leader with an industry scale of 32.96 billion yuan. In the field of optical modules and optical devices, more and more listed companies whose main business is optical communication have flocked to the field of optical modules by acquiring companies, acquiring technical teams, or setting up new product lines, etc. The performance in 2019 is particularly obvious, as the Wuhan Optics Valley area already has dozens of optical module R&D centers. The field of optical chips is still dominated by low and mid-range chips.

China optical communication market segment structure

The datacom market is far more stimulating for optical modules and optical devices than other segments. In the next few years, with the surge of data flow, including Google, Microsoft, Amazon, Facebook, Ali, Tencent, Baidu and other Internet companies continue to build new data centers around the world to meet this challenge, the growth of the datacom market will be significant. The demand for optical modules and optical devices in the datacom market is much greater than other segments, and high-speed optical modules above 100G will be the climax of development, and the market structure will increase year by year.

China optical communication market segment structural change forecast

IDC construction drives optical module market growth

Optical module is an important part of data center IDC (Internet Data Center) optical communication network, data interconnection in the data center depends on optical communication, and optical communication network is essential in the optical module. Data center transmission function cannot be achieved without the participation of optical modules, optical modules in the data center is in a key position, the market size of China's IDC industry is expected to exceed 300 billion yuan in 2022, IDC construction and upgrade will drive the demand for optical modules.

China IDC industry market size

China's optical modules are expected to further increase global market share

There are many manufacturers in the optical module industry and the competition is fierce. The industry chain is further concentrated in China, and the market share of China’s optical module suppliers is expected to exceed 50%. According to Light Counting, five optical module manufacturers from China, including Zhongji Innolight, Hisense, Accelink, HGTECH and eoptolink, are expected to enter the global top 10 in 2020 and dominate the global optical module market, compared to 2010 when only one Chinese company entered the top 10.

Zhongji Innolight is expected to enter the top 10 list of optical modules. Considering the impact of the pandemic, China has recovered faster than other countries, and coupled with the accelerated implementation of China's 5G network and data center construction, Chinese optical module manufacturers are expected to further increase the global market share.

Change of the global Top 10 optical module suppliers in 2010-2020

High demand from downstream operators for optical modules

In the telecom market, the main customers of optical module manufacturers are communication equipment manufacturers, while the end users are operators. In June 2019, the Ministry of Industry and Information Technology issued 5G licenses to China Mobile, China Unicom, China Telecom, and China Radio and Television Network. The preparation of 5G networks was officially kicked off.

According to the data, starting from 2019, the three major operators as a whole have seen a large increase in spending driven by the 5G scale construction. The spending of the three major operators is mainly focused on wireless and bearer networks, so the demand for fronthaul, middlehaul and backhaul optical modules is very high.

In April 2020, China Telecom optical modules (2019) 10G and below optical modules and 10G and above optical modules in the centralized procurement project, China Telecom's 2019 optical module procurement demand amounted to 850,000, including 10G and below optical modules and 10G and above optical modules and PON optical modules. Different application scenarios have different needs for optical modules. 10 companies such as Accelink, Suzhou Panshi, SONT, and GTGD were shortlisted.

In March 2020, China Unicom launched the 2020 centralized procurement bidding project for smart MAN access equipment, with a procurement demand of 693,800 pluggable optical modules, and China Unicom branches in Shanxi, Henan, Jiangsu, Jiangxi, Shanghai, Inner Mongolia, Fujian, Liaoning, Heilongjiang, Tianjin and other locations have launched open recruitment projects for optical modules.

Due to the data center construction and the in-depth layout of 5G network, China’s optical module companies share has increased in global market share. Because of the optical module downstream operators demand expansion, China optical module market is expected to further growth. China’s optical module market size is expected to exceed 3 billion yuan, the growth rate is expected to catch up with the global.

China optical module industry market size in 2016-2022

Expanding Communications Capital Spending Drives Optical Communication Devices

Optical modules are an important part of optical communication equipment, and optical communication devices are a major component of optical modules. Currently, based on the data from North America and China, most of the communication is achieved through optical communication. The development of optical module market is actually directly driven by downstream communication capital expenditure.

For communication service providers (CSP), the global CSP capital expenditure scale in 2016-2019 is on a downward trend, mainly because the overall global 4G construction is gradually entering the end, on the other hand, the overall revenue growth rate of traditional telecom operators hovers around 2%, and the weak revenue limits the capital expenditure budget, so CSP capital expenditure until 2019 is showing negative growth, but the overall still maintains at a level of more than USD 300 billion.

Ovum believes that from 2020 to 2021, with the gradual coverage of global 5G, the hardware and software support must be updated on a large scale, and the capital expenditure growth rate of CSP will maintain a medium growth rate; in addition, the data volume continues to grow, the North American data center is still in the large-scale construction period, and the Chinese data center is considerable in the future, and the capital expenditure of the whole communication industry will continue to grow in the future.

Global communications industry capital expenditure in 2015-2021

Communication industry capital expenditure drives the growth of optical device market demand and promotes the scale development, the global optical device and module market size shows a growth trend from 2016 to 2019, and in 2017, the global market size reached USD 10.2 billion, meanwhile, as ICP capital expenditure of optical device and module accounts for a higher proportion than CSP, so driven by the significant growth of ICP capital expenditure, the global optical device and  modules account for an increasing proportion of capital expenditure in the global communication industry.

According to Ovum data, the global optical communication device market size is in a growth trend from 2016 to 2019, the telecom market and data communication market demand for optical communication devices to maintain a growing trend, access network market demand tends to stabilize. 2019 global optical communication device market size is $11.705 billion, an increase of 8.0% from 2018. 2020 with the global commercialization of 5G, the global optical communication market size is expected to reach $16.6 billion.

Global optical communiation devices market size in 2016-2020

The value of the optical communication industry is clearly moving to China

The globalized competition pattern of optical communication device industry has been formed. With the improvement of R&D capability and production process of domestic optical communication device manufacturers, coupled with the cost advantage of the products, domestic enterprises have increased their export efforts, and foreign communication system equipment manufacturers have also increased their procurement efforts for domestic optical communication device products.

At the same time, foreign communication system equipment manufacturers have also moved their production and R&D bases to Chinese Mainland in recent years in order to reduce costs, which has also driven the demand for optical communication devices in mainland.

Ovum data shows that Accelink, Zhongji Innolight and Hisense Broadband have entered the global top 10. Due to China's supply chain and manufacturing cost advantages, the value of the optical communications industry is clearly moving to China. According to Ovum data, Lumentum/II-VI, Finisar, and Accelink, accounting for 19.0%, 10.8% and 7.7% of the total industry share respectively.

Global optical communication devices market share by manufacturers in 2019

Global optical communication devices market share by manufacturers in 2019 (unit: %)

Global optical communication devices industry market size is expected to be approximately $38.4 billion in 2026

On the supply side, after years of development and integration, optical device manufacturing has made significant progress. On the demand side, downstream data centers iterate much faster than the communications field. Amazon, Google, Microsoft have said they plan to upgrade once every three years or so, as data centers continue to improve the rate requirements, optical module high frequency upgrades constantly, to promote the development of optical communication devices.

In the next few years, the market size of the optical communication device industry will maintain growth momentum. The global optical communication device market size is expected to grow at a 15% rate from 2021-2026 and is expected to reach $38.4 billion in 2026.

Global optical communication devices market size forecast

CIOE 2021 - Information and Communication Expo, the world’s leading exhibition in information and communications industry, will present hot sellers in the market such as optical fiber & cable, fiber sensing, optical component and module, optical test & measurement device, cloud data center, wireless communications, manufacturing system equipment, operation and service. Come and connect with ICT industry professionals face-to-face at Shenzhen World Exhibition and Convention Center on September 1-3, 2021.

CIOE 2021 - Information and Communication Expo Exhibit Profile

 Follow us on social media to get insights of China's optoelectronic market.

LinkedIn: @CIOE (China International Optoelectronic Exposition)

Facebook: @CIOEShenzhenOptoelectronics

Twitter: @CIOE_Shenzhen

YouTube: China International Optoelectronic Exposition (CIOE)

WeChat: CIOE-Shenzhen

CIOE English WeChat Account

Scan to follow CIOE English WeChat