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.
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.
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 (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.
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.