Optical market set to bounce back following 2% slide in 2021: Dell'Oro

Dell’Oro Group VP Jimmy Yu predicted the optical transport market will see mid-single digit growth in 2022, after a double-digit slide in the Asia-Pacific (APAC) region resulted in an overall revenue decline in 2021.

Optical transport revenue in APAC fell 11% last year. Though a 9% drop in China had an outsized impact, Yu told Fierce declines were seen across the board, including in Japan and India.

While China’s optical transport market has steadily expanded over the past eight years Yu said it now appears capital expenditures there have shifted to focus on 5G deployments. In Japan, Yu said efforts were recently made to build up network infrastructure and capacity ahead of the Tokyo Olympics and flesh out metro and backhaul networks to support early moves on 5G, making the recent declines less of a surprise. India, meanwhile, has been in a steady state of decline for some time, he added.

Elsewhere, optical transport revenue grew 12% in North America, 6% in Europe and 19% in Latin America. Still, the slide in APAC dragged overall revenue from the optical transport market down 2% to $15.1 billion in 2021.

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Yu said supply chain issues and component shortages continued to have a significant impact on the market through the end of last year. He noted that worldwide revenue excluding China grew 3% in Q4 2021, but estimated it would have grown 7% if the component issue wasn’t in play.

“The expectation by a lot of the vendors at least is that things aren’t going to look any better until the middle of 2022, but no one says it’s going to recover in 2022,” he said. “I really don’t think anyone expects full recovery until next year.”

Declines in APAC are forecast to continue for another quarter, but Yu said he expects the second half of the year to be brighter. The impacts of the war in Ukraine on the market are unclear, with Yu noting Huwaei's ability to sell into Russia could potentially offset impacts on other vendors who are restricted by sanctions on the country. Ultimately, he tipped worldwide optical transport market revenue to achieve 5% growth in 2022.

“I do think Asia will grow, I just think it’s going to have a slow start and I do think every other region also grows in 2022” he concluded. “So it’s a nice sort of bounce back out of that 2% decline we saw in 2021.”

Dell'Oro previously predicted optical transport market revenue will hit $18 billion by 2026