400G growth will be faster than expected, Cignal AI says

"Coherent 400G will cap the growth of existing 200G and 100G technologies by 2020 as new equipment becomes available," says Cignal AI lead analyst Andrew Schmitt. (Cignal AI)

The market for coherent 400G WDM is likely to develop much faster than previously projected, based in part on the expectation that 400G ZR technology will make it significantly easier to transition from 100G and 200G, according to Cignal AI.

But first, more suppliers will need to commercialize their 400G ZR technologies. At the moment, only Ciena is manufacturing 400G ZR products in volume. Through the rest of this year and next, other suppliers will be jumping in and increasing their manufacturing output levels too. The market should start taking off in earnest in 2020, Cignal AI believes.

Some of the strongest demand for 400G WDM is coming from data center operators looking to connect their data centers to each other. These connections are typically 80 kilometers to 100 km. This long-distance portion of the 400G WDM market has been defined by proprietary and relatively complicated solutions, and interoperability among the different vendors is uncommon, if not lacking entirely. The Optical Internetworking Forum developed the 400G ZR standard to rectify that.

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In addition, the OIF developed a new profile in the 400G ZR standard specifically for the telecom market. The intent was to make 400G ZR gear attractive for use in converged edge networks and for cloud connections. The maneuver automatically expanded the potential market for 400G ZR technology.

RELATED: Ciena, Cisco take lead in 100G, 400G coherent WDM market, says analyst

Cignal AI said it based its new, more optimistic outlook on the 400G market on the expanding applications for pluggable 400G ZR, as well as the improved performance of 400G+ equipment across all distances.

According to the analysis firm, 400G is going to rapidly take market share from 100G and 200G – largely the former.

“Coherent 400G will cap the growth of existing 200G and 100G technologies by 2020 as new equipment becomes available that maximizes optical capacity independent of reach,” said Andrew Schmitt, lead analyst for Cignal AI. “Compact modular equipment is the enabling platform, with revenue almost quadrupling in 2017, and we expect that it will continue to grow at least 40 percent per year through 2022.”

Cignal AI just published the most recent of its quarterly Optical Applications Reports. This one includes 2017 port shipment results and market share for all equipment vendors.

Shipments of 100G and 200G coherent ports are growing at a very healthy clip everywhere, but especially in Western markets, where shipments were up more than 50 percent in 2017, according to Cignal AI. Nokia and Ciena were two of the notable beneficiaries.

RELATED: Ciena’s Smith: 200G is in our rear-view mirror as 400G becomes more important

The 100G/200G segment is also exhibiting one of the most obvious signs of a maturing market, however. Even as shipments go up, revenue remains flat, which is to say that prices are falling fairly precipitously.

Cignal AI called that a “challenging pricing environment,” but also said that this year, pricing should stabilize with less disruption from new companies and new technology. “A better pricing environment and improved financial results are expected as a result,” the company said.

The report also offers insight into projected growth in the compact modular hardware segment, which enables disaggregated hardware optical network deployment models.