1.cioe september 2012 - julie kunstler - presentation - ovum
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FTTx Market and ChinaTRANSCRIPT
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FTTx Market in Review: Focus on PON and China
Julie Kunstler
CIOE
September 2012
Shenzhen, China
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Optical components industry
Revenues
Leading vendors – China enters “top 10” list of optical component vendors
Dynamics
PON market
Dominance of China’s FTTx subscriber base growth
Incredible 2011 – a look at history and forecasts
10G PON and WDM PON
EPON and GPON
Deployment patterns in FTTx networks
Strength of China’s vendors at PON equipment and component levels
Cost-cutting approaches – BOSAs gain share, PIC may follow
PON ecosystem matures
Focus on ODN operations – OTDR in PON
Conclusions and thoughts
Overview
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Focus on OC Market
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Service providers (SPs)
System vendors
Subcomponent and material
Optical components Avago, Finisar, JDSU,
Sumitomo, Oclaro, Opnext, Source Photonics...
Alcatel-Lucent, Brocade, Cisco, ECI, Ericsson, Huawei, Juniper, Motorola, NEC, Nokia/NSN, Nortel, Tellabs,
ZTE...
2011 annualized revenues $1.91tn, up 7% 2011 vs.
2010
America Movil, AT&T, BT, China Mobile, China Telecom, FT, DT, NTT, Saudi Telecom, Sprint,
Telefónica, TI, Verizon, Vodafone, Zain...
Source: Ovum * Includes only optical and datacom components
Infrastructure vendors’ 2011 revenues $43.6bn,
up 8% 2011 vs. 2010
Optical component 2011 revenues of
$6.2bn, up 9% 2011 vs. 2010
Ovum does not track subcomponents quarterly
and does not track materials.
Telecommunications grew in 2011 despite challenges
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OC revenues appear disconnected from optical networking and service provider capex
Due to various reasons – supply chain loading, FTTx market, direct spending by applications service providers
-20%
-10%
0%
10%
20%
30%
40%
50%
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
YoY
reve
nue/
spen
ding
OC ON Capex
Source: Ovum
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Finisar 15.7%
JDSU 10.5%
Sumitomo 9.5%
Avago 9.5%
Oclaro 5.9%
Opnext 5.3%
Fujitsu Optical Components
4.4%
Source Photonics
3.8%
NeoPhotonics 3.8%
Oplink 3.0%
Other 28.8%
1Q11-4Q11: $6.2bn OC market
Optical infrastructure vendor landscape – 2011
China’s vendors are strong in optical networking market
Merger of Accelink and WTD will propel China into “top 10” in optical components market
Source: Ovum
Huawei 21.2%
Alcatel-Lucent 16.2%
ZTE 10.9% Ciena
8.2%
Fujitsu 6.7%
Cisco 4.9%
Ericsson 3.9%
NEC 3.5%
Nokia Siemens 3.3%
Tellabs 3.0% Other
18.2%
1Q11-4Q11: $15.6bn ON market
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What happened, what is happening
Recession slowed the market in 2009
OC recovered in 2010
ON and capex recovered in 2011
Strong spending in China for core and access in 2009/2010
Strengthening Chinese vendors
Thai floods reduced OC manufacturing capacity in 2011
Meanwhile, global bandwidth growth demand continued
Giving rise to demand for low-cost, high-data-rate technologies
Macroeconomic uncertainty moderates telecom infrastructure growth
OC suppliers must continue to deliver more with less
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Focus on PON
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FTTx subscriber growth – domination by China
0
50,000
100,000
150,000
200,000
250,000
2009 2010 2011 2012 2013 2014 2015 2016
FTTx
con
sum
er su
bscr
iber
s (00
0s)
FTTx consumer subscribers by country/region
China Japan and Korea Rest of Asia Europe NA Rest of World
Source: Ovum
China will represent 50% of worldwide FTTx consumer subscribers in 2016.
China represented 20% of worldwide FTTx consumer subscribers in 2009.
China’s CAGR of 42% surpasses the rest of Asia (31% CAGR) and Europe (28%)
Japan & Korea continue to add but started from high base.
Growth from many Eastern & Western European countries.
Australia, Indonesia, Malaysia, NZ and others lead growth.
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OLT ports - shipments and forecast
Very large increase in PON OLT port shipments from 2010 to 2011; more than 80% of OLT shipments were for China’s networks.
OLT shipments forecast to remain high in 2012, followed by year-over-year declines.
Source: Ovum
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2010 2011 2012 2013 2014 2015 2016 2017
OLT
por
ts (0
00s)
OLT port shipments by type – actuals and forecast
10G PON OLT portsEPON OLT portsGPON OLT ports
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OLT port forecast – the influencers
OLT port shipment forecasts remain high compared to 2010:
Over 2.8 million in 2017 compared to 2.1 million in 2010
FTTx network rollouts in China will have a long-term impact on FTTx equipment
Forecast – possible upside:
If several other countries accelerate FTTx deployment plans, such as Brazil, Mexico, Indonesia, India, and/or Russia
If China State Grid begins countrywide deployment of private FTTx network for smart grid
If FTTx networks are deployed across the US
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Where is 10G? Where is WDM PON?
Forecast includes very little growth for 10G in near term
10G EPON shipments began in 3Q11, but volumes will remain low
10G PON inhibitors include:
Focus of service providers on EPON and GPON deployments
Lack of complete, low-cost ecosystem – especially compared to declining costs of EPON and GPON
Service providers are interested in 10G symmetrical for mobile backhaul and business services but 10G symmetrical ecosystem is not complete
WDM PON will be used for niche applications
WDM PON is unlikely to be used for residential access in the near future
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Shipments of EPON OLT ports continue
Source: Ovum
Japan and Korea continue EPON-based FTTx network deployments.
China – various provinces and cities that began with EPON are continuing with EPON, others are adding GPON.
We expect EPON OLT port shipments to begin to decline.
0
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
OLT
por
t shi
pmen
ts
Global OLT port shipments – EPON versus GPON
GPON OLTEPON OLT
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Shipments of EPON ONTs/ONUs continue
EPON ONTs/ONUs continue to ship in large quantities.
We expect EPON ONT/ONU shipments to continue to ship given the lag between building the network and adding subscribers onto the network.
Source: Ovum
0
1,500,000
3,000,000
4,500,000
6,000,000
7,500,000
9,000,000
10,500,000
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
ON
T/O
NU
shi
pmen
ts
Global ONT/ONU shipments - EPON versus GPON
GPON ONT/ONUEPON ONT/ONU
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New network builds – focus on central office versus subscribers Ratio of shipped ONTs/ONUs to OLTs has been very low in China, this
impacts global ratio.
Source: Ovum
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Global North America EMEA Japan China
Rat
io
Ratio of shipped ONTs/ONUs to OLT ports
2009 2010 2011
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Low ratios: Why? What are the implications?
FTTx network build cycle:
Low ratios expected in early stage of network deployments – initial focus is on preparing the ODN and installment of OLTs in central offices
Higher ratios expected when focus shifts to bringing customers onto the network – leading to higher shipment ratios of ONTs and ONUs to OLTs
Early network builds include:
EMEA – Russia, Romania
China
Later network builds include:
Japan – deployments have been under way by service providers for several years
US – Verizon’s deployments have been under way for several years; other deployments are small scale
Note: We do not expect to see ratios reach theoretical splits
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China’s vendors are strong exporters in FTTx market
China’s vendors dominate the OLT equipment market
Source: Ovum
0%
20%
40%
60%
80%
100%
Global 2010 Global 2011 EMEA 2010 EMEA 2011 SCA 2010 SCA 2011
% o
f OLT
por
t shi
pmen
ts
OLT port shipments Chinese vendors(Huawei, ZTE, FiberHome)
All others
Chinese vendors increase from 76% to 86%
Chinese vendors increase from 50% to 63%
Chinese vendors increase from 37% to 59%
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OC vendors: market share in China
Total optical components market “hides” the growth by China’s optical component vendors in FTTx
Source: Ovum
Total optical components revenue breakdown by vendor location
0%
20%
40%
60%
80%
100%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
North America Japan China Other
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OC vendors market share – FTTx transceivers/BOSAs
OLT transceiver market share – 2011*
ONU/ONT transceiver market share - 2011
*Vendor segmentation based on vendor location and China includes vendors supplying to Huawei and ZTE, regardless of location.
Source: Ovum
China’s optics vendors display growing market share for both OLT and ONU/ONT transceivers and BOSAs
Several North American optics vendors are pulling back from ONU/ONT market
North America Japan China Other
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BOSAs will become the standard approach for ONTs
BOSAs (bidirectional optical subassemblies) will overtake transceivers as price pressures continue
China’s vendors lead this cost-cutting change
Source: Ovum
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014 2015 2016
% o
f tra
nsce
iver
s an
d B
OSA
s to
tota
l gl
obal
ON
Ts/O
NU
s
Global ONTs/ONUs - transceivers versus BOSAs
ONTs/ONUs - BOSAsONTs/ONUs - Transceivers
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Another cost-cutting approach - PIC
PIC (photonic integration circuit) common in higher-end, lower-volume OC product designs
2012 – PIC and PON come together - OneChip Photonics
Monolithic PICs in indium phosphide
Integrates discrete components
Replaces optical chips and TO Can
Designed for automated assembly
No active fiber alignment
MPD
SSC
1310nm
1490nm PD
WDM splitter
OneChip Diplexer PIC
DFB laser
Source: OneChip
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Maturing market – focus on ROI and operations
Revenue – bringing subscribers onto the network faster
Easier-to-install fiber
Easier-to-install ONTs
Working with building owners ahead of time
Revenue – adding services
Verizon – home monitoring, smart home
KDDI – fixed-mobile convergence, quad-play services
Monitoring and managing the ODN, such as OTDR
Reducing energy consumption of equipment
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Focus on ODN management - OTDR
OTDR equipment is used:
When an optical distribution network is being built to enable adherence to various optical parameters
When a fault along the fiber network is suspected
An OTDR instrument injects a series of optical pulses into the fiber that is being tested. It extracts light that is reflected back from the points along the fiber. The strength of the return pulses is measured and integrated as a function of time and is plotted as a function of fiber length.
Source: Broadcom
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ODN management – use of OTDR for PON
Ideally, OTDR functions would be installed at the OLT and at each ONU/ONT, enabling the signal to be tested along each separate split of the PON network.
But OTDR equipment is relatively large and expensive so alternative ways to use OTDR functions are being developed, such as:
OLT equipment – chassis-based or linecard-based
OLT optical module – embedded into the OLT optical module Embedding OTDR into OLT modules has technical challenges, given the size and power limitations of
the SFP (small form factor pluggable) optical module
Several OLT optical vendors have developments and testing under way
Embedded OTDR is just one step in the roadmap for improving PON network diagnostics and management.
Not clear how much service providers are willing to pay for OTDR; they will assess the costs and benefits of OTDR against the costs of fiber repair and lost service revenues.
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Conclusions and thoughts
The merger of Accelink and WTD puts a Chinese OC vendor into the global “top 10” ranking.
China’s vendors dominate the FTTx market at both the equipment and optical component levels.
The FTTx market will continue to be dominated by network deployments in China, but after China, OLT port shipments are likely to decline.
OC vendors must continue to look for cost-cutting approaches and China’s vendors have led the transition to BOSAs for GPON ONTs/ONUs.
Service providers are focusing on revenues and operations, such as the use of OTDR for optical network monitoring.
China’s OC vendors have the opportunity to increase their presence in the top 10 through internal growth and acquisitions.
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THANK YOU
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