If you want to know where the optical spending trends are rising, look at the cloud operator market.
Cignal AI noted in its recent Transport Hardware Report that cloud operator spending on optical transport equipment surpassed $750 million in the fourth quarter to close out what the research firm said was a “record spending year.”
However, the research firm noted a contrast in the spending patterns between cloud and traditional service providers, working through an inventory correction phase and other economic issues.
“Fourth quarter optical spending was both a boom-and-bust story as cloud operators continued to expand their networks, whereas North American and European service providers continue to absorb accumulated inventory and are hesitant to spend in a challenging macro environment,” said Kyle Hollasch, lead analyst at Cignal AI.
Cloud dominates optical and routing spending
Cloud operator spending on optical equipment in North America has risen above spending by traditional service providers. Ciena saw significant growth during the fourth quarter as the company doubled sales to large hyperscale operators.
After the robust first half of 2023, in which it skyrocketed 16%, the worldwide routing market fell. Like the optical market, cloud spending in North America now represents a quarter of the region’s networking routing spending.
China takes the lead
Optical sales in China surged quarterly as Tier 1 carriers, led by China Mobile, began long-haul buildouts based on 400G QPSK wavelengths using Gen120P optics and 6THz C+L band line systems.
Hollasch said the Chinese market was an anomaly. “Chinese spending jumped as operators made good on their promise to commence new long haul WDM builds using the latest technology.”
However, optical sales in APAC ex-Japan and China were flat following five quarters of rapid growth.
Spending in RoAPAC (excluding China and Japan) was flat after several quarters of growth. Spending remains elevated due to 5G in India, but Cignal AI said this has likely peaked.
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