TRENDS
The Optical Fiber Communications (OFC 2001) conference held in Anaheim, CA, in March served as a technology showcase for a seemingly healthy industry despite economic uncertainty worldwide. In its annual OFC media and analyst briefing, Corning Inc. (Corning, NY) forecast continued growth in photonic components and fiber, although demand in 2001 is expected to fall short of last year's phenomenal level. Corning expects increases in fiber volumes this year at about half the growth rate in most regions and network segments in 2000.
The total worldwide market for fiber in 2000 exceeded 110 million fiber-km, up 50% from 1999, according to Alan Eusden, senior vice president and general manager at Corning Optical Fiber. North America accounted for approximately 45% of that market in 2000, followed by Western Europe (25%), Japan (10%), "other Asia" (15%), and Latin America and the rest of the world (5%).
Driven by high-bandwidth demand and new network builds, North American fiber volume grew almost 50% in 2000, according to Eusden. Long-distance carriers' demand for high-data-rate fiber more than doubled in 2000. Metropolitan-network expansions also contributed to this growth.
"Overall capital expenditure for 2001 is forecast to be significantly lower, although we believe the expenditure for fiber optics will capture a greater percentage of the total, as carriers respond to the compelling economic argument for fiber," commented Eusden. "Also, we believe that we will see strong demand for metro deployments. As a result, we expect 2001 fiber demand in North America to be half of what we saw last year."
In Western Europe, fiber volume increased about 45% in 2000. Nonzero dispersion-shifted fiber (NZDSF) growth exceeded 100%, driven by significant network builds by pan-European carriers. Like North America, Corning anticipates fiber volume in Western Europe this year will increase at a growth rate of about half that in 2000. In 2001, pan-European players are shifting emphasis to the metro and access segments, as these carriers complete their long-haul builds, Eusden explained. Widespread deregulation is also facilitating the emergence of new entrants, particularly in Southern Europe, which will spur competitive response by incumbent players and also create new demand.
Deregulation of the Japanese market and building of competitive networks by new market entrants such as utilities and railways, as well as increasing popularity of new mobile phone technologies and cable exports, all contributed to 25% growth in fiber volumes in 2000, said Eusden. Corning expects "slightly lower growth in 2001, as NTT's aggressive optical subscriber network plans this year are offset by some economic uncertainty in Japan."
Growth in 2000 for the rest of Asia was 70%, significantly higher than the 25% fiber volume increase in 1999. In 2000, the primary driver was China, where demand tripled for high-data-rate fiber. Additionally, there was accelerated deployment by existing carriers throughout the market in anticipation of new competition after China's accession to the World Trade Organization, according to Eusden. The strongest growth market in "other Asia" last year, according to Corning, was Korea, where domestic consumption and key exports more than doubled. In 2001, growth in high-data-rate fiber demand in China is expected to remain strong. However, Korea is likely to experience a slowdown due to recent economic challenges. Growth in "other Asia" is forecast by Corning at about half of last year's rate.
Latin America, and the rest of the world-Eastern Europe, Russia, the Middle East, and Africa-had fiber volume growth of about 40% in 2000. Corning anticipates similar growth in 2001, due to full liberalization in Argentina, Brazil, and Venezuela and additional deregulation in the Middle East and Africa.
Long haul represented 35% of total fiber volumes worldwide in 2000, followed by metro (30%), access (25%), premises (5%), and submarine (5%), according to Corning. In 2001, market share by application is expected to shift toward metro and access applications.
Long-haul fiber volumes increased 60% in 2000 over the previous year, led by NZDSF deployments. North America represented about 80% of total volumes. In 2001, Corning expects modest growth-in the range of about 10%-for long haul. North America builds will be reduced due to lack of capital availability. European builds will continue and builds in other international regions, especially Latin America and China, will accelerate, said Eusden.
Metro fiber deployment-defined as office-to-office, switch-to-switch traffic within a region or a city-had 50% growth in fiber volumes in 2000. In North America, growth was about 70%. Growth worldwide was positively influenced by long-haul and access builds, as sustained bandwidth demand drove the network bottlenecks into the metro. In addition, specialized metro fiber and systems products are enabling new entrants to build the lowest-cost-possible networks, said Eusden.
In 2001, metro fiber growth is forecast at about half the rate of 2000, as investors challenge new entrants to increase profitability. New technologies such as Gigabit Ethernet and 10-Gbit/sec metro optimized fibers will allow some new entrants and utilities to proceed with builds in key cities. The incumbents are expected to slow their metro deployments as the need to defend their customer base against emerging players is reduced, said Eusden.
Last year, access fiber volumes worldwide and in North America increased about 40%, as Internet subscriber growth continued to exceed 100% and fiber-based architectures became more competitive in new-build scenarios. In 2001, growth is expected to be "slightly less," despite strong end-user demand, due to reduced capital expenditures in North America and the challenges of the global regulatory environment.
In premises applications, worldwide fiber growth was about 10% in 2000, as an upturn in infrastructure spending occurred after companies "successfully cleared Y2K hurdles," Eusden noted. Slightly higher growth is expected in 2001, "as data rates continue to increase in local-area networks and 10-Gigabit Ethernet begins to shift the balance in favor of fiber solutions versus copper." In addition, 800-nm over parallel multimode fibers represents a new option to interconnect equipment in central offices.
In the submarine segment-trans oceanic repeatered and unrepeatered networks-fiber volumes increased 45% in 2000 over 1999, as Global Crossing and Tycom completed a number of trans oceanic networks. A comparable growth rate is anticipated in 2001.
"All in all, in an uncertain environment, we expect to have a very solid year," observed Eusden. In 2000, Corning had 40% fiber volume growth with a record 30% premium product mix. Premium products include Corning's LEAF (long-haul) and MetroCor (metro) fiber.
This year, Corning expects approximately 20% fiber volume growth. "We are sold out of fiber capacity," said Eusden. The company expects to maintain last year's premium product mix and anticipates relative price stability for this year.
"Bandwidth demand will grow at a rate on average of more than 100% per year, at least for the next 10 to 15 years. We also believe that the economics of meeting that demand will drive the network build-out of next-generation networks," said Eusden.
Corning expects the worldwide photonics market to grow in the range of 10-30% from 2000 to 2001. "Where it falls in this range will depend on how quickly the industry resumes more normal capital-spending habits," said Gerald Fine, executive vice president and general manager of Corning Photonic Technologies. "Over the longer term, as bandwidth demand escalates and the economics of all-optical networks remain compelling, we believe this will inevitably bring the market back to growth rates of around 50%."
Long haul, which represents the largest market segment, is expected to have worldwide revenue growth from about $5 billion in 2000 to more than $20 billion in 2004. The total undersea or submarine market for photonic components worldwide is forecast by Corning to accumulate at an annual rate of about 40% through 2004, with revenues of $1 billion in 2000 to $3.7 billion in 2004. The metro and access market for photonic components, starting from a modest level, is expected to increase 130% through 2004 to more than $4 billion.
Despite the current softening in the U.S. market, with its focus on markets such as narrowband WDM, Corning expects 20-25% growth in its photonics business this year. "We've all been surprised in the first quarter about how slow the photonic components market has been," said Fine. "I think there was a general expectation among all of us that in the second half, we would be back to normal rates. While we expect some improvements in the second half, we are certainly less optimistic now than we were even a month ago." To which Fine added, "I think it is important to note that this could change at any time but right now we are seeing that it is pretty slow."