Driven by the cloud provider’s spending to keep up with the ongoing need for more bandwidth, the optical transceiver market exceeded $3 billion in the second quarter, up from $2 billion in the same period last year.
According to a recent LightCounting report, Ethernet transceiver sales increased by 100% year-over-year. The research firm said the growth came from strong demand for 400G and 800G modules.
However, several factors will impact growth for the remainder of 2024.
For one, the major transceiver vendors must reach the limits of their capacity for 100G per lane modules while starting to plan for 200G per lane transceivers. Also, a component shortage will inhibit growth.
“New records will be reached in the second half of 2024, but the growth rate will moderate,” LightCounting said. “The second half of 2023 was much stronger compared to the first half of last year, so doubling sales will be much more difficult in Q3 and Q4 of 2024 on a year-over-year basis.”
Cloud leads the way
Cloud is a significant factor in the growth of Ethernet optical transceivers.
Ethernet optical transceivers see the benefits of the dominant cloud companies continuing to dedicate more capital to expand and enhance their network capacity.
Specifically, Alibaba and Alphabet increased their spending by more than 90% and Microsoft by 55% in the second quarter of 2024 compared to the previous year.
Nvidia’s revenues were up 122% and Broadcom’s rose 43% year-over-year.
Broadcom noted in its second-quarter earnings report that AI demand and VMware were vital contributors to its growth. Revenue from its AI products “was a record $3.1 billion during the quarter.”
Telecom remains challenging
As seen in earlier quarters, the telecom provider market continues to see struggles, a trend that continued into the second quarter.
LightCounting said that “sales of optical transceivers for telecom applications remained weak, but there are some signs of improvement, suggesting a stabilization of demand in the second half of 2024.”
Telecom equipment suppliers' combined revenue was down 6% year-over-year but up 14% sequentially.
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