Optical transport equipment market to rebound

For the optical industry vendors, there seems to be light coming through this year as service providers have worked through their inventory backlogs.

Following a sharp decline in 2024 caused by oversupply and poor macroeconomic conditions, a new Dell’Oro report forecasts that the Optical Transport equipment market will return to growth.

After this corrective period, the optical market is projected to grow at an average annual rate of four percent for the next five years, bringing the market size to $16 billion by 2029.

“We believe the Optical Transport equipment revenue decline in 2024 was a corrective phase in the market cycle to align supply with demand,” said Jimmy Yu, VP at Dell’Oro Group.

He added, "After taking a step back on purchases, service providers are better positioned to judge future equipment needs, creating a more positive environment for both the network operators and equipment manufacturers.”

Content provider's growth engine

Content providers will be a significant driver of WDM growth.

Dell’Oro forecast that data center interconnect (DCI) will shift to IPoDWDM in metro applications.

Also, DWDM Long Haul for DCI is expected to grow at a five-year CAGR of 12 percent, driven by large Internet content providers (ICPs).

Enhancing wavelength speeds

Given the demands that traditional providers and ICPs drive, Dell’Oro said that the WDM market will shift to higher wavelength speeds to reduce the price-per-bit and increase spectral efficiency.

In 2025, 1.6 Tbps-capable wavelengths will represent the highest speed.

Yu said that the research firm believes 2.4 Tbps-capable coherent technology is under development and will be available as early as 2027.

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