Sales of optical transceivers declined 5% in Q1 2011

Global sales of optical transceivers achieved new highs in Q4 2010 but declined by 5% in Q1 2011. Fibre Channel and Ethernet market segments led the decline, falling by close to 20% and 10%, respectively.

Sales of SONET/SDH and DWDM interface modules declined just slightly, sustained by strong demand for 40G products. Sales of FTTx transceivers and optical interconnects increased in Q1 2011. Detailed information on sales of optical interface modules is available in the sales database released by LightCounting today. Analysis of market trends and guidance for Q2 2011 sales will be included in our market update report, which will be published in July.

Inventory corrections cited by several optical component vendors in late 2010 and early 2011 have not impacted the transceiver market significantly in Q1 2011. Considering the very high growth in sales of most products in 2010, a 5% decline in early 2011 is a much-needed pause. Since many vendors renegotiate pricing on a calendar year contracts, lower product prices introduced on January 1 impacted Q1 sales as well.

Guidance for Q2 sales offered by major vendors suggests that sales of Ethernet and Fibre Channel transceivers, which declined the most in Q1, will rebound in the second quarter as demand for 10 GigE and 8 Gbps SFP+ transceivers remains strong. The SONET/SDH segment is likely to be flat, but sales of DWDM modules will probably decline in Q2 2011. This scenario will also be consistent with previous market corrections when datacom market segments, such as Fibre Channel and Ethernet, responded much faster to changes in demand than telecom markets, like SONET/SDH and DWDM. On a positive note, growth in FTTx and optical interconnect markets is very likely to continue in Q2 2011, helping to push the global optical transceiver market back into positive territory.

July 25, 2011

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