Friday, September 14th, 2012 - OVUM
OVUM COMMENT: Julie Kunstler, Ovum Principal Analyst, Components Telecoms

At the 14th annual CIOE (China International Optoelectronic Expo) Julie Kunstler, Ovum Principal Analyst Component Telecom spoke with many of China’s leading optical communications and device vendors on the trade show floor and with optical equipment vendors before, during, and after trade floor hours.

The highlights were vertical integration to save costs and horizontal expansion to capture new markets, both product and geographic. China’s vendors are looking to increase revenues and improve margins.

Throughout the meetings, Julie Kunstler’s PON component ecosystem chart became harder and harder to read as optical vendors noted their respective plans and shared rumors regarding those of competitors.

While Ovum expects PON OLT and ONT/ONU unit shipments to increase in 2012 compared to 2011, revenues will remain about the same due to continued severe pricing pressures.

Consequently, vendors wanted to discuss potential applications for PON beyond residential FTTx, including for mobile backhaul (with a focus on small cells), in smart grids, for the enterprise market, and in cloud-based networks.

The most common market expansion topic was datacom, with a focus on how to compete on a global level and gain design wins with non-Chinese equipment vendors such as Cisco and Ciena.

The planned merger of Accelink and WTD will enable the combined entity to offer a broader product line covering more market segments. We believe that more mergers are needed among Chinese optical component vendors, supporting the combination of marketing and sales resources across product portfolios. In addition, a larger player will find it easier to secure financial resources for product development and geographic expansion. Consolidation is needed as China’s low-labor-cost advantage begins to diminish and longer term development efforts are required to penetrate 100G and data center markets.

---ENDS---

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CIOE (China International Optoelectronic Expo)

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