After a weak 2017, long-haul WDM deployments rebounded in the fourth quarter of 2018 (4Q18) with growth of nearly 20%, bringing it up almost 8% for the year. According to the 4Q18 Optical Hardware Report from research firm Cignal AI, growth was fuelled by a reversal of almost two years of terrestrial spending decline in North America and a year-over-year surge in Japan.
Scott Wilkinson, optical hardware lead analyst at Cignal AI (pictured), noted that there were several announcements of next-generation coherent optical system deployments leading up to the 2019 OFC conference, and more were expected: “These new generations of coherent optical hardware will spur long-haul and SLTE spending increases, which we expect will continue into next year,” he said.
Cignal AI’s Optical Hardware Report is issued each quarter and examines optical equipment revenue across all regions and equipment types. The analysis is based on financial results, shipment information, and guidance from individual equipment companies. Forecasts are based on overall spending trends for equipment types within the regions.
Key findings in 4Q18 Optical Hardware Report included:
- North America rebounds. After eight quarters of declining revenue, North American terrestrial spending (excluding SLTE) turned positive in 4Q18, led by long haul and cloud and colo spending. Ciena saw double-digit growth in the region and was responsible for most of the turnaround, with ADVA posting a similar growth percentage. While 2018 was down year over year, modest growth is predicted for 2019.
- Impressive returns for Japan. A stronger-than-expected third quarter combined with a 4Q18 surge resulted in regional growth of nearly 45% YoY, led entirely by non-Japanese vendors. Nokia, Ciena and Huawei posted larger gains at the expense of traditional Japanese vendors Fujitsu, Mitsubishi and NEC. While spending was up double-digits in 2018, it is expected to normalise to single-digit growth for 2019.
- EMEA quarterly spending lags. Traditional EMEA fourth-quarter spending growth was not as large in 2018 as compared to previous years, resulting in a quarterly YoY decline. For the year, EMEA is up slightly and should grow well into 2019.
- China slows down. Growth in China continued in 4Q18 but decelerated as more moderate growth becomes the new norm as large percentage gains cannot be sustained indefinitely. Nokia had a strong quarter, though Chinese sales are still dominated by the local vendors such as Huawei and ZTE. The loss of ZTE revenue in the 2Q18, however, resulted in flat Chinese spending for the year. Single-digit growth is expected into 2019.
- CALA returns to growth. Recovering from a negative third quarter, CALA had a small increase in 4Q18. The region remained down in double-digits for the year.
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