Optical networking industry recovering after dot com bust

The optical telecom network equipment market has finally recovered ten years after the dot com bubble burst according to new figures from iSuppli.

Revenue in the global optical telecom network equipment business is up this year, amounting to $13.5 billion, a 7.7 percent increase on 2009’s revenue of $12.5 billion.

Things are looking good for the next few years too, with iSuppli forecasting a boost to $22.1 billion in revenue by 2014, the highest figure amassed in the industry since its peak in 2000 when it gained $24.95 billion.

The market saw small spikes in profit in 2006 and 2007, but it slumped again in 2008 and 2009 when the recession hit home, but iSuppli believes the growth during those years was unsustainable anyway.

An internet boom is behind the massive growth in the optical networking market this year. The internet is growing at a compound annual growth rate of roughly 45 percent, according to iSuppli, and this phenomenal growth has led to a big demand for bandwidth. 

“During the final stages of the Dot-Com bubble in 2000, when everyone was sure that the boom would last forever, network operators sank billions into infrastructure equipment and fiber,” said Lee Ratliff, Senior Analyst of Broadband and Digital Home at iSuppli. “However, when the boom went bust, that fiber was left idle—becoming so called ‘dark fiber’—with much of it remaining unused for a decade. However, with the continued growth of the Internet, the industry finally has absorbed the excess capacity, lighting up the vast excess dark fiber from the bubble, and prompting companies to invest in upgraded optical equipment.”

China is one of the big players in this market’s recovery, encouraging its growth by providing tax incentives and financial subsidies for domestic fibre broadband equipment, optical chips and module manufacturers. 

This push will see broadband subscribers in China raising from 132.5 million in 2008 to 242.7 million in 2014, along with a doubling of spending on passive optical network equipment by telcos over the next four years.

Optical semiconductors and MEMS are also set to recover after almost ten years of stagnation. Optical network semiconductor revenue is expected to rise from $2.1 billion this year to $3.6 billion in 2014.

Optical MEMS will see substantial growth, with a compound annual growth rate of 17.2 percent between 2009 and 2014. Revenue in this sector is expected to rise from $111.2 billion in 2009 to $245.8 billion in 2014.