Profitability of Optical Component Suppliers - CIOE 2012
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Transcript of Profitability of Optical Component Suppliers - CIOE 2012
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Profitability of the optical component
suppliers (or lack of it)
Dr. Vladimir Kozlov LightCounting, LLC September 2012
10/30/2012 1
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
About LightCounting
10/30/2012 2
• LightCounting reports and service products are designed to help executives plan and run their businesses. We support decision making based on facts and data.
• Our research covers the entire supply chain including components, modules, and networking equipment suppliers, service and content providers.
Products and Services • Market Update and Forecast
Reports • Quarterly and Annual sales
databases • Focus reports on
• 40/100G interconnects • AOCs • 10GBASE-T
• Continuous Information service • Consulting projects
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
The Industry Supply Chain
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Pro
du
cts
and
Ser
vice
s
Cas
h f
low
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Is this Industry Profitable?
10/30/2012 4
Average Annual Net Margin = (net profit/ total revenue)
Content Providers and Communication Semiconductor Suppliers (IC Vendors) are the most profitable … on average
Optical component and module vendors are only profitable when the demand
exceeds supply
Companies 2008 2009 2010 2011
Content Providers 12% 16% 16% 14%
Service Providers 6% 10% 12% 8%
System Vendors 5% 5% 8% 6%
IC Vendors 10% 9% 22% 20%
OC and Module Vendors 2% -4% 3% -1%
State of the Industry Report: http://www.lightcounting.com/2012_SOTIR.cfm
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Optical Component and Modules suppliers are mostly in the red
10/30/2012 5
OC Vendors 2008 2009 2010 2011
Accelink 16% 13%
Emcore –12% –23% –8% –24%
Finisar 6% 4% 10% 4%
JDSU 6% 1% 1% 2%
NeoPhotonics 2% –8%
Oclaro 1% –3% –12% –21%
O-Net 28% 20%
Oplink 7% 12% 12% 19%
Opnext 1% –15% –17% –16%
Average 2% –4% 3% –1%
Annual Net Margin
- Emcore sold VCSEL business to Sumitomo
- NeoPhotonics received investments from Rusnano
- Oclaro and Opnext merged
- O-Net and Oplink have the highest margins
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Investors had very high expectations from the optical technology
10/30/2012 6
Would you like to come to a
party with us?
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Who is controlling the market?
10/30/2012 7
• MSAs • Price mark-ups
• 10G optics • AOCs
• Vertical Integration • Aggressive pricing
• Low cost datacenters • 100G interconnects
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
What is the problem with optics?
• Is this industry too young? (90% of business in photonics have less than 100 employees)
• Are the customers too powerful?
• Is the technology hard to scale?
• Too many competitors?
• Too many vendors offering contract manufacturing services?
10/30/2012 8
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Strategies for success
• Scale and diversification (Finisar, Oclaro)
• Unique capabilities (very few, Infinera?)
• Intellectual property protection (Avago/Emcore,
Finisar/Source Photonics)
• Manufacturing excellence (Contract Manufacturers)
• Innovation (very long term strategy)
10/30/2012 9
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Consolidation is very slow
10/30/2012 10
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2004 2005 2006 2007 2008 2009 2010 2011 2012
Top 3
Top 4-6
Top 7-10
Rest
Market shares of optical transceiver vendors
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Diversification of optical transceiver vendors
10/30/2012 11
Generalists Specialists
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Revenues of top ten Chinese vendors
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$0
$200
$400
$600
$800
$1,000
2006 2007 2008 2009 2010 2011
Tota
l Re
ven
ue
($
M)
Data accounts for sales of the following vendors: Accelink, Eoptolink, Gigalight, HG Genuine, Hi-Optel, Hi-Sense (HBMT), O-Net, Sunstar, WTD, and Wuxi-ZTE.
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
How does the future look like?
10/30/2012 13
You never know
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Datacenter Cabling in the “Marketing” Brochures
10/30/2012 14
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
The Yellow Wall
10/30/2012 15
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Ethernet transceiver market
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$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
2008 2009 2010 2011 2012 2013 2014 2015 2016
Sale
s ($
M) 1 GigE
10 GigE
40 GigE
100 GigE
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Bandwidth distribution
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Customer Premises Network
Core Network
Net
wo
rk B
and
wid
th
1 Mbps
20 Mbps 1 Tbps
10 Tbps
“To move up the value chain of profitable services, provider must deploy ample network bandwidth, end to end” Leping Wei, China Telecom
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Distribution of aggregated bandwidth
10/30/2012 18
Customer Premises Network
Core Network
Agg
rega
ted
Net
wo
rk B
and
wid
th
1-20 Mbps x number of customers
1 - 10 Tbps x Number of fiber lines
Major upgrades will be necessary. This will be a major opportunity for suppliers
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Telecom transceiver market
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$-
$200
$400
$600
$800
$1,000
$1,200
2008 2009 2010 2011 2012 2013 2014 2015 2016
Sale
s ($
M)
SONET/SDH CWDM / DWDM FTTx Wireless Infrastructure
LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.
Thank you
www.lightcounting.com
10/30/2012 20