highlights from - state of the industry report - june 2012 ... webinar june... · • customers...

LIGHTCOUNTING Market Research on High-Speed Interconnects Datacom, Telecom, CATV, FTTX, Consumer markets © Copyright 2011 LightCounting LLC All material proprietary and confidential.

Highlights from

- State of the Industry Report - June 2012 Forecast Preview - OptiNet conference in China

Dr. Vladimir Kozlov LightCounting, LLC

June 2012

6/12/2012 1


OptiNet 2012

6/12/2012 2

Mr. Wei Leping, Director of Science and Technology, China Telecom “In China we select the best…”, but “100G technology needs another year of work” “Yes, we need ROADMs...”, but “static networks work fine in 95-97% cases”

Mr. Mao Qian, Chairman of China FTTH Forum “What is FTTH: …near the home or in the home?” “Bandwidth ≠ User experience” – Average broadband access rate in China is very low “Bandwidth = Economic development”

Main focus: Optical Networking, Mobile Backhaul, FTTx 700 attendees, very small tradeshow, but very interesting presentations (and good English translation)

Presentations from: - China Mobile, China Telecom and China Unicom; - Alcatel-Lucent, FiberHome, Huawei and ZTE; - 3M, Broadcom, Corning, Cortina Systems, PMC, and Qualcomm; - China FTTH Forum, Broadband Forum, MEF, and LightCounting. Main concern of attendees: slow start of 2012


Slowdown in China?

6/12/2012 3

Q1 Q2 Q2 Q3 Q4

Very slow start of 2012 in China - Business is down 30-50%

compared to 2011 - Will the government help?

Historical data suggest of regular slowdowns: - Every 4-6 quarters

Is this an engineered crisis?


Economic Indicators in China, US, and Europe.

6/12/2012 4


Economic Indicators in Brazil, India, and Russia

6/12/2012 5


Telecom Equipment Sales are down

6/12/2012 6

$-

$400

$800

$1,200

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Sale

s ($

M)

0

1,000

2,000

3,000

4,000

5,000

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q1

11

Q4

12

Sale

s ($

M)

Alcatel- Lucent Optical Networking Sales

ZTE Total Revenue


Datacom Equipment Sales are flat

6/12/2012 7

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Cis

co S

ale

s ($

M)

Routers Switches


Optical Component and Module Sales

6/12/2012 8

$-

$50

$100

$150

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

10

Q1

20

11

Q2

20

11

Q3

20

11

Q4

20

11

Q1

20

12

Fin

isar

Rev

en

ue

($

M)

Datacom

Telecom


Service Providers are doing fine!

6/12/2012 9

• Customers continue to spend money on networking services • Projections for 2012 Revenue and CapEx are good “It is not a question of IF service provider will increase infrastructure investments, but it is a question of WHEN” – Jerry Rawls, Finisar

$750

$800

$850

$900

$950

2006 2007 2008 2009 2010 2011 2012

Re

ven

ue

of

top

12

se

rvic

e p

rovi

de

rs (

$B

)

120

130

140

150

160

2006 2007 2008 2009 2010 2011 2012

Cap

Ex o

f to

p 1

2 s

erv

ice

pro

vid

ers

($

B)


China Mobile, DT and Verizon

6/12/2012 10

Verizon FTTx (FiOS): - 16.5 million passed - 4.8 Million connected - Added 0.7 million in 2011 China Telecom FTTx - 40 million passed - 7 million connected - Added 5 million in 2011 - Targeting 9 million of new FTTx

customers in 2012

Verizon acquired two cloud computing vendors in 2011 and just announced acquisition of Hughes’ Telematics, targeting market for machine-to-machine services

$-

$20

$40

$60

$80

$100

$120

$140

2007 2008 2009 2010 2011

Re

ven

ue

($

B)

AT&T

China Mobile

Deutsche Telekom

Verizon

China Telecom


FTTH Market Statistics

6/12/2012 11

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

New FTTH subscribers ONU transceiver shipments

Laser ans IC chip shipments

?


Projections for Network Traffic Growth Rate Vary

6/12/2012 12

• “In the next five years, the number of mobile broadband subscribers is expected to exceed five billion and network traffic is projected to grow a

hundredfold.” Ken Hu, Rotating and Acting CEO, Huawei, April 2012

• “Global IP traffic has increased eightfold over the past 5 years, and will increase threefold over the next 5 years.” Cisco VNI Report, May 2012

Growth rate:

0

20

40

60

80

100

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032

No

rmal

ize

d N

etw

ork

Tra

ffic

250% per year 30% per year


Historical Data on Network Traffic

6/12/2012 13

Average annual growth rate = 35%

Any Data from China Telecom?

Source: AT&T


Mobile Data Traffic Grows Faster

6/12/2012 14

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013 2014 2015 2016

Glo

bal

IP T

raff

ic (

PB

pe

r M

on

th)

FixedInternet

MobileData



….FOR NOW

Source: Cisco’s Analysis (VNI Index)


Traffic Growth Rate is Slowing Down

6/12/2012 15

0%

10%

20%

30%

40%

50%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Internet traffic growth


The larger the system, the slower it grows ….at least in terms of a percent of the total


Growth in Network Bandwidth

6/12/2012 16

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Internet traffic growth DWDM network bandwidth growth

Sources: LightCounting Data and Cisco’s Analysis (VNI Index)

DWDM Network Bandwidth is calculated from shipments of optical components and modules


Cisco’s 2012 Forecast for Total IP traffic growth is higher!

6/12/2012 17


0%

10%

20%

30%

40%

50%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2011 forecast 2012 forecast


DWDM transceiver sales forecast

6/12/2012 18

$-

$200

$400

$600

$800

2009 2010 2011 2012 2013

Sale

s ($

M)

2011 forecast

2012 forecast

45%

20%

A minor (5%) change in projections for traffic growth leads to significant (25%) changes in forecast for sales of components and modules

Forecast Report: http://www.lightcounting.com/December_2011_Forecast.cfm

?

http://www.lightcounting.com/December_2011_Forecast.cfm

http://www.lightcounting.com/December_2011_Forecast.cfm


Is this Industry Profitable?

6/12/2012 19

Average Annual Net Margin

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

http://www.lightcounting.com/2012_SOTIR.cfm

http://www.lightcounting.com/2012_SOTIR.cfm


Profitability of Content Providers

6/12/2012 20

Net Profit: $0.63 billion Net profit margin: 1% Amazon Fulfillment Center

Net Profit: $9.7 billion Net profit margin: 26% Google Data Center

Amazon Web Services (AWS) revenue in 2011 is estimated to be close to $1 billion, an increase of more than 50% from 2010.


Infrastructure Insvestments

6/12/2012 21

AT&T Capital Expenditures in 2007-2011: $93 billion Google Capital Expenditures in 2007-2011: $13 billion* *Including $1.9 billion purchase of a building in New York


Bandwidth distribution

6/12/2012 22

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


Distribution of aggregated bandwidth

6/12/2012 23

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

highlights from - state of the industry report - june 2012 ... webinar june... · • customers...

Documents