Softer 4Q13 spending in China dulls global ON market

LONDON, ENGLAND: Global optical networking (ON) spending fell in 4Q13 according to the latest market share alert from Ovum, the global market analyst firm.

Revenues of $3.5 billion were down 5 percent from 3Q13 and 10 percent from the year-ago quarter. Year-end spending increases in EMEA and South & Central America (SCA) were not enough to offset declines in North America and continued softness in China, which contributed to weak Asia-Pacific spending.

Global ON spending for 2013 declined 1 percent to $14.5 billion, consistent with Ovum's pessimistic forecast scenario, but improved conditions in 2014 should enable 2 percent growth for this year. Market spending continues to fluctuate regionally out of phase by quarter, resulting in sluggish growth on a global level. Vendors with stronger exposure to EMEA and SCA did well this quarter according to preliminary figures from global market research firm, Ovum.

Highlights

- The global ON market remained weak in 4Q13. Quarterly global spending in 4Q13 was down 10 percent from the year-earlier quarter to $3.5 billion. ON spending for the year totalled $14.5 billion. The ON market has grown versus the prior year's quarter in only one out of the last eight quarters.

- 4Q13 spending increases in in EMEA and SCA did not offset declines in North America and Asia-Pacific. ON revenues in EMEA topped $1 billion for the first time in a year, while spending in North America dropped under that mark for the first time since 1Q13. SCA spending exceeded $300 million (the highest quarterly revenues for the year), while sales in Asia-Pacific fell to their lowest point in almost two years.

- 4Q was not kind to the Chinese vendors: Weakness in China drove revenues and share lower for all three Chinese vendors. Meanwhile, Ciena and Coriant were the only vendors in the top 10 posting gains both sequentially and versus the prior year. Coriant displaced NEC in the top 10.

- Spending in 2013 for CPO, ROADM, 100G, and OTN increased by double digits versus 2012, while 40G revenues weakened substantially. CPO sales for 2013 surpassed $7.4 billion, accounting for more than half of all ON spending.

- 2013 global ON revenue results are consistent with Ovum's pessimistic forecast scenario published in October 2013 calling for 1 percent decline in 2013 to $14.5 billion. Ovum will be providing a forecast update in April 2014.

Ron Kline, principal analyst, Network Infrastructure at Ovum, says: "The 2013 market ended with a whimper rather than a bang; the Asia-Pacific market did not rebound off of a weak 3Q. Market woes are a result of substantial declines in demand for legacy TDM aggregation gear and in continued spending softness in China.

"On the bright side, more than half of all spending in 2013 was for next-generation CPO gear, and the 100G market moved into generalized deployment, climbing past $2 billion for the year, and we have already seen the first field deployments of 400G. From a technology perspective 2014 looks equally exciting as gridless ROADMs and metro-optimized 100G solutions enter the market."