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Optics for the Cloud: Expectations and Reality

By Vladimir Kozlov, LightCounting Market Research

Optics for the Cloud: Expectations and Reality
Investments by cloud companies in mega datacenters and supporting networking infrastructure have created a new and very dynamic segment in the optical components and modules market. Customer expectations and supply concerns were the subject of a panel discussion at OFC on Thursday morning.
The panel was moderated by LightCounting Market Research and included speakers from Alibaba Group, Arista, Finisar, Innolight and LinkedIn. Yuval Bachar represented LinkedIn, but many attendees still associate his name with Facebook and his “famous” target of $1/Gbps for the cost of high-speed optics announced at last year’s OFC. Yuval was in a much more generous mood today, raising the target to $4/Gbps “for now” and maintaining $1/Gbps as a longer-term objective.
Osa Mok, Chief Marketing Officer at Innolight, reflected on the many challenges faced by suppliers of optics working with cloud companies. Short product lifecycles, resulting in much faster production ramps and cost reductions leave no room for mistakes at the manufacturing level. Osa encouraged companies developing new technologies to work closely with the established suppliers to avoid such mistakes.
The topic of industry consolidation came up in one of the questions from the audience. Rafik Ward, Vice President of Marketing at Finisar, commented that the industry might have to wait for the next downturn for consolidation to continue. And, the industry is growing now but expectations of new suppliers and their investors are too high.
Cloud companies deserve credit for accelerating innovation in the optical component technologies by encouraging numerous start-up companies to develop radically new solutions or push existing ones to the limit. Many of these new products, technologies and businesses will be tested in the market in 2016-2017. Some are likely to succeed in delivering functional products, but few of these will be successful commercially. It is a tough market to enter, but it is even tougher to stay profitable while developing new products.
The panelists agreed that it would certainly be helpful if all cloud companies coordinated their efforts and investments in shifting the industry priorities. The optical market is not large enough to afford more fragmentation. According to the latest LightCounting forecast total sales of 100GbE optics will hardly reach $0.4 billion by 2017, if pricing does decline to $4/Gbps.
There seems to be good correlation in strategies pursued by Alibaba Group and LinkedIn. If we could only get Amazon, Facebook, Google and Microsoft to find a consensus.

Posted: 25 March 2016 by Vladimir Kozlov, LightCounting Market Research | with 0 comments

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The views expressed in this blog are those of the authors and do not necessarily reflect the views or policies of The Optical Fiber Communication Conference and Exposition (OFC)  or its sponsors.