The demand for higher Ethernet speed, couple with the prevalence of Cloud computing, Internet of Things and virtual data center, has driven the prosperity of optical transceiver market. Optical transceivers, direct attach cables (DACs) and active optical cables (AOCs) have evolved dramatically to catch leading edge broadband network capacity. The past decades have witnessed massive adoption of optical transceivers with data rates ranging from 1G, 10/25G to 40/100G, while higher-speed 200G or even data center 400G is just on the horizon. The sales of optical components grows steadily and is expected to continue in the years to come.
As network gets faster and virtualization gradually becomes the norm, data center is undergoing a major transformation. The trend emerges in the industry signifies a migration toward higher speed transceivers and better service. These high-bandwidth transceivers are driving revenue growth which suggests a strong market. The global optical transceiver market is anticipated to reach to $9.9 billion by 2020, driven by the widespread use of 10/25 Gbps, 40 Gbps and 100 Gbps, and with the biggest sales forecasted for 25G and 100G ports. The imminent 200 Gbps and 400 Gbps optical transceivers also poise to hold a fraction of the market share.
Initially offered in the early 2000s, 10 Gigabit Ethernet has matured now to become a commonplace in data center. 10G server connections reached majority of new shipments and have outpaced 1G connection in 2015. Basically the 10G Ethernet is stacked to move to 40G and 100G at the access layer, following the upgrade path of 10G-40G-100G, which, however, will quadruple the cabling complexity, power consumption and overall cost. And this will be exacerbated when aggregating into 100G (10×10G) interface.
So there comes the game changer: 25G Ethernet for better economics and efficiency. 25 Gigabit Ethernet makes the road to 100G smoother with reduced cost, lower power consumption and less cabling complexity. SFP28 optical transceiver is designed for use in 25G Ethernet, delivering 2.5 times higher speed per lane at lower power. 25G SFP28 can be viewed as the enhanced version of 10G SFP+ transceiver, utilizing the same form factor but running at 25 Gb/s instead of 10 Gb/s. Besides, SFP28 25G is back compatible with SFP+ so it will work sufficiently on SFP+ ports. By the year of 2019, the price of a 25G SFP28 will be almost the same as a 10G SFP+. So you will be saving a great bunch of money if choosing to move to 25G. Some users even plan to skip 10G and directly deploy 25G Ethernet for better scaling to 50G and 100G.
Obviously, 10GbE is no longer fast enough for data centers handling large-scale applications, so 40G is designed to alleviate bottlenecks in the access layer . When firstly planning to scale to 40G, the cost is extremely high that makes the implement of 40G technology difficult. Luckily, we’ve seen significant cost reduction of 40G optics in the past 2 years: QSFP-40G-SR offered by FS.COM is $49 only. The price drop accelerates 40G transceivers adoption in aggregation links, or in access links to connect servers. For scaling to“spine-leaf” architecture, 40G switches can be used as spine switch with the 40G QSFP+ ports breaking out into 4 10G SFP+ ports to support 10G server uplinks. 40G port revenue has peaked in 2016 and will now decline in favor of 25G and 50G ports.
Currently 100G are the fastest Ethernet connections in broad adoption, which is growing sustainably. And the optical transceiver market indicates that 100G QSFP28 module price will continue to drop, making the cost difference between 40G and 100G even small. For example, FS.COM offers great cost reduction on 100G transceivers: only $199 for QSFP28 100G-SR. Moreover, 100G switch port shipments will outnumber 40G switch port shipments in 2018—as 25G server and 100G switch became commonplace in most hyperscale data centers that replaces previous 10G servers and 40G switches. Vendors of 100G QSFP28 transceiver will continue to grow the product and push the limits of its versatility.
Another foreseeable trend in interconnect market is the phase out of low speed transceivers in the core of networks and in data centers. So here comes the major shift from 10G and under to 40/100G and higher. New developments with QSFP28 technology in 2018 also will pave the way for the 200G and 400G QSFP-DD: next-generation 200G and data center 400G Ethernet will deploy starting in 2018, and become mainstream by 2019-2020. On the whole, optical transceiver market is evolving to higher speed, more reduced power consumption and smaller form factor. Let’s take a look at these future-proofing optical transceivers.
DACs (direct attach copper cables) and AOCs (active optical cable), with their inherent advantage of enhanced signal integrity and superior flexibility, have become the preferred, cost-effective interconnect for high-speed links at 10G, 25G, 40G and 100G for about all applications in hyperscale and enterprises, and is likely to be used for 200G and 400G as well. DAC and AOC provide improved speed and cost efficiency, they are witnessing tremendous growth in data interconnect market. 2017 has witnessed shipment over 100k direct attach copper cables for 100Gb/s networks in hyperscale data centers, and this is anticipated to continue in 2018. While the global market for AOC is projected to surpass $2 billion by 2020, the sales will keep surging in the years to come.
Data demand will continue to skyrocket. As the vast increases in Internet traffic are pushing optical transceiver market to shift, we can still expect deployment of 10/25/40/100 Gigabit Ethernet (GbE) optics in mega data centers to spur market growth in 2018. While the lower-cost and power-efficient DACs and AOCs are yielding significant growth in short-distance high speed interconnect. So just stay tuned and embrace the significant opportunities lie ahead for optical transceiver market.
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