The first quarter of 2024 has witnessed a remarkable surge in demand for datacom and telecom optical modules, particularly led by hyperscale network operators. Detailed insights from Cignal AI’s Optical Components Report reveal significant increases in shipments of high-speed modules, signalling potential revenue doubling by year-end.
Demand for Datacom Optical Modules Sees Unprecedented Growth in Early 2024
Boston, June 13, 2024 – The demand for datacom and telecom optical modules has surged to record levels in the first quarter of 2024, driven primarily by hyperscale network operators. This unprecedented growth has been detailed in the latest Optical Components Report by research firm Cignal AI, revealing significant increases in shipments of high-speed modules.
According to the report, over 3 million high-speed datacom modules were shipped in support of both AI cluster interconnects and traditional computing applications. The spike was particularly noticeable in 400 Gigabit Ethernet (GbE) and 800GbE modules, as well as in 400ZR telecom optical modules.
Unmet Demand for 800GbE Modules
“Despite the ramped-up shipment pace, 800GbE vendor deliveries still fall short of actual demand,” stated Scott Wilkinson, Lead Analyst at Cignal AI. Wilkinson noted that the first quarter of 2024 saw nearly as many 800GbE modules shipped as in the entire previous year. Although some vendors have reported shorter lead times, the overwhelming demand for both 400GbE and 800GbE modules suggests that the datacom segment’s revenue could potentially double by the end of the year.
Key Findings from the Report
The report highlighted several critical trends and data points:
– Spending on datacom optical components increased by more than 90% year-over-year (YoY), largely driven by AI applications requiring high-speed optical modules.
– Combined unit shipments of 400GbE and 800GbE datacom modules across all SR (short reach), DR (data reach), FR (fast reach), and LR (long reach) specifications rose by over 25% quarter-over-quarter (QoQ). Innolight emerged as the leading vendor in datacom module shipments.
– Telecom optical module shipments saw growth concentrated in 400G coherent pluggables, which experienced an over 35% YoY increase. This growth was particularly notable for companies like Marvell and Acacia.
– Outside of pluggable coherent modules, telecom component shipments declined YoY, with segment revenue falling by 26%.
– The coherent module market size decreased to below $5 billion in 2023; however, it is expected to grow in 2024 and may approach $10 billion by 2028.
Revenue and Market Dynamics
Analysts attribute the growth in optical component sales to the increasing adoption of advanced AI and machine learning applications, which demand high-speed data processing and transmission. These needs have substantially impacted purchasing behaviour among major network operators who require robust infrastructure to handle massive data loads efficiently.
The report’s projections suggest that this demand will not only sustain but likely increase, reflecting the broader trend of digital transformation across industries. Companies within the sector, such as Innolight, Marvell, and Acacia, are positioning themselves to benefit from these dynamic shifts, adjusting their production capabilities and supply chains to meet escalating demands.
Looking Ahead
The Optical Components Report offers a comprehensive overview of the market, including revenue-based market share and detailed unit shipment data for both datacom and telecom components. The report, which is published quarterly, serves as a valuable resource for stakeholders aiming to understand current trends and future forecasts in the optical components industry.
Cignal AI is set to present the findings of the report live on June 18, 2024, providing further insights into the market dynamics and detailed analysis by Scott Wilkinson.
Industry Implications
As digital applications continue to evolve rapidly, the requirement for high-speed and efficient data transmission will remain critical. The insights from Cignal AI’s report underscore the pivotal role of optical modules in supporting contemporary digital infrastructures. The data suggests a potential area of growth for companies willing to innovate and scale their operations in alignment with these emerging demands.
The consistent uptick in demand and evolving market conditions present a complex landscape for stakeholders, who must navigate supply chain constraints, technological advancements, and competitive pressures. The report underscores the need for strategic foresight and operational agility in this rapidly expanding sector.
