Alibaba, Amazon, Facebook, Google and Microsoft accounted for more than 65% of all Ethernet transceivers sold for applications in mega data centers in 2018, according to a new report from LightCounting.
This market segment grew by more than 50% in 2016 and more than 70% in 2017. However, the demand for optics from some of these key cloud customers started to slow down in the second half of 2018. The report cites several factors contributing to the slowing demand for optics from the cloud companies in 2019, including:
- Excess inventory of 100GbE accumulated by the end of last year.
- Transition to new switches based on Tomahawk 3 ASICs and some constraints in the supply chain related to it.
- Uncertainty in continuing economic growth and escalating trade war between the US and China.
- New regulations and penalties faced by the leading Cloud companies in the US and Europe related to data privacy and monopolistic practices of these very large vendors.
LightCounting says the first two issues in the list above are temporary and these may be resolved in the second half of 2019, but the third and especially the fourth one may limit growth of the largest cloud companies in the years to come.
Nevertheless, LightCounting expects that demand for optics from the cloud companies will return to growth in 2020-2024. Sales of new products including 100GbE DR1, 200GbE, 2x200GbE and 400GbE DR4 (including 4x100GbE) modules will lead this growth. Several new DWDM and AOC products will contribute to this trend.
