Optical fiber market waits to rebound

23 May 2003

The global market for optical fiber halved in 2002. Oliver Graydon looks in to the reasons behind this drop and finds that three key areas must improve if growth is to resume in this sector.

From Opto & Laser Europe May 2003

Revealing a 50% drop in the global market for optical fiber in 2002, Corning says that three key areas – the financial health of carriers, broadband business models and public policy initiatives – must improve if growth is to resume in the telecoms sector.

The US optical fiber maker made the comments at a briefing at this year’s annual Optical Fiber Communications conference (OFC 2003) in Atlanta, Georgia, US.

According to Bob Brown, vice-president of Corning Optical Fiber, the total worldwide requirement for optical fiber was approximately 55 million km last year – about half of the 2001 figure. His briefing on regional declines in demand painted a grim picture.

In North America, which last year comprised about one quarter of the global market, demand had dropped by approximately 65% since 2001. In Western Europe, which represented 10% of the market in 2002, demand had slumped by 75%. It was a similar story in the Latin American market, which declined by 70%.

“The market in Western Europe largely mirrored North America,” said Brown. “Reported capex [operator capital expenditure] for the region was down more than 30%, but fiber demand was down 75%. There was a near-total suspension of new network deployment by pan-European operators. The PTTs [national carriers] cut capital spending and shifted their focus to short-term revenue-generating services such as DSL [digital subscriber line].”

Perhaps the best news in the sagging fiber market came from Asia, which last year was responsible for about two-thirds of the global market for fibre in 2002. In Asia (not including Japan) demand fell by a relatively moderate 35%, while in Japan, which accounts for about half the Asian market, demand fell by just 10%.

“Following tremendous growth in 2001, the Japanese home market stabilized in 2002,” said Brown. “Domestic strength was driven by their ambitious nationwide broadband initiative, driving to connect 10 million households to 100 Mbit service by 2005 and 30 million households to 10 Mbit per second by 2005. Currently, the number of fibre-to-the-home lines added each month in Japan is equal to the cumulative number of lines installed in the US to date.”

In terms of demand by application, the fiber required for long-haul terrestrial and submarine projects was hardest hit in 2002. It declined by around 70% to become 10% of the total fiber market. Demand for fiber within metro applications also shrank, but still accounted for about 45% of the total fiber market.

The premises and fiber-to-the-home market has yet to take off in a big way, and represented only around 5% of worldwide demand last year. Corning expects 2003’s fiber market to remain more or less flat. Brown thinks it will be driven by deployments in Asia, especially in the premises sector.

“We see little change in 2003 for fiber demand,” said Brown. “Weakness in long-haul and submarine markets will continue due to over-capacity. The majority of worldwide market demand will continue to come from metro and access. North America and Western Europe remain soft with weak capital spending. Japan and China remain bright spots in 2003.”

Despite such short-term gloom, Brown is optimistic in the long term. In his opinion the 600 million km of optical fiber that have been deployed to date represent just 20% of the potential overall market. He adds that the substitution of fiber for copper cable is likely to continue. Bearing in mind that about 230 million km of copper paired cable (worth USD 6 bn, or EURO 5.5 bn) is sold each year, this is encouraging.

“Only 11% of all sheathed cable kilometres in service today are fiber, but nearly 40% of all cable deployed in 2002 was fiber,” Brown told delegates at the briefing. “In other words, low penetration but high substitution.”