In a report, Ovum said that the optical components market will grow four percent in 2013 thanks mostly to WAN and datacom demand.
Between 2012 and 2018 the total optical component market will expand at an eight percent rate to a new high of US$10.5billion.
In a forecast, the independent telecoms analyst firm identifies datacom, which constitutes components used in data centres and enterprise networks, as the fastest growing segment.
This will be pushed by a demand for 10G, 40G and 100G components to support server, switch and storage connectivity.
Daryl Inniss, Practice Leader of Components at Ovum and author of the forecast, said that demand to support data centres for cloud services is a large driver for datacom sales.
High-speed transceivers are needed to support this segment and this means that the datacom market will grow by 16 percent between 2012 and 2018.
The wide area network market is still experiencing annual double-digit traffic growth, leading to high demand for 100G ports.
It is not all great though. The access segment, which includes FTTx, CATV and optical transceivers to connect base stations to antennae is declining primarily due to maturing FTTx deployments.
“We expect stable performance from fronthaul and CATV throughout the forecast period, but the access segment as a whole is expected to decline at a seven percent due to contracting FTTx revenues,” Inniss said.
Optical component revenue growth might be slowed if too many equipment vendors make their own components.
Inniss added: “Datacom has depended on component vendors delivering standards-compliant products, but equipment vendors are now developing their own components.”
Component suppliers are now competing with their own customers, he said.
Optical component revenue depends on OC suppliers’ ability to drive out cost and deliver products at scale fairly quickly.
“While excellent OC execution minimises the impact of vendors’ captive supply, poor execution reduces the OC vendor revenue opportunity,” Inniss said.