Growth of DWMD Applications Likely to Boost Fiber Optics Market

Frost: Global. The expanding needs of customers and the high investments poured into fiber optics is resulting in increased interest in certain product lines. Products such as laser diodes, erbium doped fiber amplifiers (EDFAs) and reconfigurable optical add/drop multiplexers (ROADMs) are likely to be utilized for innovations using existing technologies.

As a result, these products will garner greater profit margins for the first few years of their adoption. In addition, technological advancements that lead to alterations in older products such as optical amplifiers and connectors are likely to spur this market.

Revenues in this industry totaled $3.41 billion in 2005 and is likely to reach $4.38 billion in 2009.

The increasing popularity of wave division multiplexing (WDM) and dense wavelength division multiplexing (DWDM) systems – especially those that incorporate optical emitters, amplifiers, switches, connectors and ROADMs – will boost this market. The keen interest expressed by system integrators and original equipment manufacturers (OEMs) to purchase modules rather than components, as they can integrate better into their system will also heighten this market's revenue potential.

However, the remarkable growth in wireless networking systems is hampering the advancement of fiber optics. This, in turn, deters the demand for optical components and modules, especially in underdeveloped countries that are more suited to wireless rather than fiber optics network.

Moreover, components such as optical switches, connectors, and emitters do not have a high degree of automation. As far as manufacturing is concerned, this increases the recurring costs in production and hence lowers the profit margins for components vendors.

The rate of technology development in wireless is likely to be more than that of fiber optics and this could be seen as the main restraining factor, which could mitigate the growth of optical products in future, explains Doraiswamy. In addition, vendors in Asia Pacific are able to manufacture components at lower costs, which forces companies from the West to compromise on profits, thus damaging their morale.

In a move to counter these challenges, manufacturers need to increase their investments to improve automation in products such as optical switches, connectors, and emitters, thereby attracting end users from the manufacturing industry. The threat of low-cost products and reduced profit margins is forcing fiber optics manufacturers to strategize on outsourcing their manufacturing activities to regions such as Asia or Eastern Europe. These moves are likely to boost revenues and increase the growth potential of this market.

World Optical Products in Fiber Optics Market Publ 20060508