Over the last decade, China had a greater impact on the global optical communications industry than any other country and in some cases more than all other countries combined. People in China are proud of their achievements and the Chinese government plans to continue surpassing the rest of the world with the fast pace and huge scale of its infrastructure projects.
Programs of the Chinese government have to be taken seriously as they usually get fully implemented. If they decide to build a wall along the country’s border, they do it. The Great Wall was even equipped with a simple optical communication network comprised of fires set up on towers to transmit alerts along the wall. If they plan to have an optical fiber to every apartment in the country, this gets done as well. All while the world is watching in amazement and market forecasters revise their projections every 6 months.
Despite having spent considerable resources building a national broadband network, Chinese infrastructure investment is continuing, but the direction of these projects is shifting.
The bulk of Fiber to the Home (FTTH) projects in China have been completed. The FTTH program is moving from initial large scale deployments to steady, but slow upgrades. 5G wireless systems are just around the corner and 1 billion 4G subscribers in China are anxiously waiting. Demand for optics required by these projects is starting to pick up now and it will be red hot by 2020. Huawei will continue to lead in deployments of DWDM systems, but most of the optics for these systems will be made internally, including pluggable transponders.
Upgrades of Cloud datacenters in China to 100GbE connectivity are just starting. These projects will have the most impact on sales of networking equipment, optical components and modules deployed in China over the next 5 years.
Consumption of Ethernet optics in China is projected to grow rapidly in 2018-2023. It will account for the largest share of the total sales of optics to China by 2023, as shown in the Figure below. Demand for optical interconnects, such as Active Optical Cable (AOCs), is expected to remain very strong as well.
Figure: Optical transceivers deployed in China by market segment.
Source: LightCounting
Chinese consumers are embracing on-line commerce in a big way. Most financial transactions in China are “made in the Cloud”, using smart phone-based mobile payment services such as Alipay and WeChat Pay. The Wall Street Journal reported that mobile payments in China quadrupled from 2015 to 2016, while increasing just 40% over the same period in the United States. Market researchers estimated the total value of mobile transactions in the United States at $112 billion in 2016, compared to $9 trillion in China. (Yes, it is trillion.)
Infrastructure investments by Alibaba, Baidu and Tencent – the top 3 Chinese ICPs – are 5 times smaller in dollars compared to the spending of Amazon, Google and Facebook, but the Chinese investments are growing faster.
There are a lot of barriers for foreign companies to operate in China’s cyberspace. However, IBM partnered with 21Vianet and Dailian Wanda to build cloud datacenters in China. Amazon Web Services are now offered by Sinnet Technology and Ningxia Western Cloud Data Technology Co. Ltd in China. Apple is also working with a local partner, supporting its cloud services.
The presence of Western competitors is igniting competition in datacenter technology. Chinese ICPs are starting to upgrade their servers, switches and the connections between them to the latest 100GbE technology. If one ICP upgrades, all the others follow. Nobody wants to see their cloud applications running slower than the competition.
LightCounting’s new report discusses current and future infrastructure projects of Communication Service Providers (CSPs) and Internet Content Providers (ICPs) in China. It analyses the impact of these projects on the demand for optical networking equipment, optical modules and components. It includes profiles of the leading Chinese CSPs, ICPs, equipment manufacturers and suppliers of optical component and modules. The report includes a companion spreadsheet containing a detailed 5-year shipment and revenue forecast of optical component demand in China.