Coherent Optical Equipment Market Size, Share & Trends Analysis Report By Technology (100G, 200G, 400G+, 400G ZR), By Equipment (Wavelength-division Multiplexer (WDM), Modules/Chips, Test and Measurement Equipment, Optical Amplifiers, Optical Switches, Others), By Application (Networking, Data Center, Original Equipment Manufacturer (OEM)), By End-User (Service Provider, Public Sector, Industries) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Market Overview

The global coherent optical equipment market size was valued at USD 14.55 billion in 2022. It is estimated to reach USD 28.60 billion by 2031, growing at a CAGR of 7.8% during the forecast period (2023–2031). 

The generation of massive data and the rise in demand for improvement in network coverage worldwide, along with the rise of digitalization, has propelled the demand for high-speed bandwidth and fueled the need for coherent optical equipment. Coherent optical equipment refers to the hardware and technology used in optical communication systems to enable high-capacity and long-distance data transmission through fiber-optic networks. It is a key component in modern optical networking infrastructure. It plays a crucial role in enabling high-speed data transfer, efficient utilization of fiber-optic cables, and reliable long-haul communication. Coherent optical equipment utilizes coherent modulation techniques to transmit and receive data over optical fibers. Coherent modulation involves encoding data onto an optical carrier wave by modulating its amplitude, phase, and polarization.

Moreover, coherent optical equipment often incorporates forward error correction (FEC) and adaptive optics, enhancing the system's performance and reliability. FEC techniques help detect and correct errors in the transmitted data, ensuring accurate and error-free transmission. Adaptive optics technology compensates for distortions caused by environmental factors like fiber nonlinearities, polarization effects, and temperature variations, enabling more robust and stable transmission.

Market Dynamics

Global market drivers

Rise in access to high-speed bandwidth

Bandwidth is proportionately related to digital communications, which refers to the rate and amount of data transferred between two data points at a specified period. The rise in digitalization has propelled the demand for high-speed bandwidth, expected to drive the market's growth. Higher bandwidth benefits such as faster application performance and a rise in data transfer capability have increased the significance of high-bandwidth spectrums. In addition, advancement in coherent optical equipment to provide high spectral efficiency (SE) and high baud rate signal transmissions. Thus, a rapid increase in data traffic boosts the demand for higher spectral efficiency (SE) and increased speed of optical communication systems, which, in turn, drives the expansion of the global market.

Technological advancements in networking infrastructure across the world

The generation of massive data and the rise in demand for improvement in network coverage worldwide have fueled the need for coherent optical equipment. The fifth-generation wireless connection is expected to be the next technological leap, as it can transmit more data while providing a more steady and reliable connection. In addition, the demand for optical fiber has been increasing due to a fiber shortage and long-term plans for installing networks. To ensure a steady supply of optical fiber, network operators have begun negotiating with fiber manufacturers directly; for example, in April 2017, Verizon Communications signed an agreement with Corning to install 20 million km of optical fiber per year from 2018 through 2020. The company intends to use this fiber to build its network.

Furthermore, telecom operators are expanding their 4G infrastructure to accommodate such huge network traffic and deliver strong network bandwidth, expected to drive the coherent optical equipment market growth in the coming years. The following graph depicts the expected growth of IP traffic from 2017 to 2022 per month (in EB).

Global market restraints

High initial investment

High installation costs of coherent optical products and services and complex installation processes prevent consumers from utilizing such efficient technology, which impedes market growth. Moreover, many consumers shifted their preference toward traditional metal wires, which led to a huge data loss, thereby significantly hampering the growth of the global coherent optical equipment market.

On the contrary, manufacturers are developing new coherent optical standards to help industries reduce costs and complexity associated with installing and adopting coherent optical equipment and create accurate, interoperable pluggable modules. This is expected to drive the adoption of coherent optics into applications where fiber links with higher capacity and efficiency are in demand.

Global market opportunities

Expansion of network infrastructure in rural areas

An increase in competitive rivalry, a decrease in the costs of data packs, and the penetration of smartphones fuel the growth of the coherent optical equipment market. The expansion by telecom service providers in rural areas of developing regions or countries is anticipated to present lucrative growth opportunities for service providers. Currently, around one out of every three next-generation network users live in rural areas, and this number is expected to grow in the coming years. Urbanization in various developing economies has led to a surge in the number of internet users, which, in turn, boosts the demand for coherent optical equipment.

In addition, telecom service providers have to put substantial efforts into expensive integration undertakings and complex coordination to deliver services in rural areas. Automation is expected to help providers automate new service launches, network upgrades, and complex tasks. Many of the population in various emerging regions, including Asia-Pacific, South America, and Africa, live in rural areas. Thus, expansion in these areas is expected to present strong growth opportunities for market players in the coming years.

Regional Analysis

North america dominates the global market

Based on region, the global coherent optical equipment market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

North America is the most significant global coherent optical equipment market shareholder and is estimated to grow at a CAGR of 7.4% over the forecast period. North America includes the U.S., Canada, and Mexico. North America is expected to emerge as a predominant region among all regions. This is attributed to the adoption of edge computing, the increased need for IoT devices, and the surge in demand for fiber optic cables due to strong fiber to the X (FTTx)-related deployments in the region. North America is one of the leading regions for rapid migration to next-generation technologies and networks. Furthermore, the growth of the North American market is driven by a surge in the adoption of new broadband technology such as Vectored VDSL, G.now, G.fast, and GPON.

Furthermore, the demand for high data speed is increasing, owing to the number of subscribers and a surge in demand for machine-to-machine communication. Furthermore, North America witnessed the highest mobile broadband adoption, mobile internet penetration, and smartphone adoption, majorly driven by the U.S. 4G and 5G coverage reached about 90% of the population just three years after their rollout in 2010 in the U.S. In 2017, 4G connections in the U.S. and Canada accumulated 70% and 68%, respectively, out of the total connections. This, in turn, has led to significant growth in demand for optical solutions in the region.

Europe is anticipated to exhibit a CAGR of 8.2% over the forecast period. The coherent optical equipment market in Europe is analyzed across Germany, the UK, France, and the rest of Europe. Europe is poised to hold a significant share of the coherent optical equipment market and North America. The growth of the coherent optical equipment market in this region is driven by factors such as a rise in demand for high-speed data services and high-bandwidth optical fiber cables for communication. The surge in penetration of digital electronic devices, adoption of advanced electronic vehicles, and advanced virtual systems present several growth opportunities for coherent optical technology in Europe.

Additionally, adopting advanced technologies such as advanced driver assistance in automotive and increased investment in smart cities is expected to boost the adoption of coherent technology in the European market. According to the data released by GSMA, about 30% of European mobile connections are expected to run on 5G networks, with approximately 214 million connections by 2025. This, in turn, is expected to support the market's growth during the forecast period.

Asia-Pacific is estimated to be the largest region in the coherent optical network market in response to initiatives by governments of key economies toward deployment of high bandwidth spectrum. For instance, China’s Central Government is strengthening its positioning by deploying 5G networks all over China to increase earnings from the domestic market and develop industrial systems.

The global market in LAMEA is analyzed across Latin America, the Middle East, and Africa. The market in LAMEA exhibits slower growth than other regions due to slow broadband growth, which results in equally slow adoption of fiber to the X (FTTx).

Segmental Analysis

The global coherent optical equipment market is bifurcated into technology, equipment, applications, and end users.

Based on technology, the global market is bifurcated into 100G, 200G, 400 G+, and 400G ZR.

The 100G segment dominates the global market and is projected to exhibit a CAGR of 7.2% over the forecast period. 100G, known as Gigabit Ethernet or 100GbE, is a group of computer networking technologies that transmit Ethernet frames at 100 gigabits per second (Gbit/s). The 100G coherent technology was developed with compatibility benefits of 10G/40G muxponder mode and 100G transponder mode in the same device. This enabled smooth migration between 10G, 40G, and 100G technologies while utilizing the same platform. The surge in the adoption of applications such as cloud services, video-on-demand, and telemedicine has fueled the adoption of data migration rates.

In addition, the long-haul optical technology research focused on averting the network capacity crisis with novel fiber transmissions, which boosted the market's growth. Moreover, advanced optical components and sophisticated digital signal processing have driven market growth. Thus, those above are major factors that have boosted the adoption of 100G technology among global industries.

Based on equipment, the global market is bifurcated into wavelength-division multiplexers (WDM), modules/chips, test and measurement equipment, optical amplifiers, optical switches, and others.

The wavelength-division multiplexer segment dominates the global market and is projected to exhibit a CAGR of 7.2% over the forecast period. Wavelength division multiplexing is a technique that is widely used in fiber optic transmissions. WDM modulates numerous data streams, i.e., optical carrier signals of varying wavelengths (colors) of laser light, onto a single optical fiber. In addition, it can enable bi-directional communication and multiplication of signal capacity. The surge in the adoption of WDM among network carriers and service providers across the globe is a major factor that boosts the segment's growth.

Moreover, advances in optoelectronic components that designed optical transmission systems to transmit multiple wavelengths of light over a single fiber have propelled WDM adoption across all networking industries. Furthermore, multiple high-bit-rate data streams of 2.5 Gb/s, 10 Gb/s, and, more recently, 40 Gb/s, 100 Gb/s, and 200 Gb/s could be multiplexed through divisions of several wavelengths. All these factors together augment the growth of the global market.

Based on application, the global market is bifurcated into networking, data center, and original equipment manufacturer (OEM).

The networking segment dominates the global market and is projected to exhibit a CAGR of 7.2% over the forecast period. The rise in the use of coherent optical equipment has been witnessed in the networking industry, owing to its coherent optical processing foundation that increases the bandwidth from 10 Gb/s to 40 Gb/s to 100 Gb/s and beyond, making the network more programmable. This, in turn, offers new potential architectural possibilities, which drive the coherent optical equipment market growth.

Furthermore, an upsurge in demand for network systems running at 2.5 Gb/s and 10 Gb/s to increase bandwidth to 40 Gb/s, 100 Gb/s, and beyond is compelling network service providers to adopt coherent optical equipment at a high rate. Optical communication link networks depend on equipment such as optical amplifiers, lasers, LEDs, and WDM that transmit data through a channel by optical fiber.

The global market is bifurcated based on end-users into service providers, the public sector, and industries.

The service providers segment dominates the global market and is projected to exhibit a CAGR of 7.9% over the forecast period. Network providers that include cable/multiple system operators (MSOs), telecom service providers, and global content network providers are evolving and transforming their networks to optical networks due to the capability of optical networks to transmit massive volumes of data at a high rate with enhanced efficiency as compared to traditional cables. Coherent optical has transformed legacy and overburdened fiber networks into data flow superhighways. As the demand from service providers is increasing for a de-facto industry standard to upgrade their networks to speeds of 100G, 200G, and 400G, the adoption of coherent optical equipment is expected to rise in the coming years. Hence, network providers are major players driving the adoption of coherent technology to increase traffic carrying capacity.

Recent Developments

• June 2023- ADVA Optical Networking announced that it had received an order from a major telecommunications service provider in Europe for its XGS-PON coherent optical transport portfolio. The order includes the company's FSP 3000 XGS-PON transponders and A1000 coherent optical network manager (MON).
• June 2023- Nokia announced that it had completed the acquisition of Adtran, a leading provider of optical networking solutions. The acquisition will strengthen Nokia's position in the global coherent optical equipment market and enable it to offer its customers a wider range of solutions.