The global optical communication and networking equipment market was estimated at USD 24.2 billion in 2022 and is projected to reach USD 36.6 billion by 2027, growing at a CAGR of 8.6% from 2022 to 2027. Growing number of data centers are the factors driving the optical communication and networking equipment market growth.
The optical transceiver segment accounted for the largest share of ~32% of the optical communication and networking equipment market, by component, in 2021. This growth is mainly attributed to the advent of technological advancements, such as AI, machine learning, and 5G communication, which lead to an increase in data traffic, which creates demand for high-scale data centers. Optical transceivers are also used across datacom/telecom switch and router connections, data aggregation and backplane applications, proprietary protocol, and density applications, among others, and are capable of high data transmission. Therefore, the increment of data traffic creates opportunities for high data transmission rates, which fuels the demand for optical transceivers in data center, telecom, and enterprise applications. The optical transceiver segment is projected to grow at the highest CAGR during the forecast period. The growing use of the internet by users of smartphones and other connected devices, as well as the adoption of cloud computing as a mainstream IT deployment option, leads to increasing demand for data centers. These factors are expected to accelerate the growth of the optical transceiver segment in the near future.
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Optical communication and networking equipment with up to 40 Gbps data rate accounted for the largest market share of ~47% by 2027. As the network capacity increases, the element management system (EMS) requires higher reliability. The data rate of up to 40 Gbps provides reliable monitoring technology for large-capacity networks. With the rapid development of 5G and high-performance services brought by cloud networks, the demand for higher bandwidth devices with a data rate of greater than 100 Gbps is expected to grow in the near future.
The BFSI vertical accounted for the largest share of ~42% of the optical communication and networking equipment market in 2021. The BFSI sector needs sophisticated and security-driven solutions to protect sensitive financial data and prevent information theft, third-party intrusions, and cyber-intrusions. Optical communication and networking devices are being increasingly deployed in the BFSI sector to protect their customers’ confidential data, meet compliance standards to ensure data security, facilitate security auditing, and avoid reputation damage caused by data breaches. Owing to this, the BFSI vertical drives the growth of the optical communication and networking equipment market.
WDM technology-based optical communication and networking equipment accounted for the largest market share of ~69% in 2021. The development of ROADM-based WDM networking solutions is one of the emerging trends in the global optical networking and communications market. Manufacturers are investing huge capital in building WDM ROADM-based optical equipment so that they can provide faster and higher transmission capacity networks to their customers. Key factors for the growth of WDM technology are higher bandwidth, easy configuration, better security, and duplex transmission. Owing to this, WDM technology is expected to continue to hold the largest market share during the forecast period.
Asia Pacific expected to account the largest share ~37% of the optical communication and networking equipment market by 2027. This growth is attributed to the growing demand for computing applications, as well as the increasing demand for compact and energy-efficient modules, is pushing the market forward. Also, the optical communication and networking equipment market will benefit from the growing focus on 5G networks and the rising demand for high data transfer capabilities in this region.