Brought to you by Informa Tech Cathy Tien 田乃馨 Account Director, Greater China Tim Munks Senior Principal Analyst, Optical Components Timothy.M 2020 CIOE Presentation Optical Networks 2020 Omdia Source: Omdia, Optical Networks Intelligence Service Q1 2020 Contents 1Q 20 network hardware revenue analysis Data center networks Edge compute Datacom optics High speed coherent optics update 400ZR 800G 2020 Omdia2 1Q 20 network hardware analysis 2020 Omdia3 Source: Omdia, Optical Networks Intelligence Service Q1 2020 Regional network hardware revenue NA was the only region up YoY in 1Q20 primarily driven by ICPs and 5G infrastructure 1Q20 only down 3% world wide as compared to 1Q19 QoQ seasonality COVID-19 has had a very limited affect on the optical network hardware market to date EMEA and NA markets could be affected more in 2Q20 with many parts of economies shut down in April and May Expect strong demand in 2H20 unless world hit with 2nd wave of COVID-19 2020 Omdia4 Optical Network Hardware Revenue (US$M) % Change 1Q19 4Q19 1Q20 QoQ YoY North America $739 $1,002 $875 -13% 18% EMEA $696 $1,126 $673 -40% -3% Asia Pacific $1,882 $2,358 $1,697 -28% -10% CALA $180 $250 $144 -43% -20% Worldwide $3,497 $4,736 $3,389 -28% -3% Source: Omdia, Optical Networks Intelligence Service Q1 2020 Optical network hardware market share 2020 Omdia5 Top 5 companies have 80% of the world wide market revenue in 2019 for high speed ports Data center networks and datacom update 2020 Omdia6 Source: Omdia, Optical Networks Intelligence Service Q1 2020 Industry vectors AI and HPC drive bandwidth Cloud adoption has driven data center growth Bandwidth growth drivers include: North-South (backbone DCI and peering) bandwidth growth is in 30%40% range East-West bandwidth growth is 5060% driven by growth of replication, high availability, high-performance computing and artificial intelligence Edge compute ICPs need 400G inside the data center but they face operational challenges ICPs are also looking to reduce latency by cutting through fabrics Facebook is deploying F16 based on Arista/Edgecore to reduce switch fabrics ICPs network planning is minimal Microsoft has the longest view at 35 years the rest are less than 3 years 2020 OmdiaPage 7 Source: Omdia, Optical Networks Intelligence Service Q1 2020 Backbone Network Run by AWS Region US East Edge POP Internet Transit Center Transit Center Availability Zone Data Center Availability Zone Data Center Availability Zone Data Center Edge POPInternet Region Region . Outpost 5G Core - AWS Wavelength Amazon AWS architecture Amazon data center structure is built around reliability Avoid single point of failures They tend to only plan 18 months out They focus on lowering overall cost Use 100G LR optics and dark fiber in Availability Zone (replace with ZR) Amazon is solving latency issues by selling AWS equipment in enterprise (Outpost) and Telcos (Wavelength) AWS focus on software and servers optical transport not a key focus 2020 OmdiaPage 8 Data Center Data Center Data Center Source: Omdia, Optical Networks Intelligence Service Q1 2020 Data rate and roadmap for major ICPs Focusing on higher data rates to meet demand Most are pushing data center switch vendors to lower power Facebook stated that “DCs are reaching cooling and electrical supply limits. Switching efficiency must improve in step with switch capacity to keep power consumption flat; traditional switch construction will be challenged beyond 25.6Tb/s as SerDes speed and radix increases and power becomes constrained” ICPs are optimistic that smaller DSPs, coherent optics or co-packaged optics will lower the power requirements from current technology without changing architecture 2020 OmdiaPage 9 Year Deployed Data Rate Underlying rate Switch Fabric 2015 2021 100G 4x25G, 2x50G 3.2Tb 6.8Tb 20192024 400G 8x50G, 4x100G 12.8Tb or 25.6Tb 20232028 800G 1600G 8x100G, 4x200G 16x100G, 8x200G 25.6Tb or 51.2T An emerging market trend: Edge compute 2020 OmdiaPage 10 Source: Omdia, Optical Networks Intelligence Service Q1 2020 2020 OmdiaPage 11 Business cloud adoption driving data center roadmap and bandwidth growth Cloud adoption cases Expedia moved 45,000 on-premise servers to AWS 3M Healthcare: “Turning up AWS servers in minutes” Carrier commentary on cloud service growth “Amazing growth, was over Internet, now a big shift to Ethernet” Cloud clients are “cranking bandwidth” Carrier commentary on their bandwidth growth Terabit orders, multiple 100GEs Diversity to “tri-versity”, new routes built Source: Omdia, Optical Networks Intelligence Service Q1 2020 Scale: 100 MWs LR4 is declining; PSM4 will start to decline in 2022 200G started to be deployed in 2018 in small volumes The highest volume 200G are expected to be FR4 and DR4 400G started to be installed in 2019 in small volumes Revenue declined in 2019 due to price pressure on 100G modules and ICPs slowing their purchasing in anticipation of network upgrades 800G will start to be deployed in small quantities in 2023 2020 OmdiaPage 18 ICP DCN Optical Transceiver Modules Revenue 2019 to 2025 High speed coherent optics 2020 OmdiaPage 19 Source: Omdia, Optical Networks Intelligence Service Q1 2020 High speed optics market Moving to higher speeds Fixed rate 100G to multi-rate coherent modems 600G & 800G (400G at reach with 64 and 96 Gbaud) 200G in China and developing countries Traditional line-cards increasingly moving to Pluggable modems (QSFP-DD, OSFP and CFP2) Compact modular modems Complex world market with bi-fricated supply line China/US trade issues Industry consolidation yields more vertical integration Network bandwidth is forecast to grow 30% CAGR for HSO 2019-2024 Page 20 2020 Omdia Source: Omdia, Optical Networks Intelligence Service Q1 2020 DCI expected to drive demand for 400G pluggable and interoperable modems DCI using traditional DWDM transport DCI using 400ZR Client “datacom” transceivers used to connect routers and switches to DWDM transport equipment Multi-haul transponders can be used for DCI-Subsea ZR transceivers plug directly into routers or switches eliminates datacom optics and reduces intra-data center SMF Lower cost, power dissipation and space required 2020 Omdia21 Source: Omdia, Optical Networks Intelligence Service Q1 2020 400G HSO forecast 400G+ currently dominated by embedded solutions Current 400G transitioning to 600G and 800G 600G and 800G broke out from 400G+ 400G pluggable modems entering the market in 2H20 DCI, metro and regional networks 400ZR in QSFP-DD or OSFP for DCI Metro- regional networks use CFP2 Expect pluggables to dominate DCI and metro-access Expect embedded modems to dominate LH and subsea 2020 OmdiaPage 22 Source: Omdia, Optical Networks Intelligence Service Q1 2020 800G coherent transport is here! Ciena began commercial shipments of products using WL5e in both their 6500 and Waveserver 5 platforms, applications include: 800G DCI 400G anywhere LH and subsea 200G transpacific Huawei field trials using H7 DCI with China Mobile and Turkcell Expect to release compact modular version in 2H20 Infinera ICE-6 based Groove platform Windstream field trial between San Diego and Phoenix 800G over 730 km on commercial link 700G over 1460 km Nyquist subcarriers expected to enhance performance Nokia 800G expected to release 800G in 2021 PSE-V super coherent DSP Vertical integration with Elenion Si Photonics 2020 OmdiaPage 23 Source: Omdia, Optical Networks Intelligence Service Q1 2020 800G applications and forecast 400G anywhere Core network upgrades 400GE aaS DCI 800G DCI 80 to 120 km links Longer? Subsea networks Page 24 Deployed bandwidth forecast for 800G+ HSO Source: Omdia, Optical Networks Intelligence Service Q1 2020 Thank you. Questions? 25 2020 Omdia Ian RedpathDon Frey Lisa Huff Timothy Munks OmdiaHQ Practice Leader Service Provider Networks Senior Principal Analyst Optical Components Principal Analyst Optical Components Principal Analyst Transport and Routing Brought to you by Informa Tech Disclaimer The Omdia research, data and information referenced herein (the “Omdia Materials”) are the copyrighted property of Informa Tech and its subsidiaries or affiliates (together “Informa Tech”) and represent data, research, opinions or viewpoints published by Informa Tech, and are not representations of fact. The Omdia Materials reflect information and opinions from the original publication date and not from the date of this document. The information and opinions expressed in the Omdia Materials are subject to change without notice and Informa Tech does not have any duty or responsibility to update the Omdia Materials or this publication as a result. 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