OC market decline in tough economy

Peter Dinham
Wednesday, 14 December 2011 13:38

IT Industry - Market

Worldwide economic uncertainty caused a softening in the global optical components market with a contraction of 0.2 per cent sequentially in the third quarter this year and a drop in OC industry revenues for the three months to $1.57 billion.

According to Ovum in its latest report on the OC market, there's no joy to come in the fourth quarter of this year - nor in the first part of next year - with the firm forecasting a double-digit revenue decline in the quarter due to the production shutdown from flooding in Thailand and continued market-wide softness.

Daryl Inniss, Ovum analyst and author of the market alert, said the contraction had been caused by the uncertain macroeconomy. 'Although there has been a slight decline in the sector, market leader Finisar grew by three per cent sequentially but lost market share on a rolling 4Q basis.'

Inniss expects a weak first half of 2012 as the impact of floods and macroeconomic uncertainty persists and 'strong price pressures result in steep 2012 price declines.'

'We are hearing about strong price pressures in the current negotiations among the key players, and this will take effect in 2012. Most of the negotiations are at the lower end of the traditional price decline scale. This aggressive pricing is a signature of the competitive environment, exasperated by supply constraints due to the Thai floods. These lower prices will affect both revenues and the bottom line."

Meanwhile, according to the report findings, among the top 10 OC suppliers, Fujitsu Optical Components posted the strongest quarter with growth of 28 per cent sequentially and a gain of 50 per cent versus the same quarter last year. Oclaro posted the weakest performance, with revenues six per cent less than in the previous quarter.

However, according to Inniss 'all is not lost though,' and he says Ovum believes there will be strong growth between the second and third quarter of 2012, with the pent-up demand driving the market to a strong second half of 2012, 'even as macroeconomic uncertainty persists.'