Dell’Oro Group forecasts the ZR pluggable optics market will surpass $500 million in annual sales by 2025, building first on 400ZR modules and later on faster 800ZR products. And that initial success is being led by hyperscale providers like Microsoft that are pushing for higher line rates.

According to the recently released report, the overall optical market will reach nearly $18 billion in sales by 2025, largely driven by wavelength division multiplexing (WDM) equipment. That growth is inline with the research group’s previous forecast.

“We still see the optical market is fairly healthy,” Jimmy Yu, VP at Dell’Oro Group, said in an interview with SDxCentral.

However, Yu lowered his outlook for WDM Metro equipment due to higher interest in using the coherent 400ZR pluggable optics in an IPoDWDM (IP over dense wavelength division multiplexing) architecture. The technology allows for the transmission of IP packets over a DWDM-enabled optical layer.

“I do think the interest level on IPoDWDM is higher than I was thinking before,” Yu said, adding that they could see this technology applied near the edge of the network by hyperscale providers and telecom operators. He explained that the 400ZR pluggable transceiver is small in size and can eliminate one of the hurdles of deploying IPoDWDM: the power consumption is too high to fully use the faceplate density. 

Yu also noted that the pluggables are interoperable, which allows optical engineers to use 400ZR modules from different vendors like Cisco-Acacia and Marvell-Inphi on each endpoint, “that's really unique and new for the optical market,” he added.

But Yu pointed out that one of the near-term inhibitors of 400ZR deployments could be the limited number of suppliers. He listed Marvell, Cisco, Ciena, Nokia, and NeoPhotonics as currently available or potential 400ZR vendors, compared to more than 20 vendors for WDM systems.

Dell’Oro’s report predicts that starting with 400ZR, the coherent ZR optical pluggable demand will reach a material amount in 2022, which drives a high-percentage growth rate for the next few years.

According to Yu, 400ZR pluggable optics had a low-volume, early shipment in 2020. But the COVID-19 pandemic delayed the qualifications and testing process. While some signs show Microsoft could be one of the first hyperscalers to deploy 400ZR technologies in their data centers during the fourth quarter of this year. “If that does occur, we should see a really high ramp going into the 400ZR,” he added.

Cisco with its Acacia acquisition is pushing the idea of “optical routing,” which puts 400ZR in routers and switches, Yu said. Other hyperscalers and internet content providers (ICPs) are also interested in putting the coherence on their switches instead of on a WDM system. “Microsoft has been doing this for a few years,” so Yu predicts that Microsoft is going to be the first big purchaser of the 400ZR pluggable transceiver.

He said that “what surprised me more was that there's just more interest and discussions by the telecom operators and wholesale carriers about 400ZR.”

The optical market first introduced 800 Gb/s-capable line cards in 2020, and the demand has rapidly increased. The report noted that the market is continuing to demand higher performance DWDM transponder cards.

Dell’Oro forecasts that the next wavelength speed increase will be for 1.2 Tb/s, which could enter the market before the end of 2023. They also predict that about one-third of all coherent wavelength shipments will be from a line card of 800 Gb/s or higher by 2025. Yu added that 800 Gb/s line cards could reach close to $1 billion in revenue by next year.

Ciena, Infinera, and Huawei are the three vendors that have 800 Gb/s-capable WDM coherent. Some of them are working on the next generation line cards with at least 1.2 Tb/s per carrier or wavelength, Yu said.

He explained that Ciena has historically always doubled its wavelength speeds, so “it would kind of be natural if they fall in a cadence to do 1.6 [Tb/s].”

However, due to the technical limitations, Yu expects the 1.6 Tb/s-capable line cards won’t be available until at least late 2023.