The optical components market thrived despite supply chain disruptions that began during the COVID-19 pandemic, according to updated research from research firm LightCounting. While the company expects a weaker forecast for 2023, ultimately the market should rebound to hit $20 billion by 2027.

Although the forecast seems rosy overall, LightCounting's findings did suggest wireless fronthaul as "one area of weakness, since 5G network deployments in China are reaching completion.” However, the firm predicts the segment will return to strong growth in 2026 to 2027 as 6G deployments begin to rise.

The forecast, updated from a report published in October 2021, projected global sales across segments of optical transceivers from 2016 to 2027. The segments included: FTTx, wireless backhaul, wireless fronthaul, course wavelength division multiplexing (CWDM)/dense wavelength-division multiplexing (DWDM), optical interconnects, fibre channel, and Ethernet.

As demand for bandwidth increases, digital infrastructure needs to be upgraded. Optics play a key role in enabling 5G and FTTx environments.

According to the company's release, the transceiver market is heading for a sturdy (14%) revenue growth through this year – up from 10% in 2021 – but is set to drop to 4% next year until finally “recovering in 2024-2025.”

DWDM and ethernet optics sales are projected to lead the growth through the next five years, with “sales of optical interconnects, mostly active optical cables (AOCs),” also increasing at double digit rates.

“The optical communications industry entered 2020 with very strong momentum,” LightCounting stated in the release.

The firm found that the demand for DWDM, Ethernet, and wireless fronthaul was already booming before the initial waves of the pandemic at the end of 2019. COVID-19 only accelerated that demand thanks to the shift to remote work and schooling that reigned across the globe in 2020 and 2021.

“While supply chain disruptions continued, the industry was able to largely overcome them, and the market for optical components and modules saw strong growth in 2020 and 2021,” the analysis firm noted.

While optics demand is strong across all market segments, "continuing bottlenecks in the global supply chain negatively impacted sales of 400G DR4 and 100G DR1+ transceivers to Amazon in the first 9 month[s] of 2022,” LightCounting stated.

Another contributing factor to the predicted market decline was Meta’s considerable reduction of optics deployments anticipated for 2023 – despite having “increased its deployments of optics sharply this year.”

“We suspect that Amazon and other cloud companies may moderate their investments in 2023, if the current economic slowdown continues to negatively impact their advertising, streaming, and retail businesses,” the firm added.