For FTTx PON components vendors, China’s boom has meant large volume shipments and tremendous innovation around cost-reduction strategies and next-generation PON.
We are witnessing the use of BOSAs (bidirectional optical subassemblies), the availability of PON MAC ONU/ONT chips with integrated PMD (physical media dependent) functionalities, dual EPON/GPON PON MACs entering the market, initial shipments of 10G PON chips, and the evolution of integrated optical interface chips to 10G. We expect to see more product announcements at OFC/NFOEC next week.
But we note that the expression “glass half full, glass half empty” applies to both optical component (OC) and chip vendors. The boom provided volume alongside poor margins caused by price pressures in China. The PON component vendors could use a “time-out” to improve ROI. This could be an option for OC vendors, but not IC vendors.
Blame accelerated developments on China’s PON boom
China was not the first country to deploy PON on a large scale, but its service providers began evaluating next-generation PON components and systems before one million Chinese households were even connected to FTTH networks. At the same time, the price pressures in China exceeded those seen in Korea, which were already intense. Today, simple EPON-based ONTs (subscriber-side) are selling for under $28 in China and EPON-based PON OLT ports (central office side) are selling for less than $100.
Component vendors faced several options, including focusing on cost savings while moving to 10G PON or exiting the market. Exiting the China market meant saying goodbye to the largest PON market in the world and possibly to future markets. Consequently, most vendors chose to speed up development efforts.