The high profile banning of Chinese telecom equipment manufacturer, ZTE, by the Trump Administration is leaving a 13% year-over-year dent in the local [China] optical transport network equipment market, according to Dell’Oro Group.
“The optical transport network equipment market year-over-year decline in 2Q18 was entirely due to fewer sales into China. Demand outside of China continued to improve, which is a great sign for the overall market health. Now that the ZTE ban has been lifted, we think optical revenue from China will increase substantially in the second half of the year,” said Jimmy Yu, vice president at Dell’Oro Group.
According to the research firm, demand for interconnecting data centers (DCI) with WDM links maintained a high growth rate. The analyst estimates DCI grew nearly 40% year-over-year, driven by both US and Chinese based internet content providers.
Dell’Oro noted that deployment of 200 Gbps coherent wavelengths was exceptionally strong in the quarter. Due to the tidal shift towards wavelength speeds higher than 100 Gbps, it predicts 200 Gbps shipments will be two-times higher in 2018, and revenue contribution from 100 Gbps shipments will slow further.
The worries for China telecom equipment manufacturers may not be over. Both Huawei and ZTE have recently been banned from participating in Australia’s 5G rollout.
At the time, technologies from said same vendor, as well as other Chinese manufacturers, have been banned for use in US government organizations by the Trump administration – about a month after the US government lifted its ban against ZTE from doing business in the country, including importing components from US vendors. ZTE was forced to briefly suspend operations as a result.