Development Trend of Optical Transceiver Data Communication Market

Global data center construction is in full swing, and the data communication market continues to be highly prosperous.

As one of the most important infrastructures for cloud computing, the high boom of cloud computing and the expanded capital expenditure of cloud service vendors directly drive the prosperity of data centers. In the long term, the trend of data traffic maintaining high growth is almost irreversible. With the large-scale construction of 5G, the interconnection of everything will make the traffic explode, while downstream explosive applications such as VR/AR, ultra-high definition video and car networking will also bring massive traffic demand, so the global data traffic is bound to show high growth in the long term. Data center leaf spine architecture upgrades, as well as rate upgrades in the face of growing demand, will create a strong demand for the number of data pass optical transceivers as well as rate increases.

100G optical transceiver is still the main force, the price is under pressure but demand continues to grow.

100G optical transceivers have a wide range of specifications, with PSM4 and CWDM4 accounting for a large proportion. 100G optical transceivers have a wide range of specifications, including 4x25G quad-channel optical transceivers and 1x100G single-channel optical transceivers if classified according to the number of channels; QSFP28 and CFP4 optical transceivers if classified according to the packaging method; PSM4 optical transceivers and CWDM4 optical transceivers if classified according to whether the wavelength division multiplexing technology is used; and SR4 and LR4 optical transceivers if classified according to the transmission distance of the application. But at present, according to the results of industry chain research, 100G PSM4 and 100G CWDM4 optical transceivers account for the largest share of the entire 100G optical transceiver market, reaching nearly two-thirds of the share. Because CWDM4 can significantly save fiber resources, it is more favored by downstream customers, accounting for about 45%.

Different categories and main products of 100G optical transceivers.

100G DR1/FR1 optical transceiver market exceeds expectations, future strategic significance in the field of data communication.

100G DR1/FR1 optical transceiver adopts a single-channel 100G approach, with a 1310nm wavelength EML laser replacing the traditional 25G DFB laser to achieve a 50G bandwidth, while adding a DSP to achieve high-precision PAM4 modulation to reach a 100G transmission rate. At present, because the 25G DFB chip and the corresponding Driver, TIA and other electrical chips are relatively mature, the cost is relatively low, while EML and DSP are still relatively high in cost, so the price of 100G DR1/FR1 optical transceiver is not yet competitive compared to 100G CWDM4. According to industry chain research, the market size of 100G DR1/FR1 is expected to reach 2 million units in 2021. Although there is no advantage in cost for the time being, the strategic significance is huge, mainly reflected in the following three points:
100G DR1/FR1 can currently replace all 100G QSFP28 series optical transceiver products of different schemes below 2km, with excellent compatibility performance, and can replace 100G LR4 optical transceiver products of 10km class after a simple upgrade (no change in electrical scheme).
Because DR1/FR1 only uses a single channel, so the overall cost is lower than that of quad channel. With the gradual maturity of EML and DSP chips, 100G DR1/FR1 will become the most cost-effective product when the price drops to a certain extent.
DR1/FR1 can interconnect 100G and 400G transmission systems directly through Breakout solution, which is simple and low cost.

100G Optical transceiver prices are under pressure, the future of cost reduction and efficiency is significant.

The main driving force of cost reduction is the chip, and domestic substitution is steadily advancing. The core components of optical transceiver include optical chip, electrical chip, optical passive components, etc. In the 100G optical transceiver, the optical chip includes the laser (LD) and the monitor detector (MPD) at the emitting end and the photoelectric detector (PD) at the receiving end; the electrical chip includes clock data recovery (CDR), drive at the transmitting end CDR, transimpedance amplifier (TIA) at the receiving end, power supply control chip and MCU, etc. On average, the cost of optoelectronic chip accounts for about 50% of the total cost, which has a greater impact on the cost of optical transceivers. 25G optical chip has been able to achieve partial domestic substitution, and the electric chip has also been part of the product development success. If the subsequent chip can achieve complete local substitution, the cost of 100G optical transceiver will be further reduced.

200G Optical transceiver demand rises above market expectations, high cost-effectiveness is an important option.

200G optical transceiver with excellent cost-effective is an important product in the data center rate upgrade path. 200G optical transceiver’s transmission rate resides between 100G and 400G, so it is considered to be an optical transceiver product in the transition period. At present, some customers in the market adopt the 100G-200G optical transceiver upgrade solution. Although they miss the shortest path of 100G - 400G direct upgrade, the 200G industry chain is more mature and the design changes on the basis of 100G optical transceiver are smaller, making it a very cost-effective product.

Mainstream solutions of 200G optical transceiver: QSFP-DD and QSFP56

200G QSFP-DD package, i.e., 8x25G structure, 25G bandwidth DML laser, single channel 25G NRZ modulation scheme; The 200G QSFP56 package adopts the structure of 4x50G, and the modulation scheme is PAM4 mode. 200G optical transceivers can be widely used in various scenarios and have a great market. In addition to different technical solutions, 200G optical transceivers are divided into SR, DR, FR, LR, etc. according to the transmission distance. Although 400G optical transceivers have started to be shipped on a large scale, the market for 200G optical transceivers is still vast. According to the industry chain research, the total demand for 200G optical transceivers this year is between 1~1.5 million, which exceeds the market expectation and the demand next year will exceed 2 million only.

The market for 400G optical transceivers continues to boom.

400G optical transceiver is one of the important optical interconnection products for data center rate upgrade. With the gradual landing of 5G construction, the increasingly strong demand for cloud computing, and the exponential growth of IoT devices, all will bring about a rapid increase in demand for data transmission and computing. Data center as a new generation of digital real estate, is one of the important digital infrastructure facilities. In order to cope with such explosive growth in data processing demand, data centers are also in the process of rate generational upgrade. The servers and TOR switches inside the cabinets are mainly 10G/25G and are transitioning to the 50G/100G stage. The interconnection between Leaf switch and Spine switch, and the interconnection between data centers is now mainly 40G/100G, and is transitioning to 400G.

400G optical transceivers are widely used in data centers due to their wide variety and application scenarios.

Like 100G optical transceivers, 400G can be divided into various optical transceiver products according to distance and whether WDM is used. At the same time, 400G can be divided into QSFP-DD and OSFP solutions according to the packaging method, with the QSFP-DD package solution being relatively smaller in size and the OSFP package solution being larger in size but with better heat dissipation. On the electrical side, 400G optical transceivers are currently using the 8x50G electrical signal transmission scheme, while on the optical side, there are mainly two schemes, 8x50G and 4x100G, corresponding to the SR8/DR8/FR8 and SR4/DR4/FR4 series optical transceivers. For the 8x50G optical port solution, the signal speed on the optical side is the same as that on the electrical side, which is 8x50G PAM4, so the optical transceiver only needs CDR for clock data recovery internally; for the 4x100G solution, the signal speed on the optical side is twice that on the electrical side, which is 4x100G PAM4, so the Gearbox is needed to multiplex the two electrical signals into one and then modulate them to the optical for optical conversion to become one optical signal.

400G optical transceiver technology threshold is higher, domestic manufacturers in the lead.

100G optical transceivers are very mature in terms of technical solutions, process accumulation and industry chain completeness, so the access threshold is relatively low, and there is an influx of many optical transceiver manufacturers, making the price of products also suffered a large impact. The 400G optical transceiver has a higher threshold in terms of circuitry, optical path, firmware, production yield and reliability, so there are not many optical transceiver vendors in the market that can supply large quantities. On the other hand, 400G optical transceivers are the next generation of data center products, which are in the early stage of inter-generational upgrade and have a wide market in the future. Domestic manufacturers are in the leading position in the world in the era of 400G optical transceivers, and the first-mover advantage will help to improve the quality of earnings and conduct research and development of higher speed products such as 800G on this basis.

800G optical transceiver development window has arrived, will become the next major battlefield.

The technical solutions for 800G optical transceivers include 2x400G and 8x100G solutions, and the packaging methods are similar to 400G, including OSFP and QSFP DD800. OSFP packaging method is mainly defined by the OSFPMSA organization, which has released version 4.0 specification documents for 800G optical transceivers; QSFP DD800 packaging method is defined by the QSFP DD800 MSA organization, which has released version 1.0 specification documents. The 2x400G solution and the 8x100G solution have both electrical and optical port rates of 100Gbps, with the main difference being the wavelength used and the corresponding optical interface. If the 8x100G is DR, it adopts 1310nm, and if it is FR and LR, it adopts LWDM8 wavelength scheme and the optical interface is LC.

The scale-up effect of coherent optical transceiver reduces the cost and sinks to multiple application scenarios, with obvious advantages of OpenZR+.

Coherent optical transceivers were initially applied to backbone networks with transmission distance greater than 1000km, but later gradually sunk to metropolitan area networks with transmission distance between 100 and 1000km, edge access networks with distance less than 100km, and data center interconnection (DCI) with distance between 80 and 120km. With the start of mass production of coherent optical transceivers, the cost is decreasing and will be widely used in 5G access networks and other markets with greater demand in the future. There are currently three standards for 400G coherent optical transceivers, namely 400GZR, OpenROADM and OpenZR+. OpenZR+ combines the advantages of both 400GZR and OpenROADM standards for a broader range of applications, targeting metro, backbone, DCI and telecom operators, and supporting multi-vendor interoperability.
According to Lightcounting, the market for DWDM optical transceivers using coherent technology will maintain a CAGR of approximately 20% over the next five years, with the first shipments of 400G ZR, 400G ZR+ and 400G OpenROADM coherent optical transceivers starting in the second half of 2021. Similarly, the DCI market, a popular application area for coherent optical transceivers in recent years, is expected to grow at an optimistic rate, with the total DCI network market reaching $5 billion by 2022, according to Dell’oro’s forecast, with the optical transport network segment containing optical transceivers holding the largest market share.