PASSIVE OPTICAL NETWORK EQUIPMENT MARKET ANALYSIS

A passive optical network (PON) is a fiber-optic telecommunications technology for delivering broadband network access to end users. The primary objective of the network is to provide a solution, which is easy to install, maintain, and upgrade. This is done by using unpowered optical splitters is PON that allows a single fiber to deliver services to multiple premises. Passive optical network is considered an environment-friendly (green) solution, as compared to traditional networks, owing to the usage of unpowered optical splitters. Optical splitters collect and separate optical signals, as they travel in the network. The necessity of the powered equipment is only at the receiving end and it is a source of the signal, unlike the traditional network.

The global passive optical network (PON) equipment market is estimated to be valued at US$ 17.8 million in 2021 and is expected to exhibit a CAGR of 22.0% over the forecast period (2021-2028).

Recent Developments:

• In August 2021, CommScope, a U.S. based infrastructure provider company launched coexistence portfolio to upgrade their PON networks to increase data speeds and deliver additional services without having to replace or add fiber to their existing PON infrastructure.
• In May 2021, AirFiber Networks, India based internet service provider company to launch data services using Gigabit Passive Optical Networking (GPON). The Nokia’s GPON solution will enable AirFiber Networks to provide high-speed broadband services in Bangalore and underpenetrated areas across the state of Tamil Nadu, aiming to reach over 100,000 subscribers in a year.
• In November 2020, Nokia, a Finland based telecommunication company launched 5G PON technology is the next step in PON (passive optical network) evolution and enables the converging of high-end services on a single fiber infrastructure.

Statistics:

Figure 1. Global Passive Optical Network (PON) Equipment Market Value (US$ Mn), by Region, 2020

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Asia Pacific region held dominant position in the global passive optical network (PON) equipment market in 2020, accounting for 45.6% share in terms of volume, followed by North America and Europe, respectively.

Market Dynamics- Drivers

Increasing need for green network solution is expected to drive growth of the global passive network (PON) equipment market during the forecast period. Passive optical local area network (POL) solutions are more eco-friendly than conventional copper-based Ethernet local area network. POL removes the use of workgroup switches and instead uses optical splitters. As a result of this, it complies with HVAC standards since it eradicates the usage of thousands of KW energy and acts as a more-cost effective option. Furthermore, there is no requirement for rack mount switches which in turn reduces the usage of non-renewable electrical equipment and lowers power consumption. Passive optical network (PON) uses a single fiber, single type optic to the WGT. In addition, PON uses small passive optical splitters, which are located in the enclosures in a building, usually on every floor. Therefore, PON produces no heat, requires no power, and can even be mounted in electrical closets. 

Low cost of ownership and high return on investment is expected to propel the global passive optical network (PON) equipment market during the forecast period. Passive optical network (PON) aids in saving the total cost of ownership (TCO) by a large amount since the cost of installation of equipment is low. Moreover, the highly-efficient equipment can offer high return on investments. This low cost of ownership is achieved with PON using a highly-centralized distribution network, which is passive in nature. Furthermore, PON saves a significant amount in the total cost of ownership, owing to savings in both capital and operating expenditure. The major chunk of capital expenditure in the traditional network was taken by the riser closets and workgroup switches. In a passive optical network, the closet and switches can be mounted on the smallest of spaces available, in turn saving 45% of the capital expenditure.

Market Opportunities

High growth of PON Asia Pacific region can present lucrative growth opportunities in the global passive optical network (PON) market. Rising demand for passive optical network in the Asia Pacific region, especially in China, proves to be one of the driving forces for the market. The China market is undergoing transition from wireless to wired optical communication. The mass adoption of electronic gadgets and the creation of a high volume of data traffic by a large number of customers further drives the end-users in China to switch to a wired optical medium from a wireless medium. Currently in India, optical fiber cable (OFC) connectivity is offered from all districts and state capitals to the block level. However, there is a proposal to connect all the 250,000 Gram Panchayats present in the country. Thus, a dark fiber network would be created which would be abided by appropriate technology leading to generation of sufficient bandwidth at the Gram Panchayat level.

Increasing bandwidth requirement can provide major business opportunities in the global passive optical network (PON) market. Growing requirement for higher bandwidths serves as one of the major opportunities for the PON market. According to a study conducted with IT professionals as respondents, about 81% admitted that the demand for higher bandwidth is expected to grow in future and is one of the major concerns for data centers. Rising number of subscribers bring in more number of devices that connect to networks and more data-dense services to ride over the networks.

Market Trends

Key players in the market are focused on research and development activities, in order to gain a competitive edge in the market. For instance, in October 2013, Broadcom Corporation Inc. launched a series of gigabit passive optical networks and Ethernet passive optical networks device for broadband connectivity at home. In October 2013, Alcatel-Lucent launched EPON solutions, which would help cable operators to focus on the growing business market, as the EPON (Ethernet Passive Optical Networking) solution uses the highest capacity fiber platform.

Major market players are involved in merger and acquisition activities, in order to enhance the market presence. For instance, in March 2012, Broadcom Corporation Inc. acquired BroadLight Inc. for US$ 195 million.  In November 2012, Calix Inc. acquired Ericsson’s fiber access assets along with the optical network terminal (ONT) and EDA 1500 GPON solution.

Figure 2. Global Passive Optical Network (PON) Equipment Market Share, By Component, 2020

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Key Takeaways of the Graph:

• The ONT segment held dominant position in the market and accounted for 62.4% share in the global passive optical network (PON) equipment market in 2020. The segment is expected to reach US$ 52.37 million in 2028, owing to increasing adoption of ONT from EPON and GPON
• In 2020, the GPON segment accounted for the largest share of 81% in the global passive optical network (PON) equipment market and is expected to be valued at US$ 89.35 million by 2028. This is owing to LMN factors.

Market Dynamics- Restraints

High installation cost at operators interface and operational challenges are expected to restrain growth of the global passive optical network (PON) equipment market during the forecast period. Although PON equipment offers numerous benefits, its high installation cost remains the major restraining factor. According to a study conducted on behalf of the Broadband Forum, 53% of the respondents said that interoperability issues caused complications associated with their internal testing burden. 44% stated issues with network performance, and 41% mentioned issues with greater management overhead. Furthermore, a gigabyte passive optical network (GPON), which is one of the most advanced technologies in PON, costs US$ 6.69 million. The equipment cost is very low when compared with other costs, as the raw material required at the service providers' end is less complex and technologically advanced.

Availability of substitute technologies is expected to hamper the global passive optical network (PON) equipment market growth over the forecast period.  Presence of alternative technologies such as XGS-PON is a major hindering factor for market players. XGS-PON is an updated standard for passive optical networks that can support higher-speed 10 Gbps symmetrical data transfer. Many end users are more inclined towards such advanced technologies.

Competitive Section

Major companies operating in the global passive optical network (PON) equipment market are Adtran Inc., Huawei Technologies Co. Ltd., Alcatel-Lucent S.A., Hitachi Communication Technologies, Inc., AT & T Inc., Freescale Semiconductor, Inc., Broadcom Corporation, Inc., Ericsson Inc., Calix Inc., and ECI Telecom, Ltd.

Key Developments

1. Key players are focused on product launches, in order to expand the product portfolio. For instance, in August 2019, Adtran Inc. launched SDX 620s & 640s XGS-PON and 10G EPON SFP+ ONUs at 2019 CONNECT Press & Analyst Event.
2. Major companies are involved in product launches, in order to gain a competitive edge in the market. For instance, in March 2019, Huawei Technologies Co. Ltd. launched a 50G PON prototype at Mobile World Congress 2019.