Global fiber component market tightening in the second quarter of 2011

According to Ovum Irvine's survey report, the global fiber optic component market shrank by two percentage points in the second quarter of 2011, the first time in two years that a recession has occurred. Global fiber component market revenue fell to 1.55 billion US dollars, which means that intense competition and price pressures are faintly appearing in the market.

Ovum analyst Darly Inniss said that inventory adjustments, low demand in the telecommunications sector and the continuing economic downturn have led to market tightening. He commented: “As with the overall market decline, market leader Finisar has lost 7 percentage points compared to the previous quarter, and its share has fallen compared to the previous four seasons. The short-term market outlook is mixed. The market outlook is even more worrying."

Inniss is concerned with inventory adjustments that transform the fiber optic component market into a buyer's market, even with new products. This situation may lead to a highly competitive environment and a positive price drop.

Innis commented: “There is no indication that positive prices have emerged in the market. However, inventory adjustments mean that market leaders may be caught up by competitors. The end result will be a shorter honeymoon period for new products in the field of fiber optic components. Increase revenue and profits to compensate for their investment.” Ovum’s market share newsletter cited the first example of a startling price pressure, including Oclaro’s 40G equipment being asked to cut prices.

At the same time, according to the results of the report, among the top ten fiber component suppliers, Oclaro had the weakest performance. In the second quarter of 2011, revenue decreased by 9% compared with the previous quarter and 4% from the same period of last year. Innis went on to say: "Our initial investigation indicated that there will be a slight improvement in the third quarter of this year, but there is still uncertainty."