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The subsea optoelectronics market surpassed $1.06bn in revenue in 2016, more than doubling from a meager $400m in 2014 (Figure 1). Asia-Pacific was the region with the greatest revenue, at $350m in 2016, followed by EMEA, North America, and Latin America and the Caribbean, at $300m, $255m, and $156m, respectively.

The subsea market has been re-energized by major internet content providers (ICPs), which have transformed from leasing capacity on cables to owning consortiums. Google has taken consortium ownership positions in transpacific cables Unity, Faster, and Pacific Light Cable Network (PLCN); the South-East Asia Japan Cable System; and now Indigo, a cable running from Singapore to Australia. Microsoft has three diversely routed transatlantic cables – AeConnect, Hibernia, and Marea – and transpacific cable New Cross Pacific. Facebook has its toe in the water in both oceans, with PLCN and Marea. Facebook is also part of the Asia Pacific Gateway, an East Asian cable with landing points in Japan, South Korea, China, Taiwan, Hong Kong, Vietnam, Thailand, Malaysia, and Singapore.

The Ovum forecast for the subsea optoelectronics market is strong, projected to exceed $1.4bn in revenue in 2022, equating to a 5% CAGR.

More cable building is expected from the ICP community, based on the ICPs’ business models, expansion initiatives, and executive statements about their future directions. The ICPs are considering latency-optimized routes for data center interconnection.

Additional forecast drivers include the following CSP initiatives:

  • more East Asian connectivity due to Asia-Pacific’s geography of islands and peninsulas and due to limited international terrestrial connectivity options

  • more transpacific cables, to minimize latency and provide diversity of routes.

The capacity upgrade business is also projected to be strong, since coherent technology can boost the bandwidth and extend the system life of older cables.

The ICP investment engine has been a boon for multiple markets:

  • It has brought new life to the subsea system suppliers of ASN, Huawei Marine, NEC, Subcom, and Xtera.

  • It has accelerated the network upgrade market pursued by both subsea cable suppliers and many terrestrial suppliers.

  • It has given a boost to the landing-station-to-data-center terrestrial backhaul business.

The subsea network initiatives are reshaping the global traffic pattern, giving CSPs an opportunity to rethink historic traffic pattern paradigms. System vendors have an opportunity for growth, leveraging their capabilities to offer the lowest bit-per-mile cost.

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