The global optical communication and networking equipment market was valued at USD 18.9 billion in 2020 and is projected to reach USD 27.8 billion by 2025; it is growing at a CAGR of 8.0% from 2020 to 2025.
Rising adoption of cloud-based services and virtualization services all over the world, increasing data traffic due to increased internet usage, and growing number of data centers are the factors driving the optical communication and networking equipment industry growth. However, the high initial investment and increased network complexity are the key factors restraining market growth. The deployment of VOIP, LTE, and 5G networks; the extension of networks in developing countries; and the adoption of IoT are among a few factors that would create opportunities for the players in the optical communication and networking equipment market. However, the vulnerability of optical networks to hacking and susceptibility of optical fibers to physical damage and transmission losses are the major challenges for this market.
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The market for fiber channel technology-based optical communication and networking equipment is expected to grow at the highest CAGR during the forecast period. In enterprise data centers, high-speed fiber channel networking technology is used extensively to transport data from storage systems. It ensures that all storage data arrives at its network destination without loss at extreme throughput and low latency while operating at high utilization rates without data collisions or the need for retransmission.
In the optical communication and networking equipment market, data center applications accounted for the largest share in 2019. This market is expected to grow at the highest CAGR from 2020 to 2025. The growth of this market can be attributed to the increasing adoption of cloud computing and the growing use of smartphones and other connected devices.
Optical switches accounted for the largest share of the optical communication and networking equipment market in 2019. This market is expected to grow at a CAGR from 2020 to 2025. Optical switches are the key component of fiber-optic transmission systems that usually send information over fiber by turning electronic signals into light. Optical switches are faster, more efficient, and more scalable. Also, they provide high flexibility in installation, replacement, maintenance, and reconfiguration of network hardware and paths, resulting in extremely high reliability and availability, as well as a reduction in OPEX. Therefore, optical switches are expected to continue to account for the largest market share in the next 2 to 3 years.
The optical communication and networking equipment market in the APAC region accounted for the second-largest market share in 2019. The market in APAC is also expected to grow at the highest CAGR from 2020 to 2025. The primary reason behind this trend is the extension of networks in China, South Korea, India, and other developing countries in APAC. Moreover, the APAC region is the largest producer and the consumer of smartphones, laptops, TVs, and various other applications across the world. Thus, the demand for the internet is growing tremendously in the region. This trend is expected to continue during the forecast period.
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