Connector market still buoyant

Friday, 28 November, 2008

The global value of connector factory shipments to the telecom/datacom market will top US$7 billion in 2008 by the end of this year and is expected to approach $10 billion in 2012, representing a five-year compound average annual growth rate of 8.6%, according to Bishop & Associates.

The forecast for the telecom/datacom market has been affected by the current global credit squeeze and stock market instabilities. The forecast data employed in this report reflects the current outlook. 

The company expects that 2008 will close with an 8.2% gain over 2007. The forecast for 2009 calls for a more conservative growth rate of 4.8% compared with our pre-crisis, year-over-year growth forecast of 7.6%.

The forecast for 2010 calls for a year-over-year gain of 9.2%, as carriers begin catching up with deferred capital programs, many of which are intended to reduce operating expenses.

This compares with the company's pre-crisis, year-over-year growth forecast of 12.5% in 2010.

It is expected that the actions of the US federal government and its global counterparts will prove effective in restoring liquidity and stability in world markets during the next several months. However, the anticipated residual effects include an economic slowdown and a period of risk averseness on the part of industry, including the telecom/datacom industry.

The company expects that some telecom/datacom capital expenditure programs will be postponed in 2009, resulting in the reduced growth of connector consumption within the sector.

Carriers that defer major network upgrade initiatives may opt for less capital-intensive, transitional solutions that can be deployed as interim measures. This further uses legacy equipment and reduces capital expenditures. It also softens the impact on connector factory shipments.

It is expected that telecom and datacom carriers will sustain their network operations. Thus, the connector demand attributable to operations and maintenance (O&M) is unlikely to change significantly. O&M-driven demand for connector consumption is estimated to be between 25 to 30% of total telecom infrastructure-related connector demand.

The wireless infrastructure segment, a traditional double-digit growth driver, is viewed by Bishop as being most vulnerable in 2009. Wireless carriers not only expend capital for network builds, but must also, in many instances, acquire costly spectrum licences. Wireless carriers, particularly in Europe, have already invested heavily in spectrum licences in 2008.


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