Optical networking and its supporting equipment, components and integrated circuits (ICs) are heading toward a market windfall, according to In-Stat/MDR. The high tech market research firm reports that with the geometric growth of the Internet, private IP networks and business-to-business (B2B) e-commerce, the demand for high speed capacity, within the core of the public network, is rapidly increasing. As a result, optical networking will be the norm for all but the last mile and some proponents even feel that fiber will enter the last mile more extensively.

"As much of the industry's advances rely solely on those in semiconductor technology, IC vendors will enjoy a bountiful future as new networks are constructed, existing ones are upgraded and the yet untapped access and enterprise markets are penetrated," says Eric Mantion, a senior analyst with In-Stat/MDR. "Even though optical ICs will experience very modest shipment growth and a slight reduction in revenues in 2002, due to the combined effects of a reduction in demand, the ever present semiconductor ASP decline and a reduction in lead-time before the product is needed, 2003 and beyond will see a positive growth in this market, resulting in a market of almost $1.8 B by 2006."

In-Stat/MDR also found that:

· As the current production grade ICs are completed, they will be sold into two major end-user markets: module suppliers and communication equipment vendors.

· While there is growth for all speed grades of optical ICs, without question, 10 GigE will experience phenomenal growth rate. Short range OC-192 will have a healthy growth rate also, since in most cases, it will be very popular in the MAN as the most inexpensive SONET method for connecting separated meshes of 10 GigE based equipment.