Cisco just held its PONC 2022 conference, with over 500 attendees registered. We found the most exciting topics at the three-day show were: (a) its progress with RON, (b) PLE availability, and (c) the 400G ZR ramp. Cisco is pushing for integrating optical transceivers with routers, a significant step forward for the industry.
The company indicated that it is seeing significant momentum for uptake of its Routed Optical Networking (RON) products; it now has 20 customers that have deployed RON networks. Additionally, there are 45 Proofs Of Concepts trials underway and more than 150 customers engaged with Cisco in various stages for RON products. Cisco touts that its RON systems result in a 78% decrease in power, a 76% decrease in rack units, and a 76% decrease in physical weight compared to using the traditional setup of separate routing and OTN systems.
Private Line Emulation (PLE) is now available for customers as a function on several of Cisco’s router product lines. We asked whether PLE can be made available to older routers, and the answer was yes, depending on customer demand to incorporate this feature. Cisco expects that it will have a significant number of PLE customers by this time next year who will take advantage of the PLE function to drive traffic that historically ran over OTN networks. The company shared its view that PLE improves latency when compared to an OTN system because its routers introduce a 5-10 microsecond latency (roughly equivalent to that of a 1 km span of fiber optic cable) compared to an OTN switch, which takes 40 microseconds.
We also learned that Cisco’s integration of recently acquired Acacia is proceeding smoothly; its 400G ZR modules are shipping. It plans for other modules to become available in the future, including 0 dBm ZR modules (autumn 2022 availability), a QSFP-DD Open Line System (OLS) (First Customer Ship in C1Q23). Google presented on Day 1 of the conference and explained that it sees a 50% CapEx savings by using 400G ZR instead of traditional transponder systems. It shared that it experienced significant OpEx savings related to power, space, and management cost reductions. And, Google said in the past three years, its bandwidth has growth between four to five times. Several of Cisco’s customers shared their experiences working with Cisco ZR and related products, including Arelion, CENIC, Colt, WebSprix, Windstream, and Zain. Windstream said that it got ZR+ working to over 1,000 km in its tests and deployments. Cisco’s team summarized its ZR success by sharing that its 400G Coherent journey from 2011 to current days has led to significant size/power/cost reductions of 40% Y/Y in the past decade.
AI/ML Workloads and Next-Generation Server Designs to Drive Growth
New network architectures and increased server speeds are causing the connectivity market inside the data center to move away from Direct Attach Copper (DAC) to active solutions. The current DAC technology can’t scale with the speed coming from next-generation server designs in the Cloud. Similar to other technologies, the Cloud will lead the way, but the broader markets of enterprise and service providers will enjoy the benefits of the technology.
Server speed is quickly moving to 112 Gbps SERDES and 100 Gbps ports for server access. There are several reasons behind this, such as the rapid move to PCIe Gen 4 and 5, faster processors, and the introduction of AI/ML workloads. But the more significant reason is the increase in accelerators via Smart NICs and DPUs.
2022-2024 server architectures take advantage of these factors and can drive multiple 100 Gbps lanes per server. DAC can’t scale as the distance becomes too small and a cable gauge becomes too large, and there is no appetite or need to move towards fiber or middle-of-row architectures. Cloud customers will be the first to proceed with the overall enterprise market following when they transition to higher speeds. These short distant server interconnects (up to 7m) account for over 50% of all data center network interconnects.
Beyond server access, customer preference continues to shift away from large Modular chassis and toward Fixed 1RU systems. At the same time, the aggregation and core layers are being moved closer together in a move away from the physical blast radius to the virtual blast radius. These trends allow aggregation switches to connect at short distances, not necessarily across a whole data center. As a result, these Distributed Disaggregated Chassis (DDC) architectures grow in volume each year and are prevalent in the three major verticals of Enterprise, Cloud, and Service Provider. DDC doesn’t need fiber for short distances, and one can think about active copper cables replacing the modular switch fabric in a chassis.
Last year, 90% of servers used DAC cables for connectivity, with the remaining 10% being a mix of 10G-Base-T, fiber, blade server enclosures, and other technologies. By 2026, we expect over two-thirds of the Cloud server market to be active copper (Figure 1). Furthermore, the percentage of 100 Gbps and above will be even higher, with almost the entire market at that speed using active copper. From a revenue perspective, the market will quickly exceed $1B and can exceed $3B by 2026, far higher than the DAC market it will replace.
Active copper cables fall into 2 main categories, ACC and AEC. ACC cables use an analog redriver approach to recover the signal that is attenuated by the losses in the copper conductors. AEC cables use a DSP retimer approach to accomplish the same. While AEC technology is able to achieve longer lengths, it also uses significantly more power. Spectra7 is a leader in the ACC segment.
The industry has moved technologies in the past, with the 1 Gbps to 10 Gbps as an excellent example of a drastic and rapid shift for server connectivity. The market for 1 Gbps was dominated by 1G-Base-T, but the need for 10G shifted rapidly to DAC, with 10G-Base-T never gaining traction beyond some enterprises. 100 Gbps should have the same trend, where there is a rapid inflection over the next 2-3 years, first starting with the Cloud providers and then shifting to the broader enterprise market.
Cloud providers currently are examining when to transition away from DAC, and we expect to see many new designs between now and the end of 2023 transition away from DAC. This times well with servers moving to 100 Gbps links and new 25.6T and 51.2T switch ASICs. While Cloud providers tend to be secretive, we expect to see demonstrations throughout the year as both cable and switch vendors demonstrate products and interoperability.
- Alan Weckel, Founder and Technology Analyst at 650 Group.
In 1Q'22, revenues for the Optical Transport market were 6% greater than the year-ago quarter, according to 650 Group's recently published report. The market overall has been inconsistent in performance over the past four quarters, oscillating between Y/Y growth and Y/Y declines.
On a regional basis, North America had the strongest Y/Y growth and on a Q/Q basis. We have maintained our revenue forecast for 2022 and 2023. For the outer years of our forecast, we are maintaining our long-term forecast since the previous report.
Cisco experienced the strongest Y/Y revenue performance, while ZTE experienced the strongest sequential (Q/Q) revenue performance.
The top 5 vendors in the quarter (ranked by revenue size in the report) were the following:
1) Huawei - grew Y/Y
2) Ciena - grew Y/Y
3) Nokia - declined Y/Y
4) ZTE - declined Y/Y
5) Infinera - grew Y/Y
The Optical Transport report breaks out over five vendors and includes detailed segmentation, forecasting, and market shares. Please contact us for press inquiries and further report information. In 650 Group's top vendor performance, we only include vendors broken out directly in the report. Vendor's in our rest-of-market category are not included in the top performing list.
650 Group is a leading Market Intelligence Research firm for communications, data center, cloud, enterprise, and SP markets. Our team has decades of research experience, has worked in the technology industry, and is active throughout the supply chain throughout the world.