This year, FTTx projects have been initiated in scales in parts of the cities in China and the operations of various manufacturers in the field of optical communication devices are generally good, which is considered as either a false appearance or an indication of the beginning of a new round of communication capacity expansion, possibly resulting in a new round of investment into the optical communication industry. How is WTD, a leading enterprise in the field of optical devices/modules in China, carrying on its business now? And how does the Deputy GM of WTD Dr. Xu Yuanzhong, a distinguished figure in this field, see such a situation? In the CIOE 2008 closed not long ago in Shenzhen, he had an interview with the editor and reporter from Fiber on Line in a WTD’s booth.

Looking upon the large-scale growth of FTTH prudently

The bright and eye-catching colors and concise and artistic decorations of its booths in the Expo seem to confirm Dr. Xu’s view. It was noticed that since the Expo was open, a continuous stream of visitors came the booths. Dr. Xu revealed that by the end of last September, WTD had an 88％ increase of orders as compared with last year, but delivered only 55% of the goods, giving much pressure on its production capacity. He indicated that the boom in the current optical device market came mainly from the following factors:

1. Olympics 2008 in Beijing. The increased orders were obtained mainly before the opening of the Games and the high standard requirements of the Games on the communication industry pushed the entire industry forward, so that it performed fairly well as a whole in the first half of the year.

2. The initiation of FTTH construction in China. The FTTH construction had come upon one snag after another in China. The growth in Japan and South Korea was seen in 2006 and 2007 respectively, while obvious progress was finally made in 2008 in China, especially in the first half of the year.

FTTx promotes the development of China’s optical device market

During the Expo, Dr. Xu delivered a speech entitled The Evolvement and Outlook on China's Optical Components Technology and Market at the High-Level Forum on China’s Photoelectronics Industry and the Special Forum on China’s Optical Communication Technology and Market, which attracted extensive attention.

In his speech, he reviewed the evolution of China’s optical device technology and market on the basis of his own experience. He thought that the rapid progress in the optical communication technology depended on the breakthroughs in the optical device technology in addition to optical fiber technologies. However, the products by China’s optical device companies had had a serious problem of homogeneity and generally they took manufacturing as their dominant operation and competed among themselves at the low side in costs. He cited a celebrated dictum of Zhuangzi, an ancient Chinese philosopher, from one of his theses Enjoyment in Untroubled Ease: If the accumulation of water be not great, it will not have strength to support a large boat to emphasize the necessary awakening of China’s optical communication enterprises to the issues of IPR and core competitiveness.

Dr. Xu pointed out the advantages of the Chinese optical communication enterprises in cost, production scale and market were the main factors for the rapid growth of China’s optical device market. He continued, the year of 2008 was regarded as China’s first year of FTTx development The market of the optical devices for FTTx was great, so was the pressure on the related costs. At present the middle- and lower-end markets of optical devices were gradually moving eastward, while the opportunities for the large-scale applications of FTTx technology would bring China’s optical devices companies into a new round of development.

At the end of his speech, Dr. Xu forecast China’s optical device technology and market in the coming five years. He believed that China’s optical device companies would still lag behind their foreign counterparts by 5 or more years in some high-side products, but China’s device market would become even more important in the world, probably accounting for 1/4 to 1/3 of the global market shares. In five years, there would be several hundred device companies specialized in the development of optical devices and components for FTTx at the end of the industrial chain, such as optical connectors, couplers, splitters, transceiver modules, BOSA/TOSA/ROSA, etc. In addition, there would be 2 or 3 optical device companies that had become internationalized in terms of technology and market. Therefore, China’s optical device market would become more and more important in the world.

He predicted that at least in the said period, those companies that were large in scale and technologically advanced and had built up their own brands would have fairly strong competitiveness, while the venture capital companies would boost the innovations in optical device technologies and system. He did not forget those predecessors in the field of optical communications and while paying tribute to them, he called on those working in this field to make continued efforts for the development China’s optical communications.

More attention to products and markets and less effort to political economics

In the current upsurge of FTTx construction, many enterprises placed great hopes on it and gradually intensified their penetration into its production chain, thus attracting much attention of the investors. It is not difficult to note from this Expo that not a few new stars had appeared in the optical communication industry and new enterprises, he thought, would continuously spring up. In the coming years, they could basically be divided into two categories:

One was those internationalized enterprises that were large in scale and had their own brands. At the present, only such enterprises had the necessary strength to develop new products. Take WTD as an example. In the future, it would take chips as the focal point in their research and development, while making still great effort to develop chip TO so as to fill up the gaps in the relevant fields in China. As probably the only one in China, WTD had succeeded in developing 2.5G and 10G chips and producing them in batches. Dr. Xu indicated that WTD would continue to concentrate its effort on the production of chips for lasers, which were badly needed by the domestic enterprises and even in the entire domestic communication industry.

The other was various new-emerging enterprises that produced various high-rate connectors, PLC, optical modules, etc. for FTTx. It is predicted that in the coming five years, there would emerge thousands of such enterprises, but they would probably compete at the low end and at low level.

Dr. Xu pointed out that only those enterprises that paid great attention to the development of the market-oriented optical device products that could really stand firm, but he did not have much hope in those that would rely mainly on the government subsidies from the very beginning. As he saw it, as such enterprises were subject to no financial pressure, they would not have sufficient reserve strength for product development. But as a matter of fact, as long as one had good products, the follow-up government subsidies would naturally come. So, he hoped that people in the trade would not play with political economics less, but spend more energy on the development of some characteristic products and technologies.

Digression

Dr. Xu Yuanzhong once worked in Accelink Technologies and Lightwaves 2020 and has been in charge of sales and marketing in WTD for four years. As many people in the industry see it, he has not only achieved some successes in optical device technologies and has fairly clear and original view of markets, but also is good at summarization. Whenever talking with him, people can always hear some new ideas. For example, when he used the term, “political economics enterprise” in this interview, he meant those enterprises that did not or would not spend their time and energy on operation, development and market exploration, but concentrate their attention on searching for large amount of government subsidies. Undoubtedly, the purpose of starting a business is to win more capital and profits, but when one indulges in seeking government subsidies and support and receives some easy money, he will lose his original enthusiasm for his undertakings instead.

In addition to the success in booth design and display, WTD had one brighter spot in this Expo, i.e. numbers. From these numbers, we can have a distinct understanding of WTD’s efforts in past few years: 85% of the global outstanding optical communication equipment manufacturers, for example, have become its customers, probably not to be matched in China. It was not long ago that WTD received CIOS Special Contribution Award for its outstanding contributions and leading position in the optical communication industry. Let’s review some of the following impressive numbers:

• 28 years history of optical device industry；
• Over 100 patents and national standards;
• Daily outputs of 30,000 pieces of chips;
• Over 3,000 customers served;
• Almost 40 first-class global communication equipment manufacturers supplied;
• Annual outputs of over 3 million pieces of modules.

We expect these numbers will be continuously growing in the not too distant future.