Sales of optical components and modules increased 7% in 2011, after spiking by 36% in 2010, according to a market report by industry analysts at LightCounting.

Very high growth of this market in 2010 followed by a slowdown in early 2011, raised concerns of a potential market bubble among investors. However, sales of many products ramped up nicely in the second half of 2011, pulling the overall market back into positive territory, the analysts say.

Among the major market segments, sales of FTTx modules grew the fastest, increasing 23% over the year. The sharp increase in shipments of GPON transceivers in China and first meaningful sales of 10-Gbps PON modules accounted for most of the growth.

The Ethernet transceiver market, which remains the largest segment with more than $850 million in annual sales, grew by 8% in 2011. This growth was slightly tempered because of weaker-than-expected sales of 40GbE and 100GbE products. However, more than 4 million SFP+ transceivers were sold in 2011 as demand for 10GbE optics in data centers remains strong.

Sales of Fibre Channel transceivers fell by 11% for the year, after a very fast growth in 2010. Strong sales of 16-Gbps modules in late 2011 compensated for weakness in sales of lower-speed products.

WDM and SONET/SDH market segments were up 12% and down 3% for the year, respectively. This weaker than expected performance is related to a drop in shipments of 10-Gbps and 40-Gbps SONET/SDH and DWDM interface modules. However, sales of CWDM transceivers are up sharply, including first significant shipments of 10G products.

"Despite somewhat weak sales of many high-end products, the broader transceiver market remained steady in 2011," commented Vladimir Kozlov, founder and CEO of LightCounting. "Demand for optics remains strong in datacenters, as well as access and metro networks."

"Weaker than expected sales of high-data-rate transceivers in the second half of 2011 are probably related to many new products developed by component vendors in 2011 and introduced in early 2012. Having too many options to choose from complicates purchasing decisions, but we expect that the market will return to double-digit growth in 2012," he concluded.

LightCounting will present detailed analysis of the optical communications market, based on confidential sales data provided by more than 20 leading vendors, in a new Market Update report to be released on March 26, 2012.  A preview is available now.