The Telecom Market for Cable Assemblies:
The Wireless Wonder

By David Pheteplace, Bishop & Associates Inc.

From 2000 to 2010, worldwide Internet usage increased from 361,000 users to 1,966,515,000. That is more than a fivefold increase, or a 10-year compound annual growth rate of 18.5%, during a time span that included two major recessions. Almost one in three persons walking the earth today s an Internet user. If that trend line continues on a linear growth path (which will more likely be exponential), there will be nearly 3.5 billion users in the year 2020 and 45% of the world’s population will be on the Internet.

By area of the world, Asia has the largest numbers of users, at 825 million in 2010. Europe follows with 475 million, North America with 266 million, and Latin America with 205 million. The most growth by region over the last 10 years was Asia, at 711 million users, and Europe, at 370 million users. By country, China had the most users in 2010, at 420 million, followed by the United States at 239 million, and Japan at 99 million. The following chart shows the numbers by region for 2000 and 2010.

The other trend affecting the Internet is the amount of data each user is using. According to Cisco, the global IP traffic was 95.5 petabytes per month in 2000. A petabyte is 1,000 terabytes, and a terabyte is 1,000 gigabytes, just to put it into perspective. That averages out to 264 megabytes (slightly more than one-quarter of a gigabyte) of traffic for each of the 361 million Internet users per month in 2000.

In 2010, Cisco estimates that the global IP traffic was 21,380 petabytes per month. That yields an average usage of 10.9 gigabytes per month per Internet user. Since the global IP traffic is growing exponentially, the number for 2020, if the data were available, would be staggering. If usage stays at the current rate of 10.9 gigabytes of data per user per month, that would equal 37.4 exabytes of IP traffic globally per month (an exabyte is 1,000 petabytes) in 2020.

Internet Traffic, Petabytes Per Month

The second-largest factor influencing the telecom/datacom market is handheld wireless devices, including cell phones, smartphones, and broadband devices. In 2010, according to the International Telecommunication Union, there were 5.3 billion mobile cellular subscriptions worldwide. That is approximately 76% of the world population. In comparison, there are 1.2 billion fixed phone lines worldwide, equaling approximately 17.3% of the population. There are 940 million mobile broadband subscriptions, or 13.6% of the population, and 555 million fixed broadband subscriptions, or 8% of the population. In 2011, 85% of all new cellular handsets will be able to access the mobile web, and more than 18% of the cell phones produced will be smartphones.

The largest growth can be seen in Asia and the Pacific area where subscriptions increased from 834 million in 2005 to 2,649 million in 2010. In many of the developing countries around the world, wireless infrastructure is supplanting the installation of traditional landline-based systems. This is because the wireless infrastructure is less expensive to install. As seen in the next graph, landline installations have all but stalled around the world. The number of landlines, 1.2 billion worldwide, has shrunk slightly over the last five years.

The impact of these two factors include:

• The large number of Internet users is requiring the expansion of the systems for Internet access — including dial-up phone service, cable systems, DSL systems, wireless systems, satellite systems, and broadband systems — into areas that have not previously been served or are underserved. This is driving equipment sales for these systems.

• The volume of data that is flowing through the various Internet delivery systems is increasing exponentially. This is driving equipment evolution toward faster systems with greater bandwidth to carry the volume, which, in turn, is driving the performance capabilities of high-speed backplane and I/O connectors.

• Cell phone and smartphone usage for accessing the web is also compelling the need to increase the capacity of worldwide broadband services. 3G networks are already common in most developed countries. The new 4G, or Long Term Evolution (LTE) systems, are just starting to be deployed. 4G will also drive equipment sales of wireless infrastructure and wireless back-haul.

• 3G and 4G will also demand an increase in the equipment for backhaul services through wireline and microwave transmission equipment. Backhaul is the transmission of signals from the cell towers to the regional office.

• Many developing countries will use microwave and radio systems as the backbone of their telecom/datacom networks to avoid the cost of installing the copper and fiber cabling networks.

• Most Western economies will generate a GDP growth rate of 2% to 3%. The U.S. has already missed this mark, with growth under 2% for the first half of the year. China and India’s GDP growth is expected to be between 7% and 9.5%. Stagnation of the world GDP growth will have a negative effect on this overall market.

• The world’s love affair with smartphones and mobile broadband devices, such as the iPad, will continue to drive the growth of the wireless market, even in hard economic times.

Although the world economy is still fragile, telecom cable assembly sales are expected to grow 6.9% in 2011. Bishop & Associates expects the worldwide market for these cable assemblies to be approximately $17.6 billion this year. The highest growth rate is expected in China. The largest market by region will also be China, with the telecom cable assembly value at $6.2 billion.