The Linley Group has developed forecasts of communications ASSPs for wired applications, embedded microprocessors, and FPGAs using information gathered in its market-share process, from public financials and other public sources, and from reviewing spending and technology trends. This report also includes our forecasts for server processors and, new to this edition, integrated base-station processors. The latter category is a new class of chips that combines CPUs and DSPs and serves both traditional macro base stations and small cells. A separate report, Mobile Semiconductor Market Share Forecast, provides forecasts for processors and wireless chips used in mobile clients such as smartphones and tablets.
As 2014 comes to a close, the communications-semiconductor market remains weak after an unprecedented three-year decline from 2011 to 2013. Although 2013 was down at the top level, results were mixed across different market segments. The two largest segments, Ethernet and broadband, were down only slightly. In both cases, revenue growth from new technologies largely offset declines in legacy technologies. The aggregate of other segments declined due primarily to legacy technologies in terminal decline. Overall, communications equipment consumed $10.5 billion in ASSPs, processors, and FPGAs in 2013.
We expect overall ASSP revenue for 2014 will be down slightly compared with 2013. Although most segments should be flat or will grow modestly, legacy technologies continue to create a drag on growth. Bright spots include broadband, optical transport, and PCIe/RapidIO. In broadband, GPON CPE chips are experiencing strong growth due to deployments in China. Deployments of LTE in China are driving the growing demand for OTN in that country. Finally, PCI Express switch chips are growing due primarily to storage applications. Our flat top line for Ethernet masks underlying weakness in enterprise spending offset by continued growth in data centers driven by cloud-service providers such as Google and Microsoft.
Beyond 2014, we expect carrier spending to slow. Service providers will increasingly focus on wireless-access networks and the transport infrastructure to support those, whereas wireline-access spending will stagnate. China began 4G deployments in 2014 and should continue spending heavily on cellular networks through 2015. Wireless operators that have completed initial LTE build-outs will shift their investments to small cells, which will help meet data-capacity demands.
To prosper in this environment, vendors must target growing subsegments. In 2013, we saw the market share of chip vendors that have invested in new technologies outperform that of vendors milking legacy products.
Two of the hottest areas in our forecast domain are home networking and switches for PCI Express. Network processors, network search engines, and optical transport ICs will also show good growth over the forecast period. These categories, however, declined in 2011 and 2012 from their 2010 peaks. Thus, the near-term growth in these categories represents a rebound as consumption of carrier equipment has stabilized.
Many of the trends affecting communications ASSPs also influence sales of embedded processors. Communications is the largest application for embedded processors and has a mixed outlook. A significant portion of processor sales is for use in base stations, and shipments of macro base stations are expected to decline through the forecast period. On the other hand, we expect embedded-processor revenue from switches, routers, and security equipment will grow substantially. Thus, wireless infrastructure creates a drag on overall revenue from communications applications.
FPGAs, like embedded processors, are a mature category with broad ap-plications, but they are capturing additional share of the total semiconductor market as their capabilities increase. As these chips support more gates and integrate more functions, they become better able to substitute for ASICs and ASSPs in production systems. New products integrating high-performance CPUs may displace embedded processors in designs using both an FPGA and a processor.
Complementing our comprehensive market-share report, this document provides investors, product-marketing staff, and executives with insight into the state of the communications IC market and key trends. Extending our ongoing coverage of the industry, it outlines both our quantitative estimates and the important assumptions behind them so that readers can better integrate our forecasts with other information they may have.