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 carrier and enterprise spending trends. Wireless coverage appears in a separate report: Mobile Semiconductor Market Share Forecast 2012–2017.
As 2013 comes to a close, the communications-semiconductor market has stabilized following an unprecedented two-year decline during 2011 and 2012. Although 2012 was down at the top level, results were mixed across different market segments. The broadband segment grew thanks to strong sales of customer premises equipment (CPE), whereas most carrier-infrastructure segments declined. Overall Ethernet revenue fell owing largely to soft enterprise spending, but adoption of 10G Ethernet in data centers prevented a steeper drop. Overall, communications equipment consumed $10.6 billion in ASSPs, processors, and FPGAs in 2012.
Revenue from communications ASSPs will be down again in 2013, but only by a small amount. We expect 2014 will be about flat with 2013. With expectations for enterprise spending already modest, the biggest risk to our 2014 outlook is a slowdown in carriers’ wireline-infrastructure spending. Although carrier capex appears strong, we have noted results in specific equipment segments can show little correlation with overall capex. The bright spot in 2014 should once again be spending on data centers, the growth of which is driven by cloud computing and companies such as Google, Microsoft, Amazon, and Facebook.
Beyond 2014, we expect carrier and data-center spending to slow. Service providers will increasingly focus on wireless-access networks and the transport infrastructure to support those, whereas wireline-access spending will languish. China will begin 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 product categories. Two of the hottest areas in our forecast are home networking and switches for PCI Express and RapidIO. 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, 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 applications, 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.