LightCounting reports on the Emerging market for PAM4 and coherent DSPs
Semiconductor ICs are one of the top technologies that have changed the world as we know it. Intel’s 50-year history is a great illustration of innovation and business success. Manufacturers in Japan, Korea and Taiwan invested heavily in semiconductor technology over the last 20-30 years and dominate several segments of the global IC market today. The Chinese government prioritized domestic manufacturing of ICs at the end of 2017 and is determined to reduce dependence of its local high-tech companies on ICs manufactured abroad. Shortages of ICs due to the pandemic shutdowns in 2020 hobbled a wide range of industries and continue to this day.
ICs play a critical role in the optical transceiver industry also, in the form of drivers, TIAs, CDRs and DSPs used in various forms and configurations in most pluggable and board mounted transceivers. Leveraging its extensive data on optical transceiver shipments as well as industry knowledge and contacts, LightCounting developed a forecast for optical transceiver IC chipsets. Overall, the market for IC chipsets for optical communications is forecast to grow from 2022 through 2027 at a CAGR of 18%, with total sales growing from around $2.4 billion in 2022 to more than $5.4 billion. Ethernet and DWDM devices account for the bulk of the market.
Of particular importance in enabling the development of higher speed optical transceivers in recent years are DSPs for PAM4 Ethernet and coherent DWDM transmission. Sales of coherent DSPs were considerably higher than PAM4 chips in 2016-2019, but coherent product sales declined in 2021 because of delays in new telecom infrastructure projects and adoption of less expensive pluggable DWDM modules, replacing on-board solutions. Sales of PAM4 chipsets almost doubled in 2021 and should surpass sales of coherent chipsets in 2022.
In addition to optical transceivers, PAM4 chipsets are also used in Active Electronic Cables and in on-board re-timers used to clean up electrical signals between switching ASICs and pluggable ports. All three products make a significant contribution to the total PAM4 market size.
Over the next five years, sales of PAM4 DSPs will contribute the most to the expected growth in the overall communications ICs market, growing to nearly $3 billion in annual sales by 2027. Coherent DSPs and related ICs will also resume growth, after a minor decline in 2021, exceeding $2 billion in annual revenues by 2027.
Our recently published report Emerging market for PAM4 and coherent DSPs includes a product-level forecast and detailed analysis of PAM4 and coherent DSPs, as well as profiles of many U.S. and Chinese IC manufacturers, and is now available to LightCounting clients.