Photonic Integrated Circuits (PIC) Market: High Demand from Telecommunication Industry to Support Growth
The ‘electronic revolution’ that changed the way we communicate and stored information paved the way for a ‘photonic revolution’. Optics and photonics technologies have taken center stage in modern life, as they enable the inspection and manufacture of integrated circuits in all electronic devices that are in use. The extensive deployment of fiber optic telecommunication networks has created new opportunities for the growth of photonics technology. As current technologies are progressing in terms of capacity, speed, and accuracy, photonics technology may offer powerful new solutions.
Optics, being the most significant method for long-haul transmission, and a key to send information over non-trivial distances, has opened up new avenues of the growth for the photonic integrated circuits (PIC) market. Considering the scope of progression in photonics technology and high penetration of photonic integrated circuits across industries Transparency Market Research conducted an exhaustive analysis of the photonic integrated circuits market. In its latest study, TMR offers information that will help stakeholders understand the market dynamics and how have new technologies have impacted the business decisions of key players.
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How has Growth Transitioned the PIC Market?
Photonics technology has seen tremendous advancements since the discovery of the laser in 1960. The most remarkable progress in the use of this technology was the use of light as a carrier of information. This technology has now proliferated in almost every industry vertical, including healthcare, food and beverages, and telecommunications. However, photonic integrated circuits are still in the nascent stage as opposed to electronic integrated circuits that have been there for more than 35 years.
With increasing video traffic, there is high demand for communication systems for the Internet, which can only be met by photonic integrated circuits. According to TMR’s study, the PIC market is anticipated to rise from its 2018 valuation of ~ US$ 503 Mn to reach ~ US$ 3.3 Bn by 2027.
However, the huge power consumption and complexity of the design may confine the expansion of the photonic integrated circuits market. This restraint creates a vital space for the development of new technologies, thus intensifying the competition in the PIC market.
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Key Trends Influencing the Market
High Demand for Indium Phosphide (InP)-based PICs
Using InP in PICs offers significant performance advantages over other substitutes such as silicon. Moreover, they find extensive applications in data transmission and telecommunications, since InP is the most important material for the generation of laser signals, and the conversion of those signals back to the electronic form. The growth of 3D sensing applications across the industrial sector has further strengthened the demand for InP-based PICs in the photonic integrated circuits market.
Increasing Application in Data Centers
The ecosystem of data centers is constantly evolving, with the booming demand for enlarged bandwidth. Over a billion smartphones were sold in 2016 around the world, resulting in the increased need for data centers. Existing semiconductor technology can barely suffice the growing need for high-speed Internet connectivity. Consequently, integrated photonics is witnessing rising penetration in data centers, as it offers the speed, bandwidth, and flexibility to cope with the rising need for enlarged bandwidth.
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Winning Strategies to Stay Ahead on the Growth Ladder
Consolidation of Position in North America
Increasing data traffic in cloud computing and rising WAN applications of fiber optic communications have created significant growth opportunities for the photonic integrated circuits market in North America. Heavy investments in the development of portable and reliable sensors across North America, majorly in the U.S., has created significant growth opportunities for companies to penetrate the market. High usage of mobile, video, and cloud-based services in this region is further pushing the demand for high bandwidth. Manufacturers are banking on the opportune potential of this region by strengthening ties with service providers and forming partnerships with data centers.
Expanding Product Offerings for Autonomous Vehicle Industry
Current versions of LIDAR that are used in driverless cars highly rely on moving parts, making them low resolution and prone to mechanical vibration. Driverless cars need to monitor everything in their immediate environment, and the use of PIC-based LIDARs helps in achieving this comprehensive view. This is mainly because optical fibers are immune to electromagnetic interference, and can handle high volumes of data produced through LIDARs. Numerous companies are developing miniaturized modules of photonic integrated circuits, sensing high demand from the autonomous vehicle industry.
Competition Landscape
The global photonic integrated circuits market features a highly competitive vendor landscape, with a large number of established players possessing advanced manufacturing capabilities. The intensity of competition is expected to remain high in the future, as global player are laying considerable emphasis on research and development activities in the field of network, communication, and information technology.
There are a large number of suppliers in the PIC market, thus reducing their bargaining power. Although manufacturers have high bargaining power, it is anticipated to reduce in the future with the growing demand for photonic ICs.
Leading players in the market such as
- Infinera Corporation
- Intel Corporation
- Ciena Corporation
- Finisar Corporation
- Huawei Technologies Co., Ltd, and others
held ~ 55% of the photonic integrated circuits market’ share in 2018.
Apart from research and development, mergers and acquisitions are key strategies deployed by market players. For instance, in December 2018, Lumentum Holdings Inc. acquired Oclaro, Inc., a developer of subsystems, modules, and optical components. This move helped the company strengthen its technological base, talent resource, and market reach. Further, in 2019, Hewlett Packard Enterprise Development LP announced a partnership with Intel Corporation, to bring storage class memory (SCM) technology to its enterprise storage platforms. Introducing new products to improve brand positioning, building robust sales channels, and increasing the volume of production are some other business strategies deployed by partakers.
Photonic Integrated Circuits (PIC) Market: Overview
- A photonic integrated circuit (PIC) is a device that integrates multiple photonic functions. A PIC is similar to an electronic integrated circuit in terms of system configuration, with electronic components replaced by photonic components.
- The adoption of photonic integrated circuits is gaining momentum, owing to increasing awareness among customers regarding the benefits offered by these circuits, such as cost efficiency and high performance for numerous applications.
- Using photonic integrated circuits enables system designers and manufacturers to integrate multiple optical devices such as modulators, optical amplifiers, lasers, and multiplexers into a single package, thereby ensuring that the complete system is compact and cost-efficient.
- Since cost is a very important factor for both, manufacturers and end users, the demand for PICs is expected to increase significantly during the forecast period.
- Owing to these advantages, the demand for photonic integrated circuits is anticipated to surge across the globe in the near future.
- The global photonic integrated circuits market is expected to expand at a CAGR of ~ 23% between 2019 and 2027, and reach a value of ~ US$ 3.3 Bn by 2027.
- Moreover, chip manufacturers across the globe are focusing on enhancing the power efficiency of PICs by using silicon photonic technology. This technology is employed to improve the energy efficiency of millimeter wave communication systems.
- Additionally, PICs are increasingly being used in optical fiber communication systems, due to their advantages such as low power consumption, high power efficiency, superior flexibility, and low latency.
Photonic Integrated Circuits (PIC) Market: Drivers
- The increasing use of photonic integrated circuits in communication networks is anticipated to boost the photonic integrated circuits market during the forecast period.
- Moreover, factors such as increasing use of optical amplifiers, presence of a large number of market players, and growing awareness about advanced technologies are fueling the global PIC market.
- The rising demand for optical amplifiers for use in optical communication applications across the globe is anticipated to boost the global photonic integrated circuits market during the forecast period.
- Additionally, consistent increase in the production of multiplexers/de-multiplexers and significant investments in R&D activities are expected to drive the global photonic integrated circuits market during forecast period.
Photonic Integrated Circuits (PIC) Market: Segment-wise Trends
- The global photonic integrated circuits market has been segmented based on raw material, integration type, component, application, and region.
- In terms of raw material used, the global photonic integrated circuits market has been divided into indium phosphide, gallium arsenide, lithium niobate, silicon, silicon-on-insulator, and others.
- The indium phosphide segment held a major share in the global photonic integrated circuits market 2018, as indium phosphide is the most commercially utilized material for photonic integrated circuits. It allows the integration of various optically-active and passive functions on the same chip. Owing to this, the indium phosphide segment is likely to maintain its dominance throughout the forecast period.
- In terms of integration type, the global photonic integrated circuits market has been classified into monolithic integration, hybrid integration, and module integration. The hybrid integration segment dominated the PIC market in 2018.
- In hybrid multi-chip integration, on-chip subsystems are tested prior to integration, which significantly increases the yield as compared to monolithic integration, wherein, failure of a single component damages the functionality of the entire system.
- Also, monolithic integration does not permit testing of light sources prior to integration into more complex systems. Hence, monolithic integration requires precise process control to maintain the yield at a high level.
- Based on component, the global photonic integrated circuits market has been divided into lasers, modulators, detectors, attenuators, multiplexers/de-multiplexers, and optical amplifiers.
- The lasers segment is anticipated to expand at a significant CAGR in the PIC market from 2019 to 2027.
- The multiplexers/de-multiplexers segment is also anticipated to expand at a substantial CAGR in the global photonic integrated circuits market during the forecast period.
Photonic Integrated Circuits (PIC) Market: Regions
- Based on geography, the global photonic integrated circuits market has been segmented into North America, Europe, Asia Pacific, South America, and the Middle East & Africa.
- North America accounted for a major share of the global photonic integrated circuits market in 2018. The photonic integrated circuits market in the region is driven by the strong presence of key players and high rate of adoption of technologies in the region.
- Attracted by the anticipated growth of the global photonic integrated circuits market and the underlying latent demand, several players are expanding their businesses through strategic mergers and acquisitions.
Some of the prominent players operating in the global photonic integrated circuits market are –
- Agilent Technologies
- Broadcom
- Ciena Corporation
- Enablence
- Finisar Corporation
- Hewlett Packard
- Huawei Technologies Co., Ltd.
- Infinera Corporation
- Intel Corporation
- Kaiam Corp
- Luxtera
- MACOM
- Mellanox Technologies
- NeoPhotonics Corporation
- Oclaro, Inc.
- TE Connectivity
- Uniphase Inc.
- VLC Photonics S.L.
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