With the increasing demand for massive computing in fields such as AI, communication, and autonomous vehicles, the evolution of integrated circuits (ICs) has reached a physical limit under the premise of Moore’s Law. How can this limit be surpassed? The answer lies in the realm of optics. Currently, many domestic and international companies are actively embracing “Silicon Photonics” technology. When electronics meet photons, it not only addresses the signal transmission loss issue but is also considered a key technology that could usher in a new era, potentially revolutionizing the future world.

Integrated circuits (ICs) cram millions of transistors onto a single chip, performing various complex calculations. Silicon Photonics, on the other hand, represents integrated “light” paths, where light-conductive pathways are consolidated. In simple terms, it is a technology that converts “electronic signals” into “optical signals” on a silicon platform, facilitating the transmission of both electrical and optical signals.

As technology rapidly advances and computer processing speeds increase, communication between chips has become a critical factor in computing performance. For instance, when ChatGPT was first launched, there were issues with lag and interruptions during the question and answer process, which were related to data transmission problems. Therefore, as AI technology continues to evolve, maintaining computational speed is a crucial aspect of embracing the AI era.

Silicon Photonics has the potential to enhance the speed of optoelectronic transmission, addressing the signal loss and heat issues associated with copper wiring in current computer components. Consequently, semiconductor giants such as TSMC and Intel have already invested in related research and development efforts. In this context, we interviewed Dr. Fang Yen Hsiang, director of the Opto-Electronics Micro Device & System Application Division and Electronic and Optoelectronic System Research Laboratories at the Industrial Technology Research Institute (ITRI), to gain insights into this critical technology.

What Is the Relationship Between Silicon Photonics and Optical Transceivers?

An optical transceiver module comprises various components, including optical receivers, amplifiers, modulators, and more. In the past, these components were individually scattered on a PCB (printed circuit board). However, to reduce power consumption, increase data transmission speed, and minimize transmission loss and signal delay, these components have been integrated into a single silicon chip. Fang emphasizes that this integration is the core of Silicon Photonics.

Integrated Circuits’ Next Step: The Three Stages of Silicon Photonics

• Silicon Photonics Stage 1: Upgrading from Traditional Pluggable Modules

Silicon Photonics has been quietly developing for over 20 years. The traditional Silicon Photonics pluggable optical transceiver modules look very much like USB interfaces and connect to two optical fibers—one for incoming and one for outgoing light. However, the electrical transmission path in pluggable modules had a long distance before reaching the switch inside the server. This resulted in significant signal loss at high speeds. To minimize this loss, Silicon Photonics components have been moved closer to the server’s switch, shortening the electrical transmission path. Consequently, the original pluggable modules now only contain optical fibers.

This approach aligns with the actively developing “Co-Packaged Optics” (CPO) technology in the industry. The main idea is to assemble electronic integrated circuits (EIC) and photonic integrated circuits (PIC) onto the same substrate, creating a co-packaged board that integrates chips and modules. This co-packaging, known as CPO light engines (depicted in figure “d” below), replaces optical transceivers and brings optical engines closer to CPU/GPU chips (depicted in figure “d” as chips). This reduces transmission paths, minimizes transmission loss, and reduces signal delay.

According to ITRI, this technology reduces costs, increases data transmission by over 8 times, provides more than 30 times the computing power, and saves 50% in power consumption. However, the integration of chipsets is still a work in progress, and refining CPO technology will be the next important step in the development of Silicon Photonics.

• Solving the CPO Bottleneck and Beyond – Silicon Photonics Stage 2: Addressing CPU/GPU Transmission Issues

Currently, Silicon Photonics primarily addresses the signal delay challenges of plug-in modules. As technology progresses, the next stage will involve solving the electrical signal transmission issues between CPUs and GPUs. Academics point out that chip-to-chip communication is primarily based on electrical signals. Therefore, the next step is to enable internal chip-to-chip communication between GPUs and CPUs using optical waveguides, converting all electrical signals into optical signals to accelerate AI computations and address the current computational bottleneck.

• Silicon Photonics Ultimate Stage 3: The Arrival of the All-Optical Network (AON) Era

As technology advances even further, we will usher in the era of the “All-Optical Network” (AON). This means that all chip-to-chip communication will rely on optical signals, including random storage, transmission, switching, and processing, all of which will be transmitted as optical signals. Japan has already been actively implementing Silicon Photonics in preparation for the full transition to all-optical networks in this context.

Where Does Silicon Photonics Currently Face Technological Challenges?

Currently, Silicon Photonics faces several challenges related to component integration. First and foremost is the issue of communication. Dr. Fang Yen Hsiang provides an example: semiconductor manufacturers understand electronic processes, but because the performance of photonic components is sensitive to factors such as temperature and path length, and because linewidth and spacing have a significant impact on optical signal transmission, a communication platform is needed. This platform would provide design specifications, materials, parameters, and other information to facilitate communication between electronic and photonic manufacturers.

Furthermore, Silicon Photonics is currently being applied in niche markets, and various packaging processes and material standards are still being established. Most of the wafer foundries that provide Silicon Photonics chip fabrication belong to the realm of customized services and may not be suitable for use by other customers. The lack of a unified platform could hinder the development of Silicon Photonics technology.

In addition to the lack of a common platform, high manufacturing costs, integrated light sources, component performance, material compatibility, thermal effects, and reliability are also challenges in Silicon Photonics manufacturing processes. With ongoing technological progress and innovation, it is expected that these bottlenecks will be overcome in the coming years to a decade.

This article is from TechNews, a collaborative media partner of TrendForce.

(Photo credit: Google)

In the bustling tech bazaar, the iPhone 14 Pro and AirPods 3 are pioneering the tech industry by incorporating InP(Indium phosphide)-based EEL(Edge Emitting Laser). These devices are leveraging the unique attributes of long-wavelength technology for skin detection, which is a strategic move that highlights the gradual emergence of InP material in the consumer market.

Historically, data communication and telecom industries have acted as the primary fuel for the InP market, their demand for backbone network photoelectric and 400G/800G optical modules in data centers has been consistent. However, as the quality and refinement of 6-inch InP single-crystal growth technology advance, we see a reduction in production costs, thus unlocking a gateway to consumer applications.

Emerging Dual Frontiers: Consumer and Photonic Applications

Apple and other savvy smartphone OEMs are contemplating the introduction of long-wavelength InP-based EEL in their next-gen products. This would be used for physiological sensing in proximity sensors or possibly to replace the currently used 940nm GaAs-based VCSEL(Vertical Surface Emitting Laser) in 3D sensing.

Simultaneously, the evolution of autonomous driving is nudging automotive laser radars towards the 1550nm wavelength, a departure from the former 905nm. This shift promises increased detection range and improved protection for human eyes.

In the realm of photonics communication technology, a more significant growth driver stems from the trend of high-end EML(Electro-absorption Modulated Laser) replacing traditional DFBs(Distributed-feedback laser).

As next-gen data center applications are steered towards 400G/800G transmission speed solutions, EML laser chips promising high bandwidth performance and high yield will take the spotlight. They are anticipated to realize the high-speed transmission characteristics of single-wavelength 100G.

It is also worth noting that as fiber-optic access in the PON (Passive Optical Network) market gradually upgrades to the 25G/50G-PON solution, there is an evident trend towards integrated solutions combining laser chips and SOAs (Semiconductor Optical Amplifiers). This shift is driven by the increasing demands for higher transmission rates and output power, leading to the replacement of discrete DFB solutions.

Supply Chain Over-centralization: A Precursor to a Sellers’ Market?

This cornucopia of application scenarios signals tremendous market potential for InP-based components. However, one must question whether the supply chain is prepared for this windfall.

One of the concern is that the industry chain’s over-centralization might usher in a seller’s market situation.

InP substrate materials and epitaxial silicon wafers pose a high technological threshold and are primarily monopolized by few manufacturers, particularly those from Europe, the U.S. and Japan.

• The InP substrate material market is highly monopolized by Sumitomo Electric Industries, AXT, and JX NMM, which collectively account for 90% of market share in 2020.
• The epitaxy process is the crux of photonic chip production, with tech prowess directly impacting product performance and reliability. Key suppliers capable of providing InP epitaxy silicon wafers include IQE, Lumentum, and Sumitomo, among others.
• In terms of photonic chip technology, its value lies more in added functionality, necessitating process integration. This gives rise to IDM giants dominating the market. For instance, Lumentum, Sumitomo, and Mitsubishi dominate the 25G DFB laser chip market.

While the influx of newcomers from China is seen in the lower-tech optical module packaging sector, the core technologies upstream are still held firmly by international industry leaders, posing a challenging breakthrough for newcomers in the short term.

The growing interest in the market for this technology indicates that end-product manufacturers developing new applications based on InP will inevitably need to double down their efforts to ensure the stability of long-term supply. It remains to be seen whether the singularity of the supply chain will further restrict the proliferation of emerging applications in the end market.

(AmCham Taiwan｜Associate Editor: Julia Bergström) As more countries look to diversify their supply chains, Taiwan has a chance to strengthen its position in the global economy. But is its infrastructure robust enough to support expanded business?

Over the past few years, the U.S. and Taiwan have intensified their efforts to reduce reliance on China in their supply chains as a way to increase resilience. First came the U.S.-China trade dispute, in which American companies were encouraged to leave or decrease operations in China, followed by the Tsai Ing-wen administration’s reshoring initiative to bring investment from China back to Taiwan.

At the onset of the global pandemic, the flow of critical products halted, global supply chains were disrupted, and supply chain resilience became a priority for all industries. Then, just as commerce began to bounce back, Russia launched an attack on Ukraine, giving rise to new worries of geopolitically induced shortages and inflationary effects.

Meanwhile, China is pushing to indigenize its supply chains, most notably with its Made in China 2025 plan, which aims to upgrade Chinese industries’ manufacturing capabilities into more technology-intensive powerhouses and achieve independence from foreign suppliers.

Although the U.S. and Taiwan are not decoupling from China, they have significantly changed the flow of goods and investments, says Rupert Hammond-Chambers, managing director of BowerGroupAsia, a consultancy.

“Instead of 10 dollars flowing into China, you’re seeing five going to China and the other five to the Southeast Asia region, or even Taiwan,” he says. However, there is no certainty that Taiwan will gain some of China’s lost business. Rather, achieving that goal will require significant policy changes and government efforts.

For Taiwan, strengthening its role in global supply chains is more than an effort to ensure economic stability – it also has political and security implications. Hammond-Chambers sees Taiwan’s role in the semiconductor industry in particular as a “geostrategic lever that focuses other countries on the importance of Taiwan and peace and security in the Taiwan Strait.”

Taiwan accounts for over 60% of the global chip foundry market, and the island plays a pivotal role in many high-tech industries, a trend expected to continue despite pushes from the U.S. and EU to revitalize their semiconductor industries.

In fact, says Joanne Chiao, senior analyst at Taiwanese market research firm TrendForce, her organization “expects Taiwan’s market share [in the chip foundry sector] will further increase to 66% in 2022,” as some of the newly added capacity will enter mass production by the end of 2022.

Although Taiwan leads in semiconductors, domestic expansion has its limits. During a discussion on Taiwan’s role in global supply chains organized by Washington, D.C.-based public policy organization The Brookings Institution, Taiwan Semiconductor Manufacturing Co. (TSMC) Vice President of Global Government Affairs Peter Cleveland noted that the company operates “at such a massive scale that it’s mind-blowing to people. [Production] takes over 4 million gallons of water per day, the power requirements are enormous, and STEM talent is critical.”

Cleveland said he sees geographic dispersion as an advantage for the company, and the expansion of Taiwan semiconductor operations in the U.S. as a way to strengthen supply chains while alleviating chip manufacturing’s strain on Taiwan’s resources. TSMC is constructing a US$12 billion fab in Phoenix, Arizona, which is scheduled to start producing chips in 2024. It is also building a plant in Japan and is in early discussions regarding a possible fab in Germany.

Apart from expanding manufacturing abroad, Taiwan also needs to implement policies that strengthen its infrastructure, according to BowerGroupAsia’s Hammond-Chambers. Of what has been termed the island’s “five shortages” (land, power, water, labor, and talent), he refers to labor, talent, and electricity as the most critical areas for government scrutiny of existing policies.

“The energy policy of Taiwan is just not working at the moment,” he says, adding that “there’s no time to waste” when it comes to improving the power grid. “It’s a strategic issue, military issue, social issue, and economic issue – it ticks every single major box.”

Jason Hsu, a former Taiwan legislator and currently senior research fellow at the Harvard Kennedy School, stressed at the Brookings seminar that the shortage of semiconductor talent is already noticeable in both the U.S. and Taiwan. The island’s recent establishment of a Semiconductor Research Institute is a step in the right direction, but not enough to fill the gap, he said.

“There needs to be a comprehensive program that links U.S. and Taiwan talent development and ensures that Taiwan can continue to develop its manufacturing capability and talent,” with innovation shared between the U.S. and Taiwan, Hsu noted.

Taiwan has relaxed immigration laws to attract foreign talent, particularly from Southeast Asia, and developed work and study programs for university students, said Minister Without Portfolio John Deng during the Brookings event.

But considering that the island is on track to become a super-aged society, Taiwan could and should implement a much more robust and open immigration policy that attracts more people to make up for the shrinking labor pool. The island’s decreasing population could pose an existential threat to Taiwan if not managed, says Hammond-Chambers.

Meanwhile, Taiwan could take advantage of what some scholars have dubbed “brain circulation” to strengthen economic ties with the U.S., according to Michael Nelson, senior fellow in the Carnegie Endowment For International Peace’s Technology and International Affairs Program.

“A lot of people from Taiwan have studied overseas, and some of them bring that knowledge back to Taiwan and start companies or teach the next generation,” he says, citing the founders of TSMC and the Industrial Technology Research Institute (ITRI) as two examples. “But a lot of them are still working overseas, and they’re part of this diaspora that forms a built-in advantage for Taiwan.”

Cloud opportunities

As the world undergoes the Fourth Industrial Revolution, digital supply chain technologies such as artificial intelligence (AI), algorithms, and machine learning can be used to analyze and learn from big data, which powers intelligent automation and provides supply chain managers with real-time insights that can assist quick responses to disruptions.

“When we think about how to boost our competitiveness, it doesn’t all have to be about manufacturing,” said Meriya Solis, Director of the Center for East Asia Policy Studies at Brookings. “We need to be mindful of the fact that we’re moving toward a digital economy.”

But while smart tools will mitigate human error, they pose a supply chain risk if they are not backed up by robust cybersecurity systems. Carnegie’s Nelson says that improving cybersecurity and investing in the Cloud of Things – integrated Internet of Things and Cloud Computing technology – would not only benefit biotech and other high-tech industries, but also create more robust supply chains for traditional industries. “It could help us do a better job of tracking fishing ports, ensuring the quality of food, and making sure cold chains are not broken,” he says.

The current global software infrastructure, notes Nelson, is built on a precarious system. Commercial software products tend to rely on complex open-source software repositories, and vulnerability in a single aspect of these repositories could compromise every commercial product that uses it.

Following an increase in cyberattacks, Taiwan’s government declared cybersecurity to be a national security issue in 2018 and proceeded to implement its Cyber Security Management Act in January 2019. The law stipulates obligations for providers of critical infrastructure, including water, energy, ICT production, and financial and healthcare services. The U.S. and Taiwan held their first joint Cyber Offensive and Defense Exercise (CODE), hosted by the American Institute in Taiwan (AIT) and the Executive Yuan’s Department of Cyber Security, in 2019.

In the past, Chinese tech seemed like it was on a steady path to market domination. But due to a high incidence of poorly written Chinese software and concerns that state actors could impel companies to embed security backdoors into their products, trust in its software is now generally low among global users. Nelson sees a lucrative opportunity for Taiwan to increase its involvement in data supply chains by establishing itself as a trusted source for more secure and better-tested software.

“Through the hardware sector and the semiconductor industry, you have all these links to all the major players,” he says. “By leveraging those links and showing that Taiwan can ensure that the software running on the chips they built is doing the job it’s advertised to do, Taiwan can help integrate different pieces of software from different companies and gain a reputation for being a trusted integrator.”

But to establish such a competitive advantage, Taiwan’s government will need to implement mechanisms that encourage local IT companies to uncover security vulnerabilities and adopt quality verification tools.

Exponential demand growth for remote and unmanned terminals in smart home, logistics, manufacturing and other end-user applications has driven iterative updates in Wi-Fi technology. Among the current generations of technologies, Wi-Fi 5 (802.11ac) is mainstream while Wi-Fi 6 and 6E (802.11ax) are at promotional stages, according to TrendForce’s investigations. In order to meet the connection requirements of industry concepts such as the Metaverse, many major manufacturers have trained their focus on the faster and more stable next generation 802.11be Wi-Fi standard amendment, commonly known as Wi-Fi 7. Considering technical characteristics, maturity, and product certification status, Wi-Fi 6 and 6E are expected to surpass Wi-Fi 5 to become mainstream technology in 2022, with global market share expected to reach 58%.

TrendForce states, in common residential applications of Wi-Fi, Wi-Fi 6E supports 6GHz and expands bandwidth by at least 1200MHz, delivering higher efficiency, throughput, and security than Wi-Fi 6, and can optimize remote work, VR/AR, and other user experiences. Moreover, in terms of the vertical IoT sector with the highest output value, smart manufacturing still mostly employs Ethernet and 4G/5G mobile networks as the central communication technologies in current smart factories. However, as early as 2019, major British aerospace equipment manufacturer, Mettis Aerospace, and the Wireless Broadband Alliance (WBA) conducted phased testing of the practicality of Wi-Fi 6 in factories, and they believe that Wi-Fi 6 can be widely adopted for manufacturing.

Market not yet mature, practical application of Wi-Fi 7 must wait until the end of 2023 at the earliest

TrendForce believes that the introduction of Industry 4.0 technology tools will become more common and the degree of digitalization within companies will increase in the post-pandemic era, with 5G and Wi-Fi expected to bring complementary and synergistic effects to the manufacturing field. The primary reason for this is that 5G characteristics include wide connection, large bandwidth, and low latency. In addition, multi-access edge computing (MEC) and standalone (SA) network slicing can improve computing power and flexibility, all of which significantly upgrade smart manufacturing tools. Although the transmission range of Wi-Fi is small, it resists interference and enhances the physical penetration of wireless signals at smart manufacturing locations. Wi-Fi also reduces the cost of 5G distributed antennas and small base stations while extending communications range and improving equipment battery life.

Looking forward to next generation Wi-Fi 7, companies such as MediaTek, Qualcomm, and Broadcom, are already laying the groundwork for their forays into this standard. TrendForce believes, even though focus is currently shifting to Wi-Fi 7, scheduled application of Wi-Fi 7 is expected to fall between the end of 2023 and the beginning of 2024. Challenges remain in terms of overall development and issues such as equipment investment, spectrum usage, deployment cost, and terminal equipment penetration must all be overcome in order to demonstrate the technical benefits of Wi-Fi 7.

In this press release, TrendForce details 10 major trends that are expected to take place across various segments in the tech industry, as follows:

Micro/Mini LED display development will revolve around active matrix solutions

A substantial number of technical bottlenecks in Micro LED development will still persist in 2022. While Micro LED manufacturing costs are expected to remain sky-high due to these bottlenecks, companies have not shown decreased willingness to participate in all segments of the Micro LED supply chain. On the contrary, these companies are actively expanding their respective production lines. Regarding the development of self-emitting Micro LED display products, TVs represent one of the major directions of mainstream Micro LED development, primarily because TVs, compared to IT products, have a relatively low technological barrier of entry. In other words, Micro LED TVs are easier to develop than are other Micro LED display products. For instance, after releasing a 110-inch commercial passive matrix Micro LED display, Samsung will likely continue to develop 88-inch (and under) consumer-grade active matrix Micro LED TVs. This extension of Micro LED technology from the large-sized commercial display segment to the household-use segment by Samsung is in turn indicative of the overall expansion of the Micro LED market.

Regarding display products equipped with Mini LED backlights, brands have been raising the number of Mini LED chips used per panel in an attempt to boost the specs of their display products and pursue 1:1,000,000 high contrast ratios that are comparable to OLED displays. As a result, Mini LED backlight panels’ LED chip consumption is more than 10 times higher compared to traditional LED backlight panels, in addition to the fact that Mini LED backplane manufacturing requires SMT equipment with a higher degree of accuracy and production capacity. While Mini LED backlights are primarily based on passive matrix solutions, they will move towards active matrix solutions going forward, with a corresponding surge in Mini LED chip consumption. Hence, the performance and capacity of SMT equipment will also become one of the key criteria in brands’ selection of potential supply chain partners.

More advanced AMOLED technology and under-display cameras will usher in the next stage of smartphone revolution

As the supply of and production capacity for AMOLED panels continue to rise, AMOLED technology has also become increasingly mature. Leading suppliers are still attempting to tack on additional functions and improved specs to their AMOLED panels in order to not only raise said panels’ added values, but also maintain the competitive advantages of the suppliers themselves. The primary value added to AMOLED panels in 2022 will likely continue to be the ever-improving foldable designs, which will feature optimized weight reduction and power efficiency. Apart from mainstream foldable phones that can unfold to reach tablet-like sizes, clamshell-like designs such as flip-up and flip-down smartphone bodies will also emerge as a form factor that more closely resembles the smartphones currently in use. Furthermore, retail prices of foldable phones are expected to generally fall within the price bands of mainstream flagships, thereby generating sales growths for the upcoming foldable models. Other foldable designs, including form factors with even more folds or rollable form factors, are expected to enter production within the near future. TrendForce expects foldable phones to reach a penetration rate of more than 1% in 2022 and 4% in 2024. LTPO panels, on the other hand, are an effective solution to power consumption issues arising from the adoption of 5G technology and high refresh rate displays. Hence, LTPO panels will likely gradually become the mainstream display panel for flagship smartphones. After two years of development and adjustments, under-display camera modules will finally make their appearance in various brands’ flagship models and enable the creation of smartphones with true full-screen displays.

The foundry industry welcomes the arrival of 3nm process technology courtesy of TSMC’s FinFET and Samsung’s GAA technologies

As semiconductor manufacturing processes gradually approach physical limits, chip development must now turn to either “changes in transistor architecture” or “breakthroughs in back-end packaging technology or materials” in order to achieve faster performances, reduced power consumption, and smaller footprints. After incorporating EUV lithography at the 7nm node in 2018, the semiconductor industry will welcome yet another revolutionary process technology in 2022 – the 3nm node. More specifically, TSMC and Samsung are expected to announce their respective 3nm process technologies in 2H22. While the former will continue to adopt the FinFET architecture that it has been using since the 1Xnm node, Samsung will for the first time utilize its own implementation of GAAFET, called MBCFET (multi-bridge channel field-effect transistor) for its 3nm process technology.

In contrast with the FinFET architecture, in which the gate makes contact with the source/drain channel on three sides, the GAAFET architecture consists of a gate that surrounds the nanowire or nanosheet channel on four sides, thus increasing the surface area of contact. The GAAFET design significantly reduces leakage currents by giving the gate a greater degree of control over the channel. Regarding possible applications, the first batch of products mass produced at the 3nm node in 2H22 is expected to primarily be HPC and smartphone chips since these products place a relatively high demand on performance, power consumption, and chip compactness.

While DDR5 products gradually enter mass production, NAND Flash stacking technology will advance past 200 layers

The three dominant DRAM suppliers (Samsung, SK Hynix, and Micron) will not only gradually kick off mass production of next-gen DDR5 products, but also continue to increase the penetration rate of LPDDR5 in the smartphone market in response to demand for 5G smartphones. With memory speed in excess of 4800Mbps, DDR5 DRAM can massively improve computing performances via their fast speed and low power consumption. As Intel releases its new CPUs that support DDR5 memory, with Alder Lake for the PC segment, followed by Eagle Stream for the server segment, DDR5 is expected to account for about 10-15% of DRAM suppliers’ total bit output by the end of 2022. Regarding process technologies, Samsung and SK hynix will kick off mass production of 1 alpha nm products manufactured with EUV lithography. These products’ market shares will likely increase on a quarterly basis next year.

Turning to NAND Flash products, their stacking technologies have yet to reach a bottleneck. Hence, after 176L products entered mass production in 2021, suppliers will continue to migrate towards 200L and above in 2022, although these upcoming products’ chip densities will remain at 512Gb/1Tb. Regarding storage interfaces, the market share of PCIe Gen4 SSDs will likely skyrocket in the consumer PC segment next year. In the server segment, as Intel Eagle Stream CPUs, which support PCIe Gen 5, enter mass production, the enterprise SSD market will also see the release of products that support this interface. Compared to the previous generation, PCIe Gen 5 features double the data transfer rate at 32GT/s and an expanded storage capacity for mainstream products at 4/8TB in order to meet the HPC demand of servers and data centers. Additionally, the release of PCIe Gen 5 SSDs is expected to quickly raise the average data storage capacity per server unit.

Regarding the server market, flexible pricing schemes and diverse services offered by CSPs have directly propelled the cloud service demand of enterprises in the past two years. From the perspective of the server supply chain, the predominant business model has gradually transformed from traditional server brands to ODM Direct, meaning that traditional server brands will see fundamental, structural changes, such as providing colocation servers or full-service cloud migration support, in their business models. This shift also means that enterprise clients will come to rely on more flexible pricing schemes and diverse risk mitigation measures in response to an uncertain global environment. In particular, while the pandemic accelerated changes in work and everyday life in 2020, hyperscalers are expected to account for nearly 50% of total demand for servers in 2022. In addition, the growth in ODM Direct server shipment is expected to surpass 10% YoY as well.

Mobile network operators will undertake more trial projects for 5G SA network slicing and low-latency applications

Mobile network operators have been actively release 5G SA (standalone) networks as the core network powering various services around the world, in turn accelerating the build-out of base stations in major cities, diversifying their network services (via network slicing and edge computing), and delivering end-to-end networks with a high degree of quality assurance. Moving to 2022, applications that are at the intersection of 5G, massive IoT, and critical IoT will emerge in response to enterprise demand. These applications, including light switches, sensors, and thermostats used in smart factories, involve the combination of network endpoints and data transmission. In particular, critical IoT applications include smart grid automation, telemedicine, traffic safety, and industrial automation, whereas critical IoT use cases within the context of Industry 4.0 include asset tracking, predictive maintenance, FSM (field service management), and logistics optimization.

Now that the pandemic has forced enterprises to engage in digital transformation and brought changes to the general public’s lifestyles, the importance of 5G deployment has become increasingly apparent. Private 5G networks, openRAN, unlicensed spectrums, and mmWave developments have also generated a diverse ecosystem that ranges from traditional mobile network operators to other emerging service providers, including OTT media service providers, CSPs, social media, and online businesses. In the future, mobile network operators will likely actively expand their enterprise 5G applications. For instance, O2’s 5G-ENCODE project explores new business models in industrial 5G networks, while Vodafone is collaborating with the MFM (Midlands Future Mobility) consortium to test networks for autonomous vehicles.

Satellite operators will compete over the low-earth orbit satellite market, with 3GPP now supporting non-terrestrial networks

3GPP recently announced that Release 17 Protocol Coding Freeze will take place in 2022. Release 17 represents the first time 3GPP has incorporated NTN (non-terrestrial network) communications into its releases and therefore marks a significant milestone for both the mobile communications industry and the satellite communications industry. Prior to this, mobile communications and satellite communications had been two separate, independently developing industries. That is why companies working across the two industries in the upstream, midstream, and downstream supply were generally different as well. After 3GPP includes NTN in its upcoming release, the two industries are likely to generate more opportunities for collaboration and co-create brand new innovations. Regarding the deployment of LEO (low earth orbit) satellites, US-based SpaceX has applied to launch the highest number of satellites among all satellite operators. Other major operators include Amazon, UK-based OneWeb, Canada-based Telesat, etc. Region-wise, US operators account for more than 50% of all satellites launched. Not only do LEO satellites have the advantage of signal coverage that is unaffected by geographical features, such as mountainous regions, oceans, and deserts, but they are also able to synergize with the 5G network. The ability of LEO satellites, as part of the NTN, to enhance 5G communications makes them a crucial component in the 3GPP Release 17. TrendForce therefore forecasts an increase in global satellite revenue in 2022.

While smart factories are among the first to leverage digital twins, IoT technologies are expected to become the backbone of the metaverse

The new normal that emerged in the wake of the COVID-19 pandemic continues to propel demand for contactless devices and digital transformations. As part of this evolution, IoT development in 2022 will likely focus on CPS (cyber-physical systems), which combines 5G, edge computing, and AI technologies to extract and analyze valuable information from vast data streams for the purpose of smart automation and prediction. A current example of CPS applications is the digital twin, used for such verticals as smart manufacturing and smart cities; while CPS integration for the former facilitates design, testing, and manufacturing simulations, the latter make use of CPS to monitor significant assets and assist in policymaking. Now that industrial realities have become more complex, and the interplay between usage cases and equipment have increasingly demanded attention, digital twins will subsequently be deployed to a wider range of applications. Paired with 3D sensing, VR, and AR capabilities, IoT-based metaverse will likely emerge as a smart, complete, real-time, and safe mirror to the physical world, and the first application of IoT-based metaverse is expected to be smart factories. Ultimately, technological innovations in data collection (including visual, auditory, and environmental data via sensors), data analysis (via AI platform integration), and data integrity (via blockchains) will also emerge as a result of IoT development.

AR/VR equipment manufacturers aim to deliver fully immersive experiences via integration of additional sensors and AI processing

The COVID-19 pandemic has fundamentally changed the way people live and work. For enterprises, the pandemic not only accelerated their pace of digital transformation, but also increased their willingness to integrate emerging technologies into their existing operations. For instance, AR/VR adoption for applications such as virtual meetings, AR remote support, and virtual design has been on the rise recently. On the other hand, companies will likely focus on various remote interaction functionalities in virtual communities and online games as an important AR/VR market segment. TrendForce therefore believes that the AR/VR market will expand by a considerable margin in 2022 due to the falling retail prices of AR/VR hardware as well as the growing adoption of such hardware for various use cases. Furthermore, the market will also continue to pursue more realistic AR/VR effects, such as applications that feature more realistic images constructed by software tools or the creation of virtual responses from real-world data assisted by either AI processing or the integration of various sensors. For instance, eye-tracking functionalities will become an optional feature of consumer products released by Oculus and Sony. Apart from these examples, AR/VR solutions may even evolve to the point where they are able to provide partial haptic feedback to the user through controllers or other wearable devices in order to deepen user immersion.

A natural extension of autonomous driving technology, automated valet parking is set to resolve drivers’ pain points

As part of autonomous driving technology’s implementation aimed at improving everyday life, AVP (automated valet parking), an SAE level 4 driverless parking service, is expected to become an important optional function of high-end vehicles beginning in 2022. Relevant international standards are currently being drafted and are expected to facilitate the adoption of AVP going forward. However, since AVP systems differ according to vehicle specifications, they are subject to various restrictions related to driving conditions, including fixed/unfixed routes and private/public parking spaces, while parking lot conditions such as wireless network connectivity and the comprehensiveness of traffic markings can also affect the viability of AVP. The distance between people and the vehicle during AVP use, on the other hand, is governed by domestic laws. In view of automakers’ diverse technological roadmaps, AVP parking routes are generated by either local computing on the vehicle end or cloud computing, the latter of which requires sufficient network connectivity in order to function. The former is therefore expected to see usage in a wider variety of use cases. Alternatively, some vehicles may be equipped with both computing solutions. With other such factors as V2X and high-definition maps affecting the range of AVP applications, TrendForce expects an increasing number of different AVP solutions to be under development at the moment.

The third-generation semiconductor industry will move towards 8-inch wafers and new packaging technologies while expanding in production capacity

The gradual phasing out of ICE vehicles by various governments across the 2025-2050 period is set to both accelerate the pace of EV sales and increase the penetration rate of SiC and GaN devices/modules. Energy transition activities worldwide as well as the rapid growth of telecom applications such as 5G technology have also led to a persistent bull market for third-generation semiconductors, resulting in strong sales of SiC and Si substrates. However, as current efforts in substrate production and development are relatively limited, suppliers are able to ensure a steady yield of SiC and GaN substrates only by manufacturing them with 6-inch wafers. Such a limitation has, in turn, led to a long-term shortage in foundries’ and IDMs’ production capacities.

In response to this quandary, substrate suppliers, including Cree, II-VI, and Qromis, are now planning to not only expand their production capacities in 2022, but also migrate their SiC and GaN production to 8-inch wafers, in hopes that these plans will gradually alleviate the prevailing shortage in the third-generation semiconductor market. On the other hand, foundries such as TSMC and VIS are attempting to shift to 8-inch wafer fabrication for GaN on Si technology, while major IDM Infineon is releasing products based on the latest CoolSiC MOSFET, delivering trench designs that enable significant power efficiency for semiconductor devices. Finally, telecommunication component provider Qorvo has also released a new GaN MMIC copper flip chip packaging architecture for military applications.