Are GAFAMs the game changers of the semiconductor industry? – YOLE’S INSIGHTS

An article written by Eric Mounier, PhD, Fellow Analyst at Yole Développement (Yole) – With photonics and AI , GAFAMs are moving deeper into the value chain, to the detriment of their traditional supply chain.

It is now clear that large-scale web operators are no longer “simple” suppliers of web content. With the growing demand in bandwidth and the monetization of data, GAFAMs and BATX are currently stepping into new areas, typically photonics and hardware for AI, and as a consequence, are shuffling their supply chain.

Let us first consider the case of photonics. It is clearly the technical answer to the dramatic increase in bandwidth for data centers. Silicon photonics is riding especially high, due to its several intrinsic advantages: low cost, higher integration, more embedded functionalities, higher interconnect density, lower power consumption, and better reliability compared with legacy optics. As the advent of Hyperscale data centers is bringing new constraints that are redefining the system supply chain, cost optimization is becoming a priority for GAFAMs. And because the data center cost is generally amortized as depreciation (elements are refreshed at different rates) and the bandwidth demand must be anticipated, web operators today develop their own optical system components. They are contracting directly with device makers, thus disintermediating the traditional server suppliers. This is the case for Facebook for example, who created its own 100G single-mode optical transceiver solution and is sharing it through the Open Compute Project.

The second factor accelerating the transition for GAFAMs and BATX to hardware is linked to AI. With the multiplication of smart wearable, VPA, smart devices, smart … anything that will share our everyday life, it is clear that every data (can be audio, images, motion … or even odors in the medium/long term) will represent $$$ value. Indeed, data access is the value. So, in order to master value from sensors while climbing in the value chain, GAFAMs and BATX are today designing their own hardware and are in the best position to develop software. They have clearly understood the importance of obtaining their own hardware and software, for control of the entire data chain offers huge opportunities.

These are two examples (photonics – linked to data communication and AI – linked to generating vale from the data) that show that GAFAMs/BATX will play a critical role in the future of the semiconductors business.

Image: this illustration is coming from Yole Développement’s report, titled: Hardware and Software for AI 2018 – Consumer focus. More info.

Notes: Gafams: Google, Amazon, Facebook, Apple, Microsoft – AI: Artificial Intelligence – BATX: Baidu, Alibaba, Tencent et Xiaomi.

About the author: With almost 20 years of experience in MEMS, Sensors and Photonics applications, markets, and technology analyses, Eric Mounier, PhD provides deep industry insight into current and future trends. As a Fellow Analyst within the Photonics, Sensing & Display division, he is a daily contributor to the development of MEMS and Photonics activities at Yole Développement (Yole), with a large collection of market and technology reports as well as multiple custom consulting projects: business strategy, identification of investments or acquisition targets, due diligences (buy/sell side), market and technology analysis, cost modelling, technology scouting, etc. Previously, Eric Mounier held R&D and Marketing positions at CEA Leti (France). He has spoken in numerous international conferences and has authored or co-authored more than 100 papers. Eric has a Semiconductor Engineering Degree and a Ph.-D in Optoelectronics from the National Polytechnic Institute of Grenoble (France).



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