Photonic IC Market Analysis (2020 – 2027)
Market Overview
A photonic integrated circuit (IC) or also referred to as an integrated optical circuit is a device that integrates multiple photonic functions similar to an electronic integrated circuit. The main difference between electronic integrated circuits and photonic ICs lies in the type of raw material used for its fabrication. In electronic ICs, silicon is the primary and most dominant material used for fabrication so far, while in the case of PICs, the type of material used majorly depends upon the function/purpose of the device. Indium Phosphide, Gallium Arsenide, silica-on silicon, and silicon on insulator are the most common raw materials used for fabrication.
The global photonic IC market is estimated to account for US$ 17,075.67 Mn in terms of value by the end of 2027.
Market Dynamics- Drivers
1. Decline in cost due to miniaturization is expected to drive growth of the global photonic IC market during the forecast period
Photonic ICs have emerged as a significant option for high-performance miniaturized and cost-effective optical systems, which is used in a vast number of applications. PICs, especially made from Indium Phosphide (InP) help designers and manufacturers to merge optical devices such as multiplexers, modulators, lasers, and more into a single unique package. This makes the overall system compact as well as cost-effective. Moreover, packaging reduction saves costs associated with individual testing of the components. Thus, miniaturization in the form of consolidation of several devices into a single platform leads to significant cost reduction. Therefore, these factors are expected to drive growth of the global photonic IC market during the forecast period.
2. Growing application areas and increased functionalities are expected to propel the global photonic IC market growth over the forecast period
The increase in functionality as given by Moore’s law is best achieved by using Indium Phosphide as a substrate for photonic integration. This is majorly on account of its capability to support the incorporation of almost all functions essential in ICT applications. In addition, a set of building blocks including waveguide, phase shifter, amplifier detector, and polarization converter is available for Indium Phosphide and SOI platforms. These building blocks allow for the fabrication of several devices, thereby granting freedom to optical designers to architect almost any optical system. Recently, there has been a steep rise in the applications of PICs in the field of optical communications, sensing, and biophotonics. Since PICs use photons as the data carriers, they are able to transfer the bulk of data over a long distance at a very high speed as compared to electronic ICs. Therefore, these factors are expected to propel the global photonic IC market growth over the forecast period.
Statistics:
North America held dominant position in the global photonic IC market in 2019, accounting for 41.1% share in terms of value, followed by APAC, Europe, and RoW respectively
Figure 1: Global Photonic IC Market Share (%), in terms of Value, By Region, 2019
Market Dynamics- Restraints
1. Lack of digitization is expected to restrain growth of the global photonic IC market during the forecast period
Digitization is essential for photonic integration to become an accepted technology platform for a wide range of product applications. Photonics is still at the analog stage while electronics utilizing analog transistors, actually use them in the digital format. The use of digital format allows a high level of integration of different devices/components into a single unit structure. In addition, as a result of their analog 2.characteristics, PICs cumulate errors during cascading of devices. This results in signal distortion and requires regeneration. The full digitization of photonic ICs, due to traditional metrics in the semiconductor IC industry is expected to be a slow process. Therefore, these factors are expected to restrain growth of the global photonic IC market during the forecast period.
2. Lack of standardization in the common fabrication and process techniques is expected to hamper the global photonic IC market growth over the forecast period
Although there is high demand for photonic ICs, lack of standardization is hindering its adoption. Such a lack of standardization in the common fabrication and process technique has retrained adoption. Therefore, these factors are expected to hamper the global photonic IC market growth in the near future.
Market Opportunities
1. Advent of quantum computing can present lucrative growth opportunities in the global photonic IC market
The use of photons produced by diodes and lasers for the purpose of computation provides a sound opportunity for the growth of the PIC market. Quantum computing is expected to increase the speed of data processing and data transfer as compared to other computing devices on account of the use of photons. The concept of quantum computing, still in its infancy, exploits the traits of quantum mechanics to create more powerful computers. Furthermore, photons can travel long distances with little interaction, making them excellent tools for holding quantum information. However, since it is not easy to store and stop a photon, storing quantum information being held on photons is a critical issue. PICs make photon interactions possible, which in turn allows quantum processing to be performed.
2. Mergers and acquisitions among market players can provide major business opportunities in the global photonic IC market
Key companies in the market focused on mergers and acquisitions, in order to enhance the market presence. For instance, in January 2013, Alcatel Lucent acquired Capella Photonics, Inc., a leading developer of Wavelength Selective Switch (WSS). In April 2013, Avago Technologies acquired CyOptics Inc., the leading manufacturer of indium phosphide optical chip and components for data and telecommunication. Moreover, in March 2010, Ciena Corporation acquired the Metro Ethernet division of Nortel.
Figure 2: Global Photonic IC Market Value (US$ Mn), 2017 - 2027
The global photonic IC market was valued at US$ 996.1 Mn in 2019 and is forecast to reach a value of US$ 17,075.6 Mn by 2027 at a CAGR of 42.6% between 2020 and 2027.
Market Trends
1. Analog mode of photonic ICs
In the current scenario, PICs are essentially operating in analog mode. The use of coupled micro-cavity lasers is the solution for developing digital photonic circuits as they allow interactions in a way that supports low-power digital optical functions and possess signal regeneration properties. Thus digitization, although a slow process, is expected to not only reduce the complexity and size but also penetrate the use of photonic integration technologies in the coming years.
2. Inorganic strategies such as joint ventures and partnerships are another key trend
Major market players are involved in partnerships and joint ventures, in order to gain a competitive edge in the market. For instance, in June 2012, Aifotec Ag entered into a strategic alliance with Focuz Manufacturing Co., Ltd.
Value Chain Analysis
Indium Phosphide (InP), Gallium Arsenide (GaAs), Silicon (Si), Lithium Niobate (LiNbO3), silica-on-silicon are the major raw materials used in the manufacture of photonic ICs. Raw material suppliers are the most important participant in the photonic IC value chain. These serve as a tier 1 supplier for photonic IC manufacturers. Photonic ICs are manufactured by the chemical processing of these raw materials. Manufacturers purchase the required basic raw materials from suppliers and manufacture photonic ICs according to the specifications laid by the equipment manufacturers. The fabrication of PICs involves building devices on a substrate using batch manufacturing processes such as photolithography, deposition and etching techniques. Several components are combined on a single substrate to fabricate multifunctional chips.
Global Photonic IC Market - Impact of Coronavirus (Covid-19) Pandemic
Due to Covid-19 pandemic, many industries witnessed significant shift in their business. There is significant impact on the growth of photonics IC market. As manufacturing operations are temporarily suspended across many countries to contain the coronavirus. Due to this situation, there is disruption in the supply chain and companies are shifting their production facilities from China. The overall consumer demand for semiconductor devices has also decreased.
Owing to pandemic, the demand for these photonic integrated circuits is exacerbated by lockdown imposed in several countries.
Competitive Section
Major companies operating in the global photonic IC market are Agilent Technologies, Inc., Intel Corporation, Aifotec AG, Infinera Corporation, Alcatel-Lucent, Hewlett Packard, Avago Technologies Finisar Corporation, Ciena Corporation, Enablence Technologies Inc., and Emcore Corporation.
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Key Developments
Major companies are focused on product launches, in order to expand the product portfolio. For instance, in April 2019, Intel Corporation launched its first 400GbE silicon photonics transceiver at Interconnect Day event.
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