The Linley Group has developed forecasts of communications ASSPs for wired applications, embedded microprocessors, and FPGAs using information gathered in its market-share process, from public financials and other public sources, and from reviewing spending and technology trends. This report also includes our forecasts for server processors and integrated base-station processors. The latter category is a new class of chips that combines CPUs and DSPs and serves both traditional macro base stations and small cells. A separate report, Mobile Semiconductor Market Share Forecast, provides forecasts for processors and wireless chips used in mobile clients such as smartphones and tablets.
Through the first half of 2016, the market for chips sold into communications systems was strong, setting up a good year. Wireless infrastructure rebounded from the 2015 inventory correction, and China continued its blistering pace of fiber-to-the-home (FTTH) subscriber additions. Overall, we expect excellent growth in wireline-communications ASSPs in 2016. We expect sales of embedded processors and FPGAs into communications will also show excellent year-over-year growth, but this growth represents only a partial recovery relative to 2014 levels. Overall, we expect communications equipment will consume $12.1 billion in ASSPs, processors, and FPGAs in 2016, up 5.6% from 2015.
We expect growth in all ASSP segments but one in 2016. The exception comes from network processors, which are experiencing customer-specific issues combined with declining access designs. Growth in the largest categories, Ethernet and broadband, will swamp the relatively small decline in NPUs. Driven by large data centers, sales of 10Gbps and faster Ethernet are rising. In broadband, PON is powering 2016 growth while cable remains stable and DSL declines. Within optical transport, OTN continues to grow but legacy Sonet/SDH shipments are plummeting, reducing growth of the category as a whole.
Beyond 2016, the picture changes as Ethernet continues to grow but wired broadband slows. While 10G Ethernet expands beyond the data center, the largest data centers will move to 25G, 50G, and 100G Ethernet. In broadband, China’s FTTH infrastructure buildout is nearing completion, and DSL subscribers are moving to FTTH. Wireless operators that have completed initial LTE buildouts will maximize use of existing macro base stations before investing heavily in small cells. LTE deployments in new markets, such as India, will not fully offset the slowdown in China. Still, we see a growing market for integrated base-station processors, which combine CPUs and DSPs, replacing general-purpose DSPs in many designs.
Ethernet chips will provide more than 75% of the communications-ASSP revenue growth from 2015 to 2020, according to our forecast. The hottest trend is the emergence of 25G, 50G, and 100G Ethernet, which are ramping into volume in 2016. Whereas past Ethernet speeds have taken years to reach high volumes, deployments by hyperscale data-center operators will drive much faster growth for these new rates. Enterprise data centers will continue to consume 10G and 40G Ethernet, enabling these speeds to still grow in parallel with 25G/50G/100G Ethernet.
Broadband subscriber growth is leveling off, and with it the number of broadband CPE ports shipped. Fortunately, competition between service providers drives customer churn, helping increase CPE shipments. Competition also fuels network upgrades, again creating demand for new CPE. The increasing complexity of CPE also supports higher average chip prices (ASPs) as gateways support faster data rates and add Wi-Fi capability. Enabling telcos to offer gigabit-class services to compete with cable and fiber, G.fast will emerge as an alternative to VDSL2 in fiber-to-the-distribution-point topologies.
Compared with communications ASSPs, both embedded processors and FPGAs have greater exposure to wireless infrastructure. They also serve large markets outside of communications. Both categories were impacted by the wireless-infrastructure decline in 2015, leading to a rebound in 2016. We expect modest growth for embedded processors over the next five years, but, communications, the largest application for embedded processors, has a mixed outlook. A significant portion of processor sales is for use in base stations, and we expect this segment will decline through the forecast period. On the other hand, we expect embedded-processor revenue from switches, routers, and security equipment will grow substantially.
We track sales of FPGAs into communications and other applications, and both of these categories declined in 2015. The downturn in wireless infrastructure severely impacted FPGA sales into communications equipment, and we do not see a return to 2014’s level until 2018. Still, over the longer term, FPGAs will remain popular for remote radio heads in wireless infrastructure as well as for next-generation optical-transport designs in wired infrastructure.
Complementing our comprehensive market-share report, this document provides investors, product-marketing staff, and executives with insight into the state of the communications IC market and key trends. Extending our ongoing coverage of the industry, it outlines both our quantitative estimates and the important assumptions behind them so that readers can better integrate our forecasts with other information they may have.