High performance processors fit network infrastructure
Average selling prices (ASPs) of individual component classes are declining in most processors. However, the migration to 32-bit will be rapid. This migration, along with higher performance microprocessors (MPUs) and top-end communications processors demand for increasing performance supporting software defined networks, are bolstering prices for processors overall.
Security solutions and strategies to support the internet of things (IoT) networking will become increasingly important, requiring high-performance communications processors. With a 7.6 percent compound annual growth rate (CAGR) expected in processors for network security, this market represents the greatest growth potential for wired network infrastructure solutions through the end of the decade.
Total available market for communications networking processors
To understand the total available market for communications networking processors, it is important to realize that communications applications extend far beyond the core networks of service provider and cloud computing routing and switching functions. In fact, wireline services distributing data to the edge of the network represent 37 percent of the total wired network infrastructure. Even within routers, switches, storage area network appliances and network security appliances, a large portion of the internet backbone is serviced by enterprise equipment. The processing requirements for distribution and edge services can represent an entirely different ecosystem of processor requirements.
The preparations for LTE Advanced and 5G is expected to drive strong transitions from big cells to small cells and centralized radio-access networks (CRAN) equipment, but the overall wireless-communications processor market is expected to be slow over the next few years of early development. As big macro cells shrink from 29 percent to 13 percent of the wireless communications processor market from 2015 to 2020, wireless core services will remain flat, while CRAN grows from 4 percent to 10 percent of the market. Small metro cells will grow from 3 percent to 6 percent, and Wi-Fi access points will grow from 8 percent to 16 percent of the market.
ARM Holdings currently holds a slight lead
The equipment markets covered in the IHS Processor for Network Infrastructure Market Tracker excludes general-purpose computers, or the revenue would be skewed heavily in favor of x86. Even so, in embedded devices, ARM Holdings currently holds a slight lead by a few percentage points, but its success is tethered to the increasing demand for intelligence out to the network access points, wireline services such as fiber-to-the-x (FTTx), cable and x-digital-subscriber lines (xDSL) as well as the CRAN and small cells in edge services.
It’s clear that the architecture ecosystems in core and edge services differ significantly from each other. In speaking with various processor solutions providers, their perception of the processor core ecosystem varies dramatically based on the serviceable market for their core competencies. This proficiency can be very high-performance network communications processors targeting the mature core services, or low-power and application-specific opportunities for emerging products in edge services.
Core architecture ecosystems dependent upon the specific subset of the market
The following graph from the report shows why this leads to a broadly divergent perspective of how core architecture ecosystems dependent upon the specific subset of the market. For large scale core equipment, the highest performing x86 cores still dominates the market followed closely by Power core architecture. At the opposite extreme in field and edge equipment, especially in the wireless markets where suppliers may support both access points and the devices connecting to them, Advanced RISC Machine (ARM) core architecture plays a more dominant role followed by Imagination Technology’s MIPS core architecture. Many suppliers may target only one aspect of the market and find their perceptions of the serviceable market are not aligned with the total market.
As the PC and smartphone markets begin to stagnate, the computer and applications-processor suppliers are aggressively looking for adjacent markets. It is clear that the growing trends toward cloud computing, IoT, and increased over-the-top media consumption will continue to provide opportunities for network communications infrastructure demanding high-performance processors as one alternative market for growth. The short-term economic growth is sluggish and infrastructure represents high capital expense creating a short-term barrier, but the long-term opportunity is tremendous. By the end of the decade investment in communications infrastructure is expected to rebound dramatically with sustained growth throughout the next decade