YG PRESS NEWS – How long will the AI trend continue to fuel the GaAs and InP markets?

In its Photonics GaAs and InP Compound Semiconductor Market Monitor Q3 2024, Yole Group announces that mergers and acquisitions, along with the expansion of InP fab capacity, are shaping the InP market as AI applications fuel the growth of the datacom sector. While the InP bare-die market continues to see steady growth, concerns are emerging regarding the open epiwafer and substrate businesses.

In the GaAs photonics market, Apple’s launch of the iPhone 16 models has further boosted demand for GaAs VCSEL technology. On the datacom front, we are witnessing a shift as some fabless companies transition into IDM businesses, driven by AI applications. Additionally, the VCSEL ecosystem in China is expanding across multiple markets, delivering high-quality VCSEL technology to support the optical communication, consumer, and automotive industries.

Driven primarily by datacom applications, the GaAs photonics landscape experienced a major shift when Apple adopted VCSEL technology for 3D sensing in the iPhone X (2017) and the Vision Pro AR headset in 2024. This catapulted 3D sensing to become the dominant application for GaAs, with the market projected to reach US$1.9 billion by 2029, according to Yole Group’s estimates. Manufacturers are leveraging 6-inch GaAs wafers to achieve cost-effective, high-volume production, transforming the supply chain. Lumentum formed partnerships with epitaxy providers, while Coherent pursued vertical integration through mergers. Sony’s recent entry into the 3D sensing ecosystem adds further intrigue to the competitive landscape, where IQE remains a leading player in the epiwafer market. How will competition among the major players unfold?

InP’s main drivers—datacom and telecom—are centered on its unique ability to support high bandwidth, fast data rates, and long-range optical transceivers. Yole Group forecasts the InP market will reach US$5.2 billion by 2029. AI, which became a key factor in 2023, is expected to fuel InP’s growth through high-data-rate technologies like 100G and 200G EMLs and SiPh. However, consumer interest declined after Apple’s 2022 adoption, largely due to cost and supply chain challenges. Despite this, InP’s capability in SWIR wavelengths offers potential for consumer technologies like AR/VR and wearables, providing a path for future growth. The future of InP depends on how well it navigates these dynamics and capitalizes on emerging opportunities. How will the InP market evolve going forward?

…For more information about the Photonics GaAs and InP Compound Semiconductor Market Monitor Monitor, Q3 2024, do not hesitate to contact us.