Market and Technology Trends

Semiconductor Trends in Data Centers 2024

By Yole Intelligence — Jan 2024

Driven by the AI revolution, innovative servers’ semiconductors will be developed to increase computing power, bandwidth while keeping low energy consumption. It will grow 12.8% reaching $205B in 2029.

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A strong contribution to the overall semiconductors market.

The semiconductor value in servers will increase due to the increased silicon content for storage, processing, and interconnections with the growth of AI and ML Frontier Models. This server devices market will benefit the overall semiconductor market. Market growth will also be driven by new technological approaches to solving the various challenges in bandwidth, latency, processing power, and power consumption, such as GPGPU, AI ASIC, CXL, optical I/O, CPO, or wide bandgap semiconductors for better energy efficiency, for example. These innovations will add more value to the semiconductor market. It is forecast that in 2029, the semiconductor value in data centers will be ~US$205B, with a 12.8% CAGR2023-2029. This will be ~65% of the overall server market. This US$205B will be 26% of the total semiconductor market in 2029. Memory and processing will represent the highest share of this market, while photonics will have the largest growth (~35%), driven by the emerging photonic chips for optical transceivers for 400G and higher, as 3.2Tb is expected before 2030. Beyond pluggables, optical I/O and CPOs will integrate servers and networking. Due to the increasing integration of artificial intelligence servers (almost ten times more power-consuming than standard ones), the market value of power supply units (PSU) higher than 3 kW will increase. In contrast, the market value for PSUs less than 1 kW is expected to decrease slightly.This growth will benefit foundries as well. In 2029, about 25 million wafers will be processed for data centers. This represents about 17% of the global production.

An abundance of technological innovations for data centers

In the dynamic landscape of server technology, the advent of disaggregation is reshaping data center infrastructure. Artificial Intelligence (AI) evolution is driving a segmentation of GPUs, traditionally used for AI training. A dedicated variant, GPGPU, is emerging for AI tasks, while AI ASICs gain prominence for specialization and energy efficiency. The proliferation of AI is boosting the attachment rate of co-processors designed to accelerate AI technologies, with GPUs currently leading the way. AI inference and training are increasingly moving away from CPUs in computing servers, propelled by data flow escalation. This shift is facilitated by GPU and AI ASIC accelerators. In the realm of networking, data center disaggregation and virtualization leverage SmartNICs and DPUs to offload CPUs, necessitating advancements in packaging, chiplets, High Bandwidth Memory (HBM), in-memory processing, and non-x86 architectures. CXL, utilizing the PCIe physical layer, is implemented for improved cache coherency, disaggregation, and composability in data centers, with a focus on memory as a primary driver. Photonics is gaining traction for optical I/O, increased bandwidth between memory and processors, and potential integration in data centers from 2028 onwards. On the power front, the adoption of wide-bandgap semiconductors like SiC and GaN is increasing for more efficient power supply units. Innovative packaging approaches, including stacking HBM on the interposer, explore photonics to address semiconductor integration challenges. Simultaneously, computing and memory innovations within memory units, featuring computational storage and in-memory processing, are considered crucial for optimal performance. Looking ahead, the report emphasizes the potential of emerging technologies like neuromorphic computing chips, optical computing, and quantum computing to significantly enhance long-term server performance.

A highly fragmented but buoyant data center supply chain.

The data center supply chain is marked by significant fragmentation, with major players such as GAFAM (Apple, Amazon, Meta, Google, Microsoft) and China's BAT entities dominating through substantial 2022 investments exceeding $132 billion, primarily allocated to servers and networking. Future trends suggest a focus on constructing data centers while expanding into hybrid cloud services and edge computing. China, in particular, designates data centers as a crucial element of its "new infrastructure," driven by applications like 5G, cryptocurrency, big data, AI, and the demand for remote work/education during the pandemic. The market outlook for 2024 emphasizes growth in AI servers, with HPE, DELL, and Inspur holding significant market share. These companies, aligned with major data center owners, wield considerable bargaining power due to their influence on device vendors. Memory devices are dominated by Samsung, SK Hynix, and Micron, while major chip suppliers like Intel, AMD, ARM, and Nvidia aggressively develop devices and accelerators for AI, HPC, and edge computing, driving demand from cloud data centers and enterprises. In the processor market, Intel, AMD, and Nvidia control 90% of the CPU market and nearly all of the GPU market, leveraging strategic investments and acquisitions for comprehensive ecosystems. Photonics is controlled by Coherent, Lumentum, Broadcom, and Trumpf, while power devices see concentration with Infineon leading, followed by Onsemi and STMicroelectronics. Sensor usage within data centers is limited, focusing primarily on temperature sensors and MEMS oscillators, with SiTime MEMS timers playing a crucial role in providing accurate timing sources for high-bandwidth requirements in data center servers

Key Features

Overview of the data center market and technological trends.
Data centers segmentation and forecast.
2023-2029 forecast for memory, logic, opto & sensors, power & analog (units, revenues, wafers)
Technology trends for the semiconductor devices and key technical challenges.
Supply chain and player mapping of the data center ecosystem.

Product Objectives

Yole is pleased to provide you with the brand-new report “” Semiconductor Trends in Data Centers 2024”, offering a detailed technology and market analysis of the semiconductors used for computing, storing and networking/switching in data centres.

The main objectives of this report are as follows:

Describe the different types of data centers (DC) and trends.
- Analysis of the DC architecture, trends and challenges.
- Trends for the different types of servers: computing, storage, networking, switching and power.
Deliver an in-depth analysis of the different semiconductor's technologies in DC (processor, memory, power, photonics and sensing).
- Analysis of the current technologies, bottlenecks and challenges in the data centre space.
Offer 2023-2029 market forecasts for the different families of semiconductors in DC.
- Shipments, revenues and equivalent 12” wafer production volumes for processors, memory, power, photonics and sensing
Describe the DC ecosystem and player dynamics.
- Description of the players, the supply chain, the segmentation, and the use cases driving improved semiconductors technologies.
- Market shares for servers and semiconductors devices

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Semiconductor Trends in Data Centers 2024

Driven by the AI revolution, innovative servers’ semiconductors will be developed to increase computing power, bandwidth while keeping low energy consumption. It will grow 12.8% reaching $205B in 2029.

A strong contribution to the overall semiconductors market.

An abundance of technological innovations for data centers

A highly fragmented but buoyant data center supply chain.