The photonics world is changing…

A strategic move: Intel to divest silicon photonics module business to Jabil

Jabil has recently unveiled its strategic initiative to acquire Intel’s pluggable optical transceiver product lines based on silicon photonics technology and has made a commitment to drive the continued development of these product lines. Jabil is widely recognized for its expertise in areas such as component design, system assembly, and supply chain management. As part of the agreement with Intel, Jabil will take on the manufacturing and deploying of silicon photonics components and modules on behalf of Intel.

Yole Group has developed in-depth expertise in the photonics domain. The market research & strategy consulting company has released a significant collection of photonics analyses, including its annual report, Silicon Photonics.

In its new edition, Yole Group estimated the silicon photonics PIC market to reach US$68 million in 2022 and forecast to generate more than US$600 million in 2028, at a 44% CAGR during this period. This growth will mainly be driven by pluggables for 800G high-data-rate modules for increased fiber-optic network capacity. Additionally, projections of rapidly growing training dataset sizes show that data will need to use light for scaling ML models using optical I/O in ML servers.

Note from the author – Forecasts have been substantially revised downward compared to the Silicon Photonics report, 2022 edition. Shipments of silicon photonics-based products have seen a notable decrease, primarily attributed to reduced adoption in datacom applications. This is compounded by a careful revision of the manufacturing yield and the average selling price of silicon photonic devices. Yole Group now excludes the tunable laser in the PIC circuit for telecom. Consequently, these adjusted estimations impact the silicon photonics forecast between 2023 and 2028.

Following Jabil’s announcement, Yole Intelligence’s analysts, Martin Vallo and Eric Mounier, analyzed the meaning of this acquisition and share today their understanding of it.

How will Jabil manage the integration of Intel’s pluggable optical transceiver business in its development strategy? What are the reasons for this acquisition? More generally, what will be the impact on the overall silicon photonics industry and its supply chain?

Discover today a snapshot of this significant event in the photonics industry. It will be in the mind of the overall community prior to the great show, Photonic West 2024.

Yole Intelligence is a Yole Group company.

Martin Vallo Senior Analyst, Photonics, Yole Intelligence, part of Yole Group
This partnership is underpinned by Jabil’s rich experience and proficiency, which positions it to pioneer innovative solutions in photonics manufacturing. These innovations are expected to pave the way for expanded production and sales of Intel’s silicon photonics-based pluggable optical transceiver products. In addition to the benefits, it offers Intel, this deal presents Jabil with a strategic opportunity to broaden its presence within the data center value chain.

Intel’s partnership started in 2001 when they signed a manufacturing agreement to assume the production of certain peripheral products in the RF access area; part of the agreement involved purchasing Intel’s facility in Penang, Malaysia.

According to Yole Intelligence’s silicon photonics report Intel’s recent strategic decision to divest its silicon photonics-based pluggable optical transceiver manufacturing line to Jabil makes sense because it allows Intel to optimize its operational efficiency, reduce costs, and leverage Jabil’s expertise to better serve its customers, remain competitive in the market, and boost profitability.

Yole Intelligence looks closer now at several strategic considerations, including the focus on core competencies, leveraging Jabil’s manufacturing/assembling expertise, scalability, reduced costs, risk mitigation, speed to market, and customer focus.

  • Focus on core competencies: Intel may want to concentrate its resources and expertise on core areas such as chip design and innovation while outsourcing the manufacturing aspect to a specialized partner like Jabil. This allows Intel to stay competitive and agile in a rapidly evolving market.
  • Leveraging Jabil’s manufacturing expertise: Jabil is a well-established contract manufacturer with extensive experience in producing electronic and optical components. By collaborating with Jabil, Intel can benefit from Jabil’s manufacturing capabilities, which include economies of scale, quality control, and operational efficiency.
  • Scalability: Jabil’s global manufacturing facilities provide scalability and flexibility, enabling Intel to meet growing market demands without large capital investments in additional manufacturing capacity.
  • Reduced costs: Outsourcing manufacturing can help Intel reduce production and operational costs, particularly important in highly competitive markets like silicon photonics.
  • Risk mitigation: Collaborating with a manufacturing partner like Jabil can help Intel mitigate risks associated with manufacturing, supply chain disruptions, and capacity limitations.
  • Speed to market: Partnering with Jabil may enable Intel to expedite product development and time-to-market, which is crucial in fast-paced technology industries.
  • Customer focus: By outsourcing manufacturing, Intel can focus more on customer needs, innovation, and the development of advanced optical transceiver products.

Eric Mounier Chief Analyst, Yole Intelligence, part of Yole Group
Intel is shifting its focus towards the development and production of higher-value components, such as processors and compute platforms, that are integral to forthcoming optical interconnects designed for disaggregated data centers. Intel recognizes that photonic integrated circuits (PICs) used in pluggable modules play a pivotal role in the scalability of future artificial intelligence and machine learning infrastructure.

Simultaneously, Intel is setting its priorities to concentrate on silicon photonic components crucial for emerging applications like automotive sensing and various medical uses. This strategic shift underscores Intel’s commitment to staying at the forefront of technological innovation in silicon photonics and advancing its contributions to data centers, AI/ML, and specialized sensing applications.

The divestment of assembly business is natural step in the technology companies. It doesn’t have necessary great impact on the industry as it helps to strengthen internal capabilities. Big change will happen in the rankings – for optical transceiver modules Intel will be replaced by Jabil which will be obviously losing dominant market share as other suppliers have emerged. Intel as silicon PIC designer and manufacturer will remain a front-runner in the photonic integrated circuit industry having a great outlook for the next decade when PICs are expected to be massively deployed in divers applications.

About the authors

Eric Mounier, Ph.D., is Chief Analyst at Yole Intelligence, part of Yole Group. With more than 30 years’ experience within the semiconductor industry, Eric provides daily in-depth insights into emerging semiconductor technologies such as quantum technologies, the Metaverse, terahertz, photonics, and sensing.

Based on relevant methodological expertise and a significant technological background, Eric works closely with all of Yole Group’s teams to highlight disruptive technologies and analyze business opportunities through technology & market reports and custom consulting projects.

Eric has spoken at numerous international conferences, presenting Yole Group’s vision of emerging semiconductor technologies, markets, and applications.

Previously, Eric held R&D and Marketing positions at CEA-Leti (France).

Eric Mounier has a Ph.D. in Semiconductor Engineering and a degree in Optoelectronics from the National Polytechnic Institute of Grenoble (France).

Martin Vallo, Ph.D., is a Senior Analyst, Photonics, specialized in optical communication and semiconductor lasers within the Photonics and Sensing division at Yole Intelligence, part of Yole Group. With 12 years’ experience in semiconductor technology, Martin is involved in the development of technology & market reports as well as the production of custom consulting projects at Yole.

Prior to his mission at Yole, he worked at CEA (Grenoble, France), where he focused on the epitaxial growth of InGaN/GaN core-shell nanowire LEDs by MOCVD and their characterization for highly flexible photonic devices.

Martin graduated from the Academy of Sciences, Institute of Electrical Engineering (Slovakia) with an engineering degree in III-nitride semiconductors.

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