Top Gun pilots aren’t the only ones who feel the need for speed. Also data centers. And that has spurred the drive for silicon photonics systems, which could give a boost Broadcom (AVGO) stocks and others.
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As electrical interconnects in semiconductor systems reach data transmission speed limits, attention has shifted to silicon photonics, which use optical or light interconnects to transmit data. Silicon photonics products integrate the optical connections on the chip instead of relying on optical plug-in components in computer racks.
On March 1, Broadcom introduced its first integrated silicon photonics network product, codenamed Bailly. Broadcom stock surged higher following the announcement.
Bailly integrates optical links with Broadcom’s next-generation Tomahawk 5 switch and offers data throughput of 51.2 terabits per second. This doubles the switching capacity compared to Broadcom’s predecessor product called Humboldt.
According to Broadcom, Bailly will be available in stores later this year. The company says it’s the world’s first fully functional co-packaged optics switch.
Hyperscalers are driving the need for silicon photonics
The high-speed interconnects that silicon photonics systems offer are particularly important for hyperscalers, such as B. Cloud service providers running artificial intelligence applications.
“The hyperscalers — Amazon, Google, Meta, and the others — have a significantly growing need for optics,” Manish Mehta, vice president of marketing and operations for Broadcom’s Optical Systems division, told Investor’s Business Daily. “You spend 10x more on optics than going from silicon to networking. So they have been demanding innovation in optics for the past decade as they have been the largest consumers of optics.”
The benefits of integrating silicon photonics with switches and processors are higher bandwidth and lower power consumption, Mehta said. The systems also take up much less space than today’s component-based approach to optical networks, he said.
He also points out that data centers need optical communications embedded in semiconductors as networking has become a bottleneck for data-intensive workloads like artificial intelligence.
“We need optical I/O (input-output) to keep up with the growth in computing power,” Mehta said. “And the only way to do that is through silicon photonics and co-packaged optics.”
He added, “You never want I/O to be the reason you’re underutilizing a compute unit.”
Broadcom stock benefits from Silicon Photonics
Christopher Rolland, an analyst at Susquehanna, said he expects Bailly to be “a powerful product” that should allow Broadcom to capture some of the massive optics-related spend. Rolland is positive on Broadcom stock with a price target of 690.
Broadcom stock ended the regular session on March 13 at 616.47.
In addition to Broadcom, companies working on silicon photonics also include Cisco systems (CSCO), intel (INTC) and Marvell technology (MRVL).
“They’re lagging (Broadcom) in terms of their level of integration and a little behind in terms of the power consumption (reduction) they can achieve,” Mehta said.
Meanwhile, manufacturers of optical network equipment such as Ciena (CIEN) and Infinera (INFN) see limited impact of the trend as they focus on long-distance communications.
Aehr Test Systems is experiencing increasing demand
Manufacturer of semiconductor test equipment Aehr test systems (AEHR) is hoping for a boost in sales for everything to do with silicon photonics.
“With several market leaders announcing plans to integrate photonics transceivers into their microprocessors, graphics processors and chipsets, we believe silicon photonics will become a significant market for wafer-level testing and burn-in over the next few years,” Aehr chief executive Gayn Erickson said on a conference call with analysts Jan. 5.
Erickson expects the silicon photonics business to pick up momentum in the second half of the decade.
Aehr Test Systems and shares of Broadcom are both on the list of IBD Tech Leaders.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories about consumer technology, software and semiconductor stocks.
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