The main surprise in the last quarter of 2020 is that demand for semiconductor chips in the automotive market is stronger than expected. Consumers are preparing to travel more in 2021 or after the epidemic is over. Consumer spending in many areas has rebounded, and there are shortages in the global supply chain from giant containers to miniature semiconductor chips, but this problem is excellent for now.

According to the latest reports from II-VI and Lumentum, the demand for optical devices in the telecommunications and data communication markets remains strong. Several semiconductor suppliers, including AMD, Inphi, Maxim and MaxLinear, all set new sales records in the last quarter. Intel’s fourth-quarter sales revenue was very close to the record set in the fourth quarter of 2019, but due to continued weakness in cloud computing, corporate and government businesses, the company’s data center revenue fell 16% year-on-year. In contrast, AMD’s server processor sales revenue from cloud and enterprise customers set a record, with total revenue increasing by 52% year-on-year to $3.24 billion.

Another record confirms strong demand from cloud computing companies. Chip manufacturer Innovium announced that in 2020, the shipment of 400G TERALYNX® switching ASIC ports will exceed 1 million. The 12.8Tbps TERALYNX 7 ASIC is equipped with 256 50Gbps SerDes, which can be used as 32 400Gbps connections, and most ports are used in combination with 400Goptics.  The company reported that market demand for these products continued to grow in the fourth quarter of 2020, which means that shipments of 400G Ethernet optical transceivers will rise in the first quarter of 2021. The demand for switching ASIC chips usually precedes Optics, so the former is a good indicator for the Optics market.

Amazon should have identified several new suppliers of 400G transceivers by the end of 2020, and sales of related products from all these suppliers will increase. II-VI is one of the first suppliers to report an increase in related demand. In the quarterly performance report to the end of 2020, the company stated that the shipments of 200G and 400G products have risen, driven by the growing demand from Hyperscale customers in the United States and China. The bad news is that the more suppliers, the lower the price. The good news is that demand may be higher than expected.

Cloud computing companies set a new revenue record in the fourth quarter of 2020, but expenditures did not. In terms of capital expenditures, Alibaba, Google, Amazon, Facebook and Microsoft are the world’s top five, accounting for 85-90% of the top 15 cloud computing companies tracked by LC. These five companies all achieved record high revenues in the fourth quarter of 2020. This is because consumers have avoided various physical stores and consumed more goods and services online due to the impact of the epidemic. This result also reflects that the COVID-19 pandemic has greatly accelerated the migration of enterprises, schools and individuals to cloud computing.

Over the years, the growth of infrastructure spending has often been synchronized with revenue. Therefore, analysis predicts that spending in the fourth quarter of 2020 will also set a record, but this is not the case. Although compared with the third quarter, the expenditures of these five companies have increased at a double-digit rate, but compared with the fourth quarter of 2019, the expenditures of Alibaba and Google have actually declined, and the expenditures of Facebook and Microsoft have grown, but they have not broken records. Amazon’s expenditures did set a record, but a large part of them were used to support its logistics and distribution business, not the cloud business.