Telecom gear will be at the center of the coming AI boom

Telecom industry hardware looks set to be one of the biggest growth areas in AI tech in the next three years, IDC's latest semiconductor forecast reveals. Broadly this growth is going to come in two parts: the embedding of data-hungry AI models in smartphones and other devices, and the flood of AI traffic into data centers.

IDC's chip industry outlook predicts a strong recovery of the global market after two years of contraction, with around 20% growth this year and another 14% expansion in 2025. Mario Morales, IDC group VP for enabling technologies and chips, said 5G was the biggest single semiconductor application, driving about 30% of the market in device and network chips.

About a third of global chip industry revenue growth this year is expected to come from smartphones, PCs and other devices, IDC forecasts.

Morales pointed to the new flagship smartphones on show at Barcelona that foreshadow AI capabilities and will begin shifting AI processing from the cloud onto the devices themselves. "We think this is going to be something that begins to ramp in the second half of this year, and really accelerate as we go into 2025," he said in an online presentation earlier this month.

AI edge devices to double

Morales said the number of connected edge devices will double in volume from 2022 to 2027 and ultimately will carry the bulk of AI traffic. Most of this will be AI inferencing, which is doing the data crunching that provides answers based on the existing models, rather than the training that creates the models.

"AI inferencing will actually be larger than what we've already seen in training for within the data center and infrastructure, and we think that bodes well for the outlook of the market on a longer-term basis," he said.

Data centers are also expected to grow dramatically, with 45% growth tipped for 2024. Over the next five years, IDC predicts data centers will become the biggest source of demand in the semiconductor market, overtaking PCs and smartphones.

Morales said demand for communications network chips, which accounts for around 10% of the total market, would be worth about $61 billion this year, up 13.5%. "A lot of the growth that we believe is in the market is definitely sustainable, at least over the next five to seven years," he said.

Telecom aside, an IDC survey in December 2023 also found that the level of enterprise gen AI activity already is incredibly high. The survey data said 41% of enterprises worldwide are already investing significantly in gen AI infrastructure, have set a budget and have acquired gen AI software or consulting services.

Another 22% are doing initial testing and have a spending plan in place over the next 18 months, the survey found.