High-speed copper cables - Incremental demand brought by ASICs

The popularity of ASICs will bring significant incremental demand for high-speed copper cables, especially in the fields of data centers, communication networks, and high-performance computing (HPC).

1. Growth in interconnection demand within data centers

(1) ASIC drives computing power upgrades, increasing interconnection demand between devices

Core characteristics of ASICs: ASIC chips have powerful performance in AI training, inference, and dedicated computing, suitable for large-scale parallel computing. To enhance overall computing power, data centers will deploy more ASIC nodes (such as AI accelerators), thereby increasing the demand for interconnection between nodes.

Incremental demand for copper cables comes from: The connections between servers, switches, and storage devices within data centers have a strong demand for low latency and high bandwidth, and high-speed copper cables are the preferred choice for short-distance interconnections. Each newly deployed ASIC node requires more high-speed interconnections, directly driving the growth in demand for high-speed copper cables.

(2) Surge in data traffic drives network expansion

High traffic generated by ASIC application scenarios: AI training and inference tasks require frequent transmission of massive data between devices. Data center networks need to support 400G/800G Ethernet, or even higher bandwidth.

Applicability of high-speed copper cables: High-speed copper cables (such as DAC) provide cost-effective high-speed connections within 10 meters and are the standard choice within data centers. Network expansion means more switches and server connections, which will directly boost the demand for high-speed copper cables.

2. Driving force in the communication field

(1) Application of ASICs in 5G and cloud computing

ASICs are widely used in 5G base stations, core network devices, and edge computing devices to accelerate specific functions (such as network traffic optimization and signal processing).

The interconnection of these devices also requires low-cost, high-performance solutions, and high-speed copper cables have advantages over fiber optics in short-distance connections.

(2) The position of copper cables in network device connections

The device upgrades brought by ASIC chips often require supporting high-speed communication links.

In short-distance connections of communication devices (such as within and between racks), high-speed copper cables can meet the bandwidth demands of 5G and cloud computing.

3. Demand in high-performance computing (HPC) and AI scenarios

(1) Dependence of HPC systems on high-speed copper cables

In supercomputing clusters, nodes with dedicated chips like ASICs require ultra-high-speed, low-latency connections.

Copper cables, by supporting high-speed protocols (such as InfiniBand and Ethernet), have become a common interconnection solution in HPC.

(2) Interconnection demand of AI accelerators

In AI training and inference scenarios, ASICs need to work in conjunction with other accelerators (such as GPUs and FPGAs), and copper cable connections have advantages of low latency and high cost-effectiveness.

As AI infrastructure expands, the demand for copper cables will continue to increase.

4. Market advantages of high-speed copper cables drive growth

Short-distance advantages: In scenarios like data centers, copper cables are cheaper than fiber optics and can avoid delays caused by optical-electrical conversion.

Technological maturity: Currently, the transmission speed of copper cables can reach 100G or even 400G to meet the high bandwidth demands of ASICs and modern data centers.

Ease of deployment: High-speed copper cables do not require additional lasers and modules, making deployment simple and becoming an ideal solution for high-density connections.

5. Incremental demand in typical application scenarios

(1) Data center upgrades

Hyperscale data centers (such as Google, Amazon, Alibaba) are continuously expanding AI and cloud service infrastructure, and the widespread deployment of ASIC accelerators will significantly increase the demand for copper cables.

(2) 5G networks and edge computing

The trend of miniaturization and densification of 5G base stations and edge computing devices makes short-distance, high-speed connections critical, and the application of copper cables in these scenarios will also increase.

(3) Supercomputing and AI training clusters

In HPC and AI clusters, each ASIC device requires multiple high-speed links to connect storage and computing nodes, and this high-density deployment will further increase the usage of high-speed copper cables.

6. Market expectations

With the rapid proliferation of ASIC chips and the continuous growth of data traffic, it is expected that the market demand for high-speed copper cables will see significant increments:

Scale: According to industry forecasts, the global data center interconnection market (including high-speed copper cables and fiber optics) will maintain rapid growth in the coming years, with an expected annual compound growth rate of over 15%.

Key products: High-speed DAC copper cables (such as 25G/50G/100G) and active optical cables (AOC) will become the main driving force for market growth.

The booming application of ASICs will directly drive the incremental demand for high-speed copper cables, mainly due to the significant growth of short-distance, high-bandwidth connections within data centers. Copper cables, with their cost-effectiveness, mature technology, and low-latency characteristics, have become an important interconnection solution in ASIC-dominated computing architectures.

The popularity of ASICs will also mean that the procurement parties in the copper cable supply chain will no longer be dominated by one player. The capacity bottleneck of high-speed copper cables currently means that supply is far below demand, which also gives suppliers the confidence to raise prices in 2024. In the short to medium term, before supply and demand reach market balance, suppliers will have considerable leverage over prices.

The impact of this increment on the valuation of overall concept stocks is currently uncertain, but as we approach Q1 2025, the numbers will gradually unveil that layer of mystery.

Embrace the industry explosion period, remember - kiss the top player, stay away from the weeds.

Considering the magnitude of copper cable usage in servers, the failure rate will be the primary weight for VIPs to consider aside from price. The magnitude of copper cable usage determines that the ultimate focus of product quality competition is reliability. The yield rate of production only determines your one-time output ratio, while reliability is the direct perception of customers after delivery. After bulk supply, such issues will gradually become prominent, and whoever's flowers bloom the brightest will be the price and share leader.