650 Group Blog
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650 Group offers thoughts on the state of the global semiconductor industry.
Semiconductor shortages continue to make headlines impacting almost every industry from automotive, healthcare, consumer, and into all aspects of the data center. Semiconductor shortages have their roots in 2020, with COVID-19 causing a lack of investment in new capacity as well as a significant decrease in orders. Other industries absorbed the decline in orders. For example, the automotive sector slashed orders for semiconductors, and consumer electronic devices picked up that capacity because of a surge in demand to support WFH. When the automotive industry tried to increase orders on a better economic outlook, the suppliers could not respond because that capacity was now allocated elsewhere. Exacerbating the issue is increased political instability and limited, if any, secondary capacity in the world for critical components. Semiconductors are the new steel industry powering the 21st-century economy forward. Like the Industrial Revolution of the past, many verticals stall when the base component of semiconductors cannot fulfill demand. However, unlike in the past, the capital investment in fabs and related supply chain aspects is massive and takes years, so adding capacity is not a simple task. The automotive industry is learning this the hard way right now, with many automotive plants being idled or shut down fully because of parts that cost less than $1. You cannot build 99% of a car, and you cannot make 99% of a data center. With most manufacturing capacity in semiconductors outside the US and limited control in the hands of the companies placing orders, the industry will address this shortage differently than in the past. A multi-source solutions strategy can help address the semiconductor shortage with a long-term plan. If we have billions of IoT devices shipping per year and many devices having significant chip counts in them, the market must change. The solution is forming today, and actions are taking place at all levels of the US government and private sector, including a summit held in the White House to discuss the problem and find solutions. The US must increase capacity to address demand and directly invest a significant amount of capital into building fabs and supply chain resiliency via incentives and policy changes. It is in the US’s best interest and should be a national priority. Today’s shortage is shaving billions off of GDP growth at a time when the economy needs to recover and jobs need to form in a post-COVID-19 world. Imagine the subsequent shortage with no investments today. Customers should seriously consider using multi-source semiconductor solutions. Besides addressing the supply shortages, customers get other benefits, including faster innovation, better products, and ultimately lower cost and healthier supply chains. Datacenter equipment is unique. Customers have historically had multiple silicon suppliers for memory, CPU, HDs/SSDs, but not so much in networking. Now is an excellent time to revisit this strategy. Networking also has uniqueness in moving from trailing edge process geometry to leading-edge with 400 Gbps and will remain leading edge as we look towards 800 Gbps, ZR/ZR+, and silicon photonics. We cannot move forward to higher speeds in networking without increasing the number of vendors, suppliers, and fabs. This is even more so when one looks into the short-term future of new networking demand driven by new applications and workloads centered around edge-computing, AI/ML, and AR/VR. The future is bright, and innovation is widespread. We need to ensure the investment is made today to guarantee one of the core building blocks of the economy can be sustainability manufactured going forward and not end up in a perpetual boom/bust cycle in fab and related supply chain investment.
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The Telecom Infra Project (TIP) announced the launch of OpenWiFi Release 1.0, which is a community-developed project that encompasses Access Point hardware, an open-source AP operating system, and an SDK to build cloud-native Wi-Fi Controller software for Service Providers (SPs) and Enterprises. TIP is also starting lab and field trials. At the end of this post, we’ll address the question of “will open-source Wi-Fi upset the enterprise Wi-Fi industry?” Here are some of the points made by presenters at the OpenWiFi launch: OpenWiFi is compatible across multiple markets like enterprise, SP and consumer. Boingo’s Derek Peterson said a significant benefit of OpenWiFi is that this system can be applied to various Wi-Fi markets, like consumer/home, enterprise, large venue, multi-tenant venues and SP networks. He shared that no single commercial system spans across the various consumer, SP and enterprise markets. Boingo is actively testing OpenWiFi, and he looks forward to deploying it; Boingo has a goal to “get to 100,000’s,” which we assume means users. OpenWiFi can be used with others’ components, including Access Points and operating systems. Dan Rabinovitsj, who leads Facebook Connectivity said that OpenWiFi is an open system. Even though OpenWiFi offers its own operating system, it is easy to use OpenWiFi with OpenWRT, a operating system for consumer-focused Wi-Fi routers. Additionally, OpenWiFi can be used with various different hardware such as those from Edgecore and TP-Link. Below is a representative list of participants in the webinar and sponsors of the event. Initial support for OpenWiFi is meaningful. The OpenWiFi community includes over 100 participants. SPs, hardware companies, standards bodies, and software companies.
Roaming capabilities are inherent in OpenWiFi. OpenRoaming, Wireless Broadband Alliance (WBA) Passpoint 2.0, and Google’s Orion OpenRoaming service are all supported in OpenWiFi. Some Wi-Fi OEMs have been promoting proprietary roaming capabilities. By offering compatibility with these open roaming systems, more Wi-Fi users will be able to bounce between various networks in the future. Disruption of existing Wi-Fi industry, according to presenters at the event. FB Connectivity’s Dan Rabinovitsj thinks that existing OEMs will see OpenWiFi as threatening. On the other hand, Rabinovitsj does not expect existing enterprises to adopt OpenWiFi based systems; but for SPs, he expects them to adopt OpenWiFi. Boingo’s Peterson said the industry must change because SPs are not just building networks; they are building experiences and systems focused on various use-cases. Deutsche Telekom’s Daniel Brower commented that by using OpenWiFi, this can reduce the likelihood that it will be subject to vendor lock-in. Participating hardware players comments were interesting. Edgecore/Accton’s Edgar Masri says his company is buying more inventory than normal because lead times are longer than usual; Edgecore expects the supply chain issues will persists for about two years. CIG says WiFi chipset lead times are around 52 weeks; CIG plans to ship its Wi-Fi 6E based Access Points by the end of 2021. Qualcomm’s Nick Kucharewski promoted Wi-Fi 7 at the event; and Kucharewski also said that product shortages may be partially addressed by adopting OpenWiFi because those who use it can buy hardware from various OEMs and ODMs instead of being locked into one. TIP plans to incorporate cellular capabilities in the future. Doron Givoni, Solution Architect at Facebook, described TIP’s plan to incorporate cellular capabilities alongside with OpenWiFi. According to our research, the private cellular market is in its infancy and we see it as generally complementary to Wi-Fi. Many enterprise focused Wi-Fi vendors have not launched their own cellular capabilities, and we see that it is possible that some could adopt the cellular capabilities from TIP. As for the question of “Will open-source Wi-Fi upset the enterprise Wi-Fi industry?” What we learned at the TIP OpenWiFi launch today, it appears there is significant support for the project by Service Providers and very limited support by the enterprise-focused WiFi vendors. We expect that SPs and MSPs initially will be the primary addressable market for the OpenWiFi community; over time, though, as TIP incorporates cellular capabilities to OpenWiFi, this could open up the market for more enterprise-focused opportunities. To elaborate, initially, OpenWiFi will appeal to users/operators with a relatively high degree of in-house capabilities like Service Providers. We’ve seen that many medium-sized and large-sized enterprises rely on their vendors to provide a significant amount of support to simplify operations. In addition to traditional service providers who will leverage OpenWiFi, we see initial support from Managed Service Providers (MSPs). Examples of MSPs include OpenWiFi supporter, Indio Networks (India), Boingo (USA), iBrowse (Europe); MSPs generally have teams capable of integrating various hardware and software systems that are then used to deliver a service to customers such as Small and Medium Businesses (SMBs). Interestingly, TIP mentioned that in future releases, it would support cellular technology. Few enterprise Wi-Fi vendors have brought cellular capabilities to the market. It is possible that when TIP delivers cellular support, that enterprise OEMs may participate in the TIP/OpenWiFi community.
On April 21, 2021, DISH, the fourth wireless operator in the US market, and hyperscaler Amazon Web Services (AWS) announced plans to work together, whereby DISH will leverage AWS infrastructure and services to build a cloud-based 5G Open Radio Access Network. The DISH/AWS announcement is important because this is the first 5G Radio/hyperscaler deal – or second if you count Rakuten as a hyperscaler. We are encouraged by the DISH/AWS deal and think this represents a big step in the industry. What’s so important is that two of the three major Radio Access Network (RAN) functions will be running on AWS; these are the Centralized Unit (CU) and the Distributed Unit (DU). We see the DU running on the AWS service called Outposts as being the most critical part of this announcement, because historically this hardware has been delivered as a proprietary hardware system using proprietary semiconductors from the likes of vendors like Ericsson, Nokia and Huawei. Thus, AWS’ involvement in the DISH network serves as a reminder of the opportunity for RAN vendors to deploy cloud native RAN in future cellular network deployments. DISH is employing a terminology it called a “Capital Light” model, whereby it reduced the amount of capital spending it requires to build out its planned national network. Key to achieving this light capital model is leveraging the capital spending done by AWS and instead leveraging what some might call an OPEX oriented model. DISH plans to launch live cellular services in Las Vegas, NV first, and then its 5G network will cover 20% of the US population by June 2022 and then 70% by June 2023 and 75% of by June 2025, and thereafter it will continue its build to “match competitors beyond 2025.” The company also plans to begin building enterprise focused 5G networks beginning in 2021. In our follow-up inquiries to the AWS and DISH teams, we have learned that DISH is exercising an option to run O-RAN using AWS Graviton hardware plus Enterprise Kubernetes Services. Additionally, DISH has the option to use Intel based COTS based hardware in parts of its network. Thus, DISH has flexibility to deploy baseband systems on AWS or in its network, and can use Graviton or Intel systems. We have seen AWS engage in contracts with other parties where there are minimum usage rates or dollar commitments. We are not sure this is the case for the DISH deal, but AWS explains that it expects to deliver “thousands of site specific hardware,” while at the same time DISH expects that by mid 2023, it will have built out “15,000 cellular sites.”  What AWS plans to deliver to DISH  DISH use of AWS infrastructure We wanted to share some insights on how this relationship appears to be structured. It appears that many scenarios have been envisioned as to how the relationship may evolve in the future, and we think that both parties have worked in contract terms that allow some flexibility in achieving each company’s goals. We did not review the contract between the two companies, but in a webinar presentation held April 30, 2021, executives from DISH hedged their bets somewhat on the relationship with AWS in ways we found interesting:
Each year, Aruba, a Hewlett Packard Enterprise company has its Atmosphere conference. This year the conference theme was “Journey to the Edge.” However, this year was also much different from previous conferences because Aruba completed the acquisition of Silver Peak last September. As a result of the acquisition, the conference had a significant focus on SD-WAN, the primary product of Silver Peak, and integration with Aruba. A critical new trend that the combined company is now pivoting towards is SASE, which Aruba includes in “Edge to Cloud Security.” Aruba is partnering with well-known companies to deliver a complete “Edge to Cloud Security” portfolio. Aruba’s broadening portfolio allows it to “land and expand” to customers and provide a more comprehensive portfolio. Portfolio growth is what other competitors to Aruba are doing because there’s a growing need to manage networking and security systems simultaneously as users and computing leave the campus environment. Additionally, the company made several new announcements to advance Aruba ESP (Edge Services Platform), like Aruba Central being available on-prem, ClearPass Policy Manager integration with the Aruba EdgeConnect SD-WAN edge platform, and IDS/IPS/UTM capabilities. The company also updated its partners on its growing AIOps capabilities and hinted that it would be making Wi-Fi 6E announcements “soon.” New announcements
Future announcements. Management hinted at some announcements that will come in the future. These include:
Updates. We felt some noteworthy comments came up during the show.
    NVidia Announcements impact every industry, and every company in the world Today's GTC keynote by Jensen unleashed significant enhancements across the NVidia portfolio. NVidia did an excellent job of discussing verticals and giving examples with the company, clearly positioning itself as a leader in the data center space with expertise in ASIC development. A clear theme throughout is that AI/ML is moving at a slightly faster pace than Moore's law, and in many cases, applications that used to take days to years can now complete in a fraction of the time. These advancements will forever change verticals, like transportation and healthcare. We are just a few years away from having over 100 trillion parameter models. The results of such large datasets will change how we construct data centers. Not only will this milestone usher in technologies like silicon photonics, but we will also see new ways to power and cool these data centers. Moving data into the data center will drive significant growth in DCI using ZR/ZR+ options. End-users will not be aware of the cloud's computational power going into every aspect of their lives. We see innovation in AI and the use of AI in enterprises as still in its infancy, and for markets like data center switching and servers, AI is an additional growth driver over the next few years. 650 Group looks forward to other GTC events this week.  In the keynote session of Huawei Analyst Summit 2021, there was a big focus on chip availability, both in prepared remarks and from questions fielded from the audience. Huawei Deputy Chairman, Eric Xu, as he has done in past years, answered questions from the audience. Huawei reiterated that it has enough B2B-focused chips, consistent with comments made one year ago today, which suggests that it stockpiled significant amounts of chips ahead of sanctions. Huawei expects to remain on US Entity List for a long time.
 We had the opportunity to speak with an exciting Internet Service Provider (ISP) called GeoLinks today. Skyler Ditchfield, the CEO, shared his thoughts on the recent spectrum acquisition from Verizon and how it will change the company’s addressable market. We think what GeoLinks has done with this spectrum acquisition is interesting because this is a medium-sized company buying spectrum from one of the world’s largest operators. The company is planning such a rapid expansion to many important broadband markets.
On March 25, 2021, GeoLinks announced that it had acquired approximately 80% of Verizon’s LMDS fixed use 29-31 GHz mmWave spectrum. This spectrum does not include Verizon’s mmWave spectrum holdings that it uses to service mobile users, so recent iPhone models that communicate with Verizon’s mmWave will continue to work as they always have. According to GeoLinks, this new spectrum increases its homes passed metric for residential to 90.6 million homes and businesses to 5.9 million businesses. Markets in which it acquired spectrum include New York, Los Angeles, Chicago, Philadelphia, Dallas-Ft. Worth, Atlanta, Houston, Washington, DC, Boston, Tampa-St. Petersburg, Minneapolis-St. Paul, Detroit, Miami-Ft. Lauderdale, Charlotte, St. Louse, Raleigh-Durham and Indianapolis, among others. With the recent spectrum acquisition, GeoLinks is expanding its footprint from a predominantly California (plus southern Nevada) to a nationwide coverage map. We asked Mr. Ditchfield what the company’s plans are for expanding to the new territories. We learned that the company is planning a “roll-up” strategy to acquire Wireless ISPs (WISPs) and small local wireline broadband companies. As these acquisitions occur, GeoLinks plans to offer the acquired companies’ customers the new, higher-speed wireless service in the new spectrum. GeoLinks plans new rounds of financing, which may come as soon as a couple of months from now. Cisco's customer event, Cisco Live (virtual), is underway, and the company made many announcements. We are emphasizing what we think are the most relevant, which include Observability capabilities, Network as a Service (NaaS), and SASE. Here is a rundown of what we learned about today. Core portfolio (includes Campus Ethernet Switches, Wireless LAN).
Security (includes Firewall, Content Security, Identity).
 Chuck Robbins, CEO of Cisco Systems at Cisco Live on March 30, 2021 In the news this week, Cisco has entered an agreement to sell HashiCorp Terraform® Cloud Business alongside its own Cisco Intersight® platform. Cisco and HashiCorp are helping enterprises accelerate application innovation, including automated management and security, across hybrid clouds. The deal helps enterprises achieve a hybrid cloud operating model using HashiCorp’s “infrastructure as code” for network provisioning and management of private data centers via Intersight. The Cisco Intersight Service for Terraform will offer a bridge to easily and securely integrate on-premises environments with Terraform Cloud Business, and enable IT Ops and DevOps teams to automate infrastructure provisioning using infrastructure as code across hybrid cloud. Why this matters? This arrangement provides flexibility to those organizations running both public cloud and private data center environments. Because provisioning can be complex across multiple clouds, customers can benefit from HashiCorp Terraform Cloud as it allows Network Operation teams to provision multi-cloud infrastructure, and manage risks for security, compliance, and operational constraints in a more automated and consistent way, and then extend provisioning into private networks/data centers. Additionally, infrastructure security for applications and services across multi-cloud environments and private/distributed data centers remains paramount for enterprises. Specifically addressed security elements in the Cisco + HashiCorp agreement include policy, SSO, and audit logging. Implementing automation tools to keep settings and policies consistent — and easily replicated— goes a long way towards ensuring data is protected to a high standard, wherever it is moving. Lastly, according to the press release, Cisco will also offer centralized support across customers’ Intersight and HashiCorp Terraform Cloud Business environments under the Cisco Solution Support program.  SONiC OS continues to be hardened for data center deployments well beyond the hyperscalers2/24/2021  SONiC has gained popularity, and development efforts accelerated throughout 2020, despite the lack of travel and face-to-face interactions from COVID-19 restrictions. 2020 saw the incorporation of more features and excitement amongst suppliers and customers. SONiC now has more advanced features and functionality and continues to be hardened for data center deployments well beyond the hyperscalers. Advanced functions like BGP and RDMA are supported. SONiC also added many hours of production traffic under its belt as we estimate over 100,000 switches running SONiC at the end of 2020. SONiC is a Linux-based open-source networking operating system with its roots in the open community and Microsoft as an original contributor. Today it has over fifty member companies and thousands of individuals contributing. It has reached a critical scale beyond Microsoft’s internal use within Azure. Increased vendor and customer contributions help increase the appeal of SONiC, and our end-user interviews indicate strong interest in several enterprise verticals, more than just the typical financial services sector. Disaggregation is a trend here to stay with customers evaluating the ASIC, physical switch, optics, and operating system separately. What was standard with full decoupling at the hyperscalers is making its way down to more traditional cloud and enterprise customers. True to its open-source Linux roots, SONiC leverages the strength of the community, is beneficial financially to vendors both large and small, and also creates an ecosystem of support and career advancement for individual member contributions. SONiC’s recent developments time well with a renewed interest in disaggregation. This is important. SONiC is being embraced not only at the system level via system vendors but at a Silicon level and in a market of millions of customers, not just a few hyperscalers. Broad-based support can make SONiC meaningful for the whole networking market. SONiC deployments increased in complexity as well. Vendors showcased SONiC working on modular switches, modular routers, as well as the disaggregated chassis. The 2020 releases and future roadmaps continue to add critical enhancements to automation and telemetry. As we look towards 2021, we see increased adoption of SONiC in Tier 2/3 Cloud providers. We expect more enterprises to move parts of their network to SONiC. More contributions from traditional enterprise suppliers and the community will create even more trust in SONiC. With the disaggregation of switch hardware from the software, we believe SONiC will also see the benefit of accelerated hardware and software development in 2021. The industry might not observe this directly because of the rapid move from 3.2 Tbps to 12.8 Tbps to 25.6 Tbps switches. Still, as switch ASICs rapidly hit the market with faster pipes, more programmability, and massive amounts of telemetry data, the industry needs disaggregation and increased development velocity to keep pace. Beyond 2021, SONiC could play a significant role beyond the data center; edge computing and networks built to support AI/ML seem like good targets, and we are closely watching developments outside the data center as well. |
CHRIS DePUY
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