"In the future, as the artificial intelligence (AI) industry grows, data centers will inevitably increase, and consequently, the demand for advanced communication cables will also rise."
Zhenhai Jiang, the Asia-Pacific (APAC) representative of the French network infrastructure corporation Aginod, noted in a recent interview in Seoul regarding the outlook for future communication and data solutions markets. Aginod's core business primarily consists of two sectors: cabling solutions that support consolidation between servers in data centers and communication cables used in advanced manufacturing facilities such as semiconductor factories. In fact, many global data centers and production facilities of Infineon, Tencent, and Xiaomi are using Aginod's cables. In Korea, Aginod's cables are installed at Samsung Electronics' Pyeongtaek semiconductor factory. Semiconductor production facilities are highly digitalized, making it essential to transmit high-speed data signals quickly and reliably. The quality of the cables is crucial; Aginod successfully delivered products after passing Samsung's stringent quality test.
Aginod was originally a core division of the Nexans Group, one of Europe's top three cable manufacturers (Nexans Telecom and Data). With the recent expansion of the data center market for AI development, it was launched as a separate independent company in July 2023. Plans are in place to target the rapidly growing data center market in East Asia, and in light of U.S. trade regulations, Korea is being considered as a candidate for an advanced communication cable production hub. Jiang explained, "Because the end user, the ultimate customer, is close to the production base, and considering the political stability and solid supply chain that has been established, Korea is a suitable production area." The following is a Q&A session.
I am curious about the global data center market trends that Aginod is focusing on.
"Currently, the global data center market is led by the United States, followed closely by China. China is characterized by a unique market marked by overproduction and excessive investment. As soon as market participants recognize opportunities, everyone jumps into that area, so it is predicted that investment will not decrease in the Chinese market. Korea, Japan, and European countries are also increasing their data centers and making their presence known. In fact, currently 30% of Aginod's revenue in the Asia-Pacific region comes from data centers."
It seems that the number of data centers will increase as the AI era is fully underway.
"That's right. As the influence of AI-generated content comes to the forefront, data centers are establishing themselves as the core infrastructure for AI technological advancement. Considering the potential of AI technology, it's clear that the scale of investment in data centers will continue to grow. As AI technology becomes widespread, within five years, not only will the physical count of data centers increase, but their computational capacity is expected to surge by 20 to 30 times, leading to an explosive rise in demand for cables supporting consolidation between servers. This underpins Aginod's great expectations for the data center market."
What is the volume of cables used in a data center?
"Based on full load, each rack can accommodate 20 to 30 servers, and the required cable length amounts to 1 km. In terms of expense, the cost of the cables in one rack alone can reach 20 million won. Additionally, about 1 to 2 km of cabling is needed to connect the entire internal modules. The number of racks varies significantly from one data center to another, making it difficult to specify the exact amount of cables required, but it is a fact that the initial investment cost is substantial."
The quality of cables must also be important.
"Indeed. The quality of cables can have a direct impact on both the performance and stability of a data center. Even a minor disruption in a cable can risk taking down the entire system that is connected. Particularly for AI-exclusive data centers, which process vast amounts of data, the reliability and stability of the network infrastructure are essential. Therefore, corporations must check what types of cables are being used before moving into a data center. Thus, cables can be considered a key component that dictates the stability and operational efficiency of a data center."
Where are the cables primarily produced?
"The production factory is located in Shanghai, China. However, with Donald Trump recently elected as the next U.S. president, there is a possibility that U.S.-China trade risks could resurface starting in January next year, so we are reviewing the establishment of production bases in regions other than China. Korea is also one of the leading candidates. Given that we have customers such as Samsung Electronics and the political stability and robust supply chain, I believe Korea is a suitable production area."
There are many cable corporations around the world. What differentiates Aginod?
"The name Aginod also conveys the meaning of 'agility.' Our core competitive edge lies in swiftly and nimbly responding to customer needs and providing tailored services. As we are based on European-style manufacturing, research and development (R&D) is also regarded as an important value. For instance, we release new products almost weekly. This allows us to consistently implement the latest technological trends. The fact that global automotive semiconductor leader Infineon from Germany, as well as global companies like Tencent and Xiaomi, have utilized our products for over 15 to 20 years is indicative of this."
What efforts are you making to improve quality?
"We operate an R&D laboratory at our Shanghai factory. Significant investments are being made in R&D and experiments there. Through our own laboratory, we conduct thorough quality assurance testing before products are launched in the market to provide optimal solutions through rapid system analysis and problem resolution if customer complaints or quality-related claims arise. Internally, we are also strengthening quality management through key performance indicators (KPIs). We maintain a waste rate of under 1% prior to product launch, and the non-conformance rate of products released in the market is significantly lower. In particular, our communication cables and optical connectivity products guarantee perfect quality through 100% inspection before market launch."
How do you view the APAC market, including Korea?
"While we are seeking various growth opportunities in the APAC market, the current slowdown of growth in the Chinese market makes it challenging to maintain high expectations. Instead, we are focusing on regions outside of China, particularly Korea. Of course, while Korea's economic growth rate has somewhat slowed down, it remains a core market for us, primarily due to our major customer, Samsung Electronics' semiconductor sector. The semiconductor production line is highly digitalized and records all manufacturing data. Therefore, all manufacturing processes must be connected to the network, making our cables indispensable at Korean semiconductor factories. Additionally, as semiconductors are at the foundation of the AI ecosystem, the demand for semiconductors will also increase as AI grows. Consequently, we expect to grow alongside Samsung Electronics."
Are Aginod's cables utilized in Samsung Electronics' semiconductor production facilities?
"Yes. Aginod is the corporation that successfully passed Samsung Electronics' stringent quality tests. We are a major supplier at Samsung Electronics' Pyeongtaek Plant 3 (P3) Ph2 (upper left), and our cable solutions are supplied not only to Pyeongtaek but also to Hwaseong, Giheung, and Cheonan-Asan plants."
What are your goals in the Korean market moving forward?
"Korea features a market structure where major corporations like Samsung, SK, and Lotte are centralized. Therefore, we aim to secure each of these large corporate customers in order to continuously expand our market share in Korea."