Optical transceiver market to be worth $22.3bn in 2028

Generative AI will drive expansion in data centre infrastructure and the optical transceiver adoption supporting it. China’s position is becoming increasingly prominent, driven by the AI landscape.

The server computer density that AI requires generates significant heat, presenting energy efficiency and sustainability challenges. 

AI is the primary factor driving demand for data centres, others are UHD video and a variety of AR/VR applications and cloud services – social networking, business meetings, video streaming in UHD, e-commerce, and gaming applications.

“Revenue generated by the optical transceiver market increased 19.3%, from $9.8 billion in 2021 to $11 billion in 2022,” says Yole’s Martin Vallo, “this  growth is driven by high demand for 800G high-data-rate modules by big cloud service operators and CSP s requiring increased fiber-optic network capacity.”

The global optical transceiver industry is highly competitive, with players ranging from large international companies offering a broad portfolio of products to smaller companies specialising in narrow markets. 

Different techniques and approaches can be used to overcome physical limits to achieve higher data rates. It is also evident that the two competing strategies based on the InP and the silicon photonics platforms will coexist during the coming years as leading players are linked with both platforms.

“Under its continuous catch-up and accelerated development program, China is taking an increasingly prominent position in the optical communication industry,” says Yole’s Eric Mounier, “nowadays,, the core optical technology for high-speed modules is the domain of American and Japanese manufacturers, but China has invested heavily in photonic manufacturing platforms – GaAs , InP, and SiPh .”

The Chinese government’s program – the Roadmap for the Development of the Optical Device Industry (2018-2022) – defined a national strategy to increase the market share of local producers of optical chips. 

The China-US trade restrictions and ZTE’s ban may prompt China to increase its support for high-speed optical chips, and domestic optical chip production is expected to accelerate further.