As AI continues to drive exponential demand for bandwidth, the sector is transitioning to higher data rates, with 200G/channel becoming the new mainstream, enabling 800G and 1600G transceivers to meet the performance and energy efficiency requirements of AI workloads.
A diverse ecosystem is driving innovation, with vertically integrated leaders, startups, foundries, and equipment suppliers collaborating to scale solutions.
China emerges as a key competitor, shipping millions of modules and closing the technology gap with Western suppliers.
Co-packaged optics (CPO) is on track to transform data center architecture, with large-scale deployments projected between 2028 and 2030.
”The industrial ecosystem brings together vertically integrated leaders such as TeraHop (former InnoLight), Cisco, Broadcom, and Marvell, alongside innovative startups including Ayar Labs, Lightmatter, Celestial AI, and Nubis Communications,” says Yole’s Martin Vallo, “foundries and fabs like TSMC, GlobalFoundries, Intel, and STM, play a pivotal role in scaling technology, while equipment suppliers such as Applied Materials and ficonTEC enable high-performance manufacturing. Together, they fuel a dynamic industry delivering solutions for data communications, LiDAR, and emerging quantum technologies.
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Global competition is intensifying. China is scaling domestic capabilities, with TeraHop, Hisense, Accezlink, amongst others, shipping millions of modules to power AI interconnects.
Bolstered by government programs and academic collaboration, Chinese players are closing the gap with Western suppliers and positioning themselves as global players.
