Silicon Photonics, LPO, and CPO: Key Market Predictions for 2024

Recently, LightCounting, an optical communications R&D organization, updated its forecasts for silicon photonics, LPO, and CPO. The organization said that the surge in demand for optical connections in artificial intelligence clusters has reversed the downward trend in GaAs vcsel market share. Nvidia has purchased nearly 24 million 400G SR4 and 800G SR8 optical modules and plans to purchase another 4 million this year. These optical modules use 100G vcsel, and many experts believe that such systems are not reliable enough when deployed. This is a real comeback story for VCSELs, but it won't last long. Nvidia is prioritizing silicon photonics technology for its next-generation optical modules.

The chart below shows sales data for lasers and photonic integrated circuits (PICs) used in optical transceivers, broken down by technology.

The agency expects the market share of GaAs and InP-based transceivers to gradually decline, while silicon photonics (SiP) and thin-film lithium niobate (TFLN) PICs will gain share. The adoption of LPO and CPO will also help the market share of SiP and even TFLN devices grow.

Sales of silicon photonic chips will increase from $800 million in 2023 to more than $3 billion in 2029. Sales of PICs with TFLN modulators will increase from almost nothing today to $750 million by 2029. Sales of bulk LiNbo3 modulators for traditional DWDM transceivers will continue to decline and become negligible by 2029.

Companies making TFLN products are joining forces to accelerate the development of the supply chain, with more companies investing in the infrastructure needed to scale up TFLN wafer and PICs production. Silicon photonics will provide an integrated platform for TFLNs. If TFLNs are included in the broader definition of silicon photonic PICs, sales of these products will approach $3.8 billion by 2029.