AI Boom Fuels 45% Year-on-Year Growth in the Optical Module Market

Recently, market research firm YOLE Group pointed out in its latest market report that the AI-driven optical module market will see a year-on-year growth of 45%. It is expected that by 2024, the AI optical transceiver market in the data communication field will achieve a year-on-year growth of up to 45%, showing strong market vitality and broad development prospects.

The revenue of the optical transceiver market will drop slightly from $11 billion to $10.9 billion in 2022, but this is a temporary adjustment. With the continuous advancement of technology and the continued growth of market demand, the optical module market will rebound quickly and usher in a new growth peak. According to the YOLE Group's forecast, by 2029, the total revenue of the optical transceiver market is expected to reach $22.4 billion, showing a strong growth momentum.

These cutting-edge technologies, with their low power consumption and scalability, have greatly promoted the widespread deployment and application of high-speed optical technology. With the continuous development of technologies such as cloud computing, big data and the Internet of Things, the demand for high-speed and efficient data transmission is growing, which also provides huge development opportunities for the optical module market.

However, starting in March 2023, demand for 800G modules surged, driven by hyperscale customers, leading to significant growth in orders and shipments. Later in 2023, some companies also increased demand for 400G modules, reflecting the growing AI-driven market. Suppliers prepared for this growth by increasing production capacity and securing raw materials, positioning themselves for significant growth in revenue in both the 800G and 400G segments.

The optical transceiver market revenue declines slightly, from $11.0 billion in 2022 to $10.9 billion in 2023, but is expected to reach $22.4 billion by 2029, driven by high demand for high data rate modules above 400G from cloud service operators and national telecom operators. Revenue growth is expected to reach 27% in 2024, driven by large AI infrastructure orders and data center network upgrades to 800G.

The demand for 400G and 800G data communication transceiver modules has significantly promoted revenue growth. The industry is transitioning from 100Gb/s per channel to 800G links at 200Gb/s per channel to reduce power consumption and cost. EML and CW-DFB devices are ready for 200G/channel applications, while 200G/wavelength VCSELs are expected to enter volume production in 2026.

Integrated photonics is expected to provide low-cost, scalable optical solutions in the field of communications. As optical links move towards higher speeds and shorter distances, silicon photonics (SiPh) is gradually emerging. Using CMOS technology, SiPh has the advantages of high performance, low cost, high yield and batch manufacturing. Although SiPh can carry a variety of photonic components, its laser source has certain limitations compared with III-V materials such as InP and GaAs.

An alternative to co-packaged optics (CPO) is line-driven pluggable optics (LPO), which has no DSP or CDR, resulting in lower power and latency. This is critical for switch-to-switch, switch-to-server, and GPU-to-GPU connectivity in machine learning (ML) and high-performance computing (HPC). LPO can be used in multi-mode (VCSEL) and single-mode (EML, SiPh) applications, but is best used in conjunction with linear modulators such as TFLN (thin-film lithium niobate), BTO (barium titanate), and organics. The technology ecosystem for LPO is ready to integrate 100G SerDes into the latest network switch silicon. At OFC 2024, the focus of the discussion was on linear receive optics (LRO) for 1600G (8x200G) applications, which improves performance, manufacturing margins, and robustness.

This is the end of this issue of industry information! 3Coptics is committed to providing customers with high-quality, high-performance optical module products, so that customers can better respond to the ever-changing market demands.