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 artificial intelligence 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 has slightly dropped from US$11 billion in 2022 to US$10.9 billion, 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 YOLE Group's forecast, by 2029, the total revenue of the optical transceiver market is expected to reach US$22.4 billion, showing a strong growth momentum.
These cutting-edge technologies have greatly promoted the widespread deployment and application of high-speed optical technologies with their low power consumption and scalability. 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 increasing, 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, resulting in 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 the 800G and 400G segments.
Revenue in the optical transceiver market declined 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.
Demand for 400G and 800G data communication transceiver modules significantly drove revenue growth. The industry is moving 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 mass production in 2026.
Integrated photonics is expected to provide low-cost, scalable optical solutions in the communications field. As optical links move to 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 mass manufacturing. Although SiPh can carry a variety of photonic components, its laser source has certain limitations compared to III-V materials such as InP and GaAs.
An alternative to packaged optics (CPO) is linear drive pluggable optics (LPO), which has no DSP or CDR, thereby reducing power consumption and latency. This is critical for switch-to-switch, switch-to-server, and GPU-to-GPU connections in machine learning (ML) and high-performance computing (HPC). LPO can be used in multimode (VCSEL) and singlemode (EML, SiPh) applications, but is best used in combination 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 chips. At the OFC 2024 conference, the focus of the discussion was on linear receive optics (LRO) for 1600G (8x200G) applications, which improves performance, manufacturing margins and robustness.
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