The requirements of AI for optical modules are mainly reflected in the following aspects:
- High speed demand driven: The explosive growth of AI computing infrastructure directly drives the demand for high-speed optical modules. Currently, 800G optical modules have become the mainstream configuration for interconnection in ultra large scale data centers, and their shipment volume is expected to double by 2025, reaching 18 million to 19.9 million units.
The industry’s focus is rapidly shifting towards next-generation technology, with 1.6T optical modules entering their commercial first year in 2025. It is expected that shipments will surge to 20 million units by 2026, becoming a new core growth point.
- Technological iteration acceleration: In order to meet the higher requirements of AI for bandwidth and energy efficiency, optical module technology is accelerating iteration. Silicon photonics (SiPh) technology is expected to occupy 50% -60% of the 800G market and 60% -70% of the 1.6T market by 2026 due to its performance and cost advantages.
At the same time, emerging technologies such as co packaged optics (CPO) will accelerate commercialization from 2026, aiming to further improve bandwidth density and reduce power consumption.
- Supply chain and capacity competition: The surge in demand has led to tight supply of core components such as optical chips, and advanced optical chip production capacity is expected to fall behind demand by 5% -15% by 2026.
This shifts the competition among top manufacturers from downstream module assembly to controlling and coordinating the upstream supply chain, with production capacity layout and technological breakthroughs becoming key.
- Long term growth expectations: AI giants such as Nvidia, Google, Meta, and Amazon continue to increase their capital expenditures, with a projected total of $596.4 billion by 2026, providing a strong and predictable demand foundation for the optical module market.
Although copper cables still have cost advantages in scale up interconnection within cabinets, in scenarios such as scale out interconnection between racks, optical modules have become an irreplaceable choice due to their high bandwidth characteristics, and have broad long-term demand prospects.
