Co-packaged Optics Market Size & Share Analysis - Growth Trends & Forecasts (2025 - 2030)

Global Co-packaged Optics Market Trends and Insights

Ramp-up of 51.2T switch silicon requiring 1.6T CPO

Broadcom’s Bailly platform showed how embedding eight 6.4 Tbps optical engines beside a Tomahawk 5 switch delivered 70% lower power draw than pluggable transceivers.^{[1]Broadcom Inc., “Broadcom Delivers Industry's First 51.2-Tbps Co-Packaged Optics Ethernet Switch Platform for Scalable AI Systems,” investors.broadcom.com} Hyperscale operators consequently reassessed network topologies because legacy electrical traces could not sustain the signal integrity demanded by 51.2 Tbps ASICs. The economic gap widened when rack-level thermal budgets for 800G pluggables hit practical ceilings, prompting procurement teams to treat co-packaged optics as a necessity rather than a lab project. As the third-generation CPO with 200 Gbit/s lanes enters production, the co-packaged optics market gains a clear technical roadmap that aligns with 2026-2028 switch-silicon refresh cycles. Equipment OEMs, therefore, accelerate design wins, locking in demand visibility over the medium term.

Hyperscale data-center energy-efficiency mandates

Net-zero pledges published by major cloud providers intensified scrutiny on watts-per-gigabit metrics. ASE’s demonstration of <5 pJ/bit optical engines confirmed that integrating optics inside the switch package cuts DSP power and eliminates copper trace losses. Regulatory pressure—from carbon-pricing schemes in the EU to city-level moratoriums on new data-center builds—made the power reduction a board-level issue. Operators outlined three-year payback targets tied to energy savings and, in parallel, positioned co-packaged optics as a lever to unlock higher rack densities without breaching site power envelopes. The policy environment, therefore, transforms a technical benefit into an investment imperative, boosting demand through long-term purchase agreements.

Surge in AI/ML cluster bandwidth demand

Large-language-model training scales synchronously across thousands of GPUs, and any network contention translates directly into higher training cost per parameter. NVIDIA signaled the shift by integrating co-packaged optics into its Spectrum-X and Quantum-X switching families, promising 1.6 Tbps per port while trimming power by 3.5× relative to conventional optics. Simultaneously, Cisco’s Silicon One roadmaps introduced congestion-aware scheduling optimized for optical fabrics. Such vendor moves validated co-packaged architectures for time-sensitive AI workloads and underpinned procurement forecasts from hyperscale GPU farms in North America and China. Short-term pull from AI houses, therefore, represents the single largest incremental revenue catalyst for the co-packaged optics market.

Foundry participation enabling volume economics

The entrance of top-tier fabs reshapes cost curves. TSMC’s Compact Universal Photonic Engine combines 65 nm electronics with photonic ICs inside a single SoIC-X stack and delivers 12.8 Tbps aggregate bandwidth, a milestone that slashes the dollars-per-gigabit metric versus discrete optics. GlobalFoundries committed USD 700 million to on-shore silicon-photonics capacity in New York, ensuring greater geographic redundancy in supply. Foundry engagement lets system OEMs lock multiyear wafer capacity, smoothing learning-curve driven cost declines. The improved economics feed directly into bill-of-materials reductions essential for mainstream adoption beyond hyperscale flagships.

Manufacturing complexity and heterogeneous integration yield

Co-packaged optics combines silicon photonics, III-V lasers, and advanced substrates inside a millimeter-scale envelope. Aligning optical waveguides to within tens of nanometers while also attaching high-power switch dice drives yields loss across multiple process steps. Recent yield slippages in advanced CoWoS lines, highlighted during NVIDIA’s Blackwell ramp, underscore the fragile process window. Material-mismatch thermal stress necessitates exotic interface layers and active cooling, increasing part counts and inspection steps. Until learning curves mature, volume availability remains constrained, elongating lead times for tier-two OEMs and tempering near-term shipment forecasts for the co-packaged optics market.

Interoperability and standards immaturity

Open Compute Project working groups published draft mechanical and thermal specifications, yet full-stack standards—covering firmware hooks, optical test specs, and connector pin-outs—are still evolving Enterprises that rely on multivendor sourcing thus face integration risk. Linear Pluggable Optics MSAs reduce complexity by eliminating DSPs, but the CPO ecosystem needs equivalent consortium frameworks. Absent hard interoperability guarantees, telcos and enterprises favor legacy pluggables, delaying penetration outside hyperscale spheres. Consequently, standard gaps subtract growth momentum from the long-term forecast.

Segment Analysis

By Data Rate: Bandwidth scaling beyond 3.2T

The 3.2 Tbps segment accounted for 38.3% of the co-packaged optics market revenue in 2024, reflecting the installed base of Tomahawk 4 class switches. However, ≥6.4 Tbps devices are posting a 61.4% CAGR through 2030 as AI clusters press for higher radix fabrics. A single 6.4 Tbps engine co-located with a 51.2 Tbps ASIC yields eight optical lanes at 200 Gbit/s each, which halves the switch-to-module power budget and eliminates retimer stages. Vendors thus lock the ≥6.4 Tbps roadmap into server refresh cycles beginning in 2026.

Looking forward, the foundry roadmaps project 12.8 Tbps engines that stack multiple optical cores within one package, positioning the top-end band to outgrow all other data-rate tiers. While sub-1.6 Tbps CPO remains viable for edge appliances where cost outranks density, hyperscale bidding documents now stipulate 200G/lane signal paths as a baseline. As this migration unfolds, the co-packaged optics market size for ≥6.4 Tbps devices is set to outstrip the combined value of lower speed classes by 2029.

Note: Segment shares of all individual segments available upon report purchase

By Component: Laser sources accelerate the share gain

Optical engines represented 41.8% of 2024 revenue, yet laser sources are expanding at a 45.3% CAGR as vendors master on-chip light generation. China’s integrated indium-phosphide laser arrays, produced on 200 mm silicon wafers, removed the need for external pump lasers and reduced package height, trimming material cost, and improved reliability.

Electronics ICs maintain steady demand as controller functions migrate on-package, but the incremental value pool is shifting toward laser innovation. With integrated sources eliminating fiber pigtails, system architects design slimmer top-of-rack switches and free front-panel real estate. The co-packaged optics market size for laser devices is therefore moving from niche to core, supported by multi-year supply agreements between hyperscalers and laser foundries.

By Integration Approach: Chip-level packaging gains momentum

On-board optics still held 64.4% revenue in 2024 because legacy switch PCB layouts could accommodate optical engines at the board edge. Yet, co-packaged optics recorded a 54.4% CAGR and is projected to surpass on-board solutions late in the forecast period. NVIDIA’s decision to co-package optics within its GPU networking stack signaled to OEMs that board-level interposers will not meet next-generation latency targets.^{[2]SPIE Europe Ltd., “Nvidia reveals plan to scale AI 'factories' with co-packaged optics,” optics.org}

Chip-level integration shortens channel lengths and removes host-card electrical connectors, pushing signal-integrity margins higher even as lane rates climb to 224G PAM4. While thermal design rules remain challenging, advancements such as embedded micro-thermoelectric coolers and glass-core substrates mitigate hot-spot risks. Consequently, procurement pipelines indicate a turning point where co-packaged optics market adoption rises sharply as soon as second-generation thermal designs prove in volume.

By End-use Application: AI clusters reshape demand

Hyperscale cloud facilities led with 47.3% revenue in 2024 since they refresh switch fabrics every two years, but HPC and AI/ML clusters will grow at 58.4% CAGR, reflecting their need for synchronous, low-latency bandwidth. Ranovus and Cerebras collaborated on wafer-scale engines that connect trillions of parameters over co-packaged optics fabrics.

Enterprise data centers and telco central offices adopt more cautiously, hampered by standards immaturity and multivendor qualification requirements. However, as hardware reference designs mature and operating cost savings become quantifiable, corporate CIOs pilot smaller deployments. Once case studies prove 30-50% energy gains, enterprise pull will widen, broadening the co-packaged optics market beyond AI strongholds.

Geography Analysis

Asia-Pacific commanded 33.2% of 2024 revenue and is advancing at a 43.3% CAGR, powered by government subsidies and vertically integrated supply. China’s CNY 8.2 billion subsidy enabled eight-inch silicon-photonics wafer production and laser integration that compresses the bill-of-materials cost. Japan’s Ministry of Economy, Trade and Industry funded USD 305 million for NTT, Intel, and SK Hynix to co-develop optical chips, strengthening local design ecosystems.^{[3]Nikkei Asia, “Japan's NTT, Intel to collaborate on cutting-edge chips using optical tech,” asia.nikkei.com} South Korea complements the loop by aligning high-bandwidth memory roadmaps with optical interfaces.

North America supplies the bulk of end-user demand through hyperscale operators. Broadcom, Intel, and NVIDIA anchor the regional technology stack, while TSMC’s Arizona fabs introduce domestic packaging capacity that shortens lead times for US cloud customers. The co-packaged optics market, therefore, benefits from a closed loop that links chip design to captive consumption, reinforcing the region’s share even as production diversifies globally.

Europe prioritizes interoperability and sustainability. Open Compute Project chapters headquartered in the EU draft interface blueprints, shaping global deployment practices. Carbon-pricing legislation further propels adoption; operators document 30-50% power savings when shifting from pluggable optics to co-packaged lanes. M&A activity, typified by Nokia’s USD 2.3 billion acquisition of Infinera, signals the region’s intent to secure proprietary optical IP and climb the value chain.