Optical Interconnect Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

The Optical Interconnect Market is segmented by Type (Optical Transceivers, Active Optical Cables, Embedded Optical Modules), Applications (Telecommunication and Data Communication), and Geography.

Market Snapshot

Optical Interconnect Market CAGR
Study Period:

2018- 2026

Base Year:

2020

Fastest Growing Market:

Asia Pacific

Largest Market:

Asia Pacific

CAGR:

13.29 %

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Market Overview

The Optical Interconnect Market was valued at USD 8,919.8 million in 2020, and is expected to reach to USD 21,711.3 million by 2026, while registering a CAGR of about 13.29% during the forecast period (2021 - 2026). Due to the adverse effects of COVID 19 across industries, players such as 3M are currently manufacturing medical products to assist various stakeholders globally, to combat Covid-19. 3M has doubled production of N95 respirators to 1.1 billion per year at its global manufacturing facilities, including in the U.S., Asia, and Europe. This has led to reduced manufacturing for optical interconnect cables.

However, as the ability to work from home has become an absolute necessity, market players such as Nexcom (Taiwan) plans to help telecom providers and data centers across the world to virtualize and expand capacity. For meeting current network demands for faster speeds, the NC 220FMS3 module provides a PCIe3.0 x16 interface and two QSFP28 ports, each supporting 100Gb/s Ethernet connectivity. The module provides high-speed connectivity without any packet loss. The 100 G optical transceivers (providing 100Gb/s ethernet), their form factor type, and standard are developed according to the cost and power consumption, which are regarded as the main drive in the development for interconnect market, which potentially drives the demand of optical interconnect.

  • Moreover, directly modulated VCSEL arrays, parallel fiber ribbons, along with detector arrays, are highly being applied to optical backplane capacity issues. In the future, additional higher functionality is highly expected as an emerging trend for optical interconnects, which includes features such as cross-connect switches and data packet routing in the optical domain.
  • The increasing demand for communication bandwidth is expected to drive the market. Due to the emergence of a large number of new services in different types of communications and their value-added entities, the demand for bandwidth has gone up more than ever before. Optical interconnect drive it possible in providing more bandwidth and bring great advantage to computing performance, compared to electrical interconnects.
  • With optics, over the next decade, it is believed that the energy-requiring for cross-chip communication would approach less than 0.5 pJ b−1 and to 0.1 pJ b−1 for communication, such as off-chip communication technology. By utilizing the ability to move data affordably, both the power consumption and the total cost for such future multicore processor systems are expected to be reduced with improving bandwidth.
  • Since the beginning of 2020, vendors, like Ciena, Infinera, Huawei, and Nokia, have been pushing the limits of modern optics. Huawei CloudFabric EVN Layer 2 DCI solution provides highly permits scalable, efficient layer 2 interconnection that allows expansion of up to 32 data centers across IP WANs. Like Huawei, competing vendors, like Ciena or Infinera, are also working on their 800G-capable coherent solutions, which may power next-generation optical DCI platforms.
  • By the second quarter of 2020, millions of people switched to work from home, and video consumption (which amounts to 60% of the global data traffic) was at an all-time high. Critical services were being impacted, and Wi-Fi access points were facing congestion; FWA witnessed limitations, and interconnect points were burdened. 
  • These scenarios also surge the cloud computing activities, along with significantly increasing investments from the industrial and enterprises segment. All these factors made a massive boom in the data center market along with technologies incorporated to expand the capabilities of data centers. Such trends are expected to further stimulate the growth of the market studied.

Scope of the Report

The optical interconnect refers to any system of transmitting signals from one part of an integrated circuit to another using light and are highly being used in applications, such as telecommunication and data communication, and further providing connectivity solutions in the end-user industries, such as military and aerospace and automotive.

Type
Optical Transceivers
Active Optical Cables (AOCs)
Embedded Optical Modules (EOMs)
Application
Telecommunication
Data Communication
Geography
North America
United States
Canada
Europe
Germany
United Kingdom
France
Rest of Europe
Asia Pacific
India
China
Japan
Rest of Asia Pacific
Latin America
Middle East and Africa

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Key Market Trends

Data Communication is Expected to Spur the Demand for Optical Interconnects

  • One of the major applications of optical interconnectivity is within data communication networks which include datacenter networks, wireless access networks, and wired access networks. Current data center networks, which are based on electronic packet switches, experiences an exponential increase in network traffic due to cloud computing development. Optical interconnects emerged as a promising alternative that offers high throughput, low latency, and reduced power consumption.
  • According to IEEE Communications, all-optical networks could provide up to 75% energy savings in the data centers. Especially in large data centers used in enterprises, the use of power efficient, high bandwidth, and low latency interconnects is of paramount importance, and there is significant interest in the deployment of optical interconnects in these data centers.
  • Currently, optical technology is utilized in data centers is only for point-to-point links, which is in the same way as point-to-point optical links that were used in older telecommunication networks (opaque networks). However, optically switched interconnects are still in the research phase.
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North America To Witness High Market Growth

  • The rapid penetration of the internet is expected to raise the growth of the market in this region. Moreover, according to Cisco Systems, the cloud traffic in 2021 is estimated to be around 6844 exabytes per year in North America, which is highest in comparison to other regions. According to the November 2020 edition of the Ericsson Mobility Report, North America was expected to end 2020 with about 4% of its mobile subscriptions being 5G. Hence, such trends create scope for the market, as a powerful interconnect is required to enable cell towers and other applications to handle 5G transmissions.
  • Also, North America has various players that provide optical interconnect products and solutions, along with players who are also keen to innovate new solutions for the improvement in interconnect bandwidth density at around 10x lower power. For instance, in March 2020, Ayar Labs announced that it had received a strategic investment from Lockheed Martin Ventures, where the funds will be used to accelerate the commercialization of Ayar Labs’ patented monolithic in-package optical I/O (MIPO) solution for applications that require high bandwidth, low latency, and power-efficient short-reach interconnects.
  • Moreover, data movement within the data center is becoming a critical feature, and the rise in the ample of new businesses leveraging data center services in the United States, and Canada will leverage more machine-to-machine (M2M) traffic. To overcome this problem, IBM focuses on providing optical switches in the data center as a key to resolve the problem. IBM is undertaking to build reconfigurable optical switches using silicon-photonic technology. If implemented, this optical solution becomes a new trend in the optical interconnect market.
  • In June 2020, Equinix Inc., the global interconnection and data center company, announced its agreement to purchase a portfolio of 13 data centers across Canada from BCE Inc for USD 750 million in an all-cash transaction. The 13 data center sites representing 25 Bell data center facilities are likely to generate approximately USD 105 million annualized revenue.
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Competitive Landscape

The Optical Interconnect Market is fragmented in nature and is characterized by the presence of several key vendors and other prominent vendors. The key vendors are increasingly focusing on creating awareness about the optical Interconnect development courses and their benefits, along with new innovation and acquisitions. Further, global vendors are trying to stabilize themselves in the market, through strategic collaborations and investements. Key players are 3M, Sumitomo Electric Industries, etc.

  • December 2020 - Corning Inc. spent USD 450 million to expand its Cabarrus County fiber optic cable plant in Concord, N.C., generating 475 new jobs and making it the largest such facility in the world.
  • November 2020 - Ayar Labs, which makes chip solutions based on optical networking principal's architecture raised USD 35 million in a Series B round of funding. According to the company's CEO, the funding will be used to continue developing its product and working on further commercialization. The main application area for the company's technology is next-generation computing, anywhere that there is a massive movement of data, including aerospace and government applications, artificial intelligence and high-performance computing, telecoms and cloud applications, and lidar for self-driving car and other autonomous systems.

Recent Developments

  • March 2021 - Canada-based Reflex Photonics was awarded a multimillion-dollar contract to deliver thousands of SpaceABLE 28 optical module devices to be used in high-throughput communication satellites (HTCS) that may be deployed in geostationary orbit. Building on the recognized robustness inherent in the design of Reflex Photonics’ optical modules, the SpaceABLE28 line may provide radiation-resistant optical interconnect modules tested and qualified for use in harsh space environment. In 2019, the company launched new LightCONEX active optical blind mate that interconnects compatible with the upcoming VITA 66.5 standard and supported by the Sensor Open System Architecture (SOSA) consortium.
  • July 2020 - Vodafone New Zealand collaborated with US-based Ciena Corporation for deploying 800-Gbps data center interconnect between its facilities in Auckland. The fiber network upgrade may help Vodafone manage network requirements in support of its recently launched 5G service. The company may leverage Ciena’s WaveLogic 5 Extreme (WL5e) coherent optical engine online cards plugged into Vodafone New Zealand’s previously fielded Ciena 6500 packet-optical transport platforms. The new capabilities may enable the service provider to offer transmission rates from 200 to 800 Gbps. The company also may see a 50% reduction in power consumption.

Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions and Market Definition

    2. 1.2 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET DYNAMICS

    1. 4.1 Market Overview

    2. 4.2 Market Drivers

      1. 4.2.1 Increasing Demand for Communication Bandwidth Owing to Demand for Cloud Computing, AI, and HPC

      2. 4.2.2 Increasing Investment in Data Centers Interconnect and Fiber Optic Communication

    3. 4.3 Market Restraints

      1. 4.3.1 Slow Commercialization of Optical Interconnection Related Technologies

    4. 4.4 Industry Value Chain Analysis

    5. 4.5 Industry Attractiveness - Porter's Five Forces Analysis

      1. 4.5.1 Threat of New Entrants

      2. 4.5.2 Bargaining Power of Buyers/Consumers

      3. 4.5.3 Bargaining Power of Suppliers

      4. 4.5.4 Threat of Substitute Products

      5. 4.5.5 Intensity of Competitive Rivalry

    6. 4.6 Assessment of Impact of Covid-19 on the Market

  5. 5. MARKET SEGMENTATION

    1. 5.1 Type

      1. 5.1.1 Optical Transceivers

      2. 5.1.2 Active Optical Cables (AOCs)

      3. 5.1.3 Embedded Optical Modules (EOMs)

    2. 5.2 Application

      1. 5.2.1 Telecommunication

      2. 5.2.2 Data Communication

    3. 5.3 Geography

      1. 5.3.1 North America

        1. 5.3.1.1 United States

        2. 5.3.1.2 Canada

      2. 5.3.2 Europe

        1. 5.3.2.1 Germany

        2. 5.3.2.2 United Kingdom

        3. 5.3.2.3 France

        4. 5.3.2.4 Rest of Europe

      3. 5.3.3 Asia Pacific

        1. 5.3.3.1 India

        2. 5.3.3.2 China

        3. 5.3.3.3 Japan

        4. 5.3.3.4 Rest of Asia Pacific

      4. 5.3.4 Latin America

      5. 5.3.5 Middle East and Africa

  6. 6. COMPETITIVE LANDSCAPE

    1. 6.1 Company Profiles*

      1. 6.1.1 3M Company

      2. 6.1.2 Sumitomo Electric Industries Ltd

      3. 6.1.3 Molex LLC

      4. 6.1.4 Amphenol Corporation

      5. 6.1.5 TE Connectivity Ltd.

      6. 6.1.6 Go!Foton Inc.

      7. 6.1.7 II-VI Incorporated

      8. 6.1.8 Corning Incorporated

      9. 6.1.9 Cisco Systems Inc.

      10. 6.1.10 Huawei Technologies Co. Ltd

  7. 7. INVESTMENT ANALYSIS

  8. 8. MARKET OPPORTUNITIES AND FUTURE TRENDS

**Subject to Availability

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Frequently Asked Questions

The Optical Interconnect Market market is studied from 2018 - 2026.

The Optical Interconnect Market is growing at a CAGR of 15% over the next 5 years.

North America is growing at the highest CAGR over 2021- 2026.

North America holds highest share in 2020.

  • 3M Company
  • Sumitomo Electric Industries, Ltd.
  • Molex Electronic Solutions
  • Amphenol Corporation
  • TE Connectivity

Are the major companies operating in Optical Interconnect Market.

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