Photonics Market Size & Share Analysis - Growth Trends and Forecast (2026 - 2031)

Global Photonics Market Trends and Insights

Proliferation Of Data-Center Interconnect Spurring Silicon-Photonics Transceiver Demand

Hyperscale operators are upgrading from 400-gigabit pluggable optics to 800-gigabit and 1.6-terabit co-packaged modules to lower latency and power budgets in AI training clusters.^{[1]Broadcom Inc., “Tomahawk 5 Co-Packaged Optics Announcement,” broadcom.com} Intel reported 40% year-over-year silicon-photonics revenue growth in 2024, anchored by shipments into GPU pods exceeding 10,000 accelerators per hall.^[2] Lumentum’s 1.6-terabit Cloud AI platform delivers 15-watt thermal envelopes, encouraging data-center architects to replace discrete transceivers with on-board optics. Traditional module vendors are therefore acquiring photonic-IC design houses to protect gross margins. The ramp is exposing a shortage of indium-phosphide gain chips, where substrate capacity remains limited to 100 mm wafers in Japan and the United States.

Adoption Of LiDAR-Based ADAS Across Chinese Automotive OEMs

Chinese electric-vehicle brands integrated LiDAR sensors into 1.2 million passenger cars during 2025, an 18% penetration rate that dwarfed the 7% seen in Europe and North America. BYD’s Seal and Han models employ USD 500 solid-state units from Hesai, halving the cost of mechanically scanned alternatives.^{[3]Hesai Technology, “AT128 Solid-State LiDAR Specifications,” hesaitech.com} NIO pairs Innovusion 1,550-nanometer fiber-laser units with long-range detection that EU regulators are evaluating for Level 3 autonomy certification. Rapid uptake is compressing cost curves for gallium-arsenide edge-emitting lasers, enabling tier-two suppliers to introduce sub-USD 300 modules by late 2026. The trend is creating spill-over demand for silicon avalanche photodiodes and high-frequency driver ICs.

EU Green-Deal Incentives for Micro-LED And GaN Photonics Fabs

The European Commission allocated EUR 1.2 billion (USD 1.3 billion) in 2024 to co-finance gallium-nitride and micro-LED lines in Germany, France, and the Netherlands. Germany approved EUR 500 million (USD 545 million) for a 200 mm GaN-on-silicon fab in Saxony led by Infineon and AMS OSRAM. France earmarked EUR 300 million (USD 327 million) for a micro-LED pilot line in Grenoble targeting automotive head-up displays. Subsidies cover up to 40% of capital expenditure, contingent on local-content and carbon-intensity thresholds. The initiative seeks to cut reliance on Taiwanese epitaxial suppliers that hold 70% of global GaN capacity.

India’s PLI Scheme Catalyzing Domestic Photonics Clusters

In March 2024, India extended its Production-Linked Incentive scheme to silicon photonics, offering 50% capital-expenditure reimbursement for fabs producing integrated photonic circuits and optical transceivers. The program targets INR 50 billion (USD 600 million) in investment by 2028 and requires 60% domestic value addition plus 40% export commitments. Bengaluru and Hyderabad are emerging as hubs, with the Indian Institute of Science establishing a 200 mm foundry in partnership with Applied Materials and Lam Research. Tata Electronics has committed INR 12 billion (USD 144 million) to a transceiver assembly plant in Gujarat, scheduled to ship in 2026. Fast-track environmental clearances and duty exemptions are mitigating historical barriers to upstream manufacturing.

Compound-Semiconductor Wafer Bottlenecks (InP, GaN <150 mm)

Indium-phosphide and gallium-nitride substrates remain confined to 100 mm and 150 mm sizes, keeping wafer prices at USD 1,500 and USD 800 respectively versus USD 50 for 300 mm silicon. Lead times stretched to 26 weeks in 2025 as coherent-transceiver demand spiked. Trade controls imposed by the United States on metal-organic chemical-vapor-deposition tools further tightened supply, forcing Chinese fabs to qualify domestic equipment. Scaling to 200 mm faces defect densities above 10^4 cm^-2 that degrade yield. The constraint is most acute in radio-frequency power amplifiers and high-power lasers where silicon substitutes are infeasible.

Thermal-Management Limits On >10 kW Diode Lasers

Diode-laser bars above 10 kW generate heat fluxes exceeding 500 W cm^-2, necessitating micro-channel coolers with <50 µm channels to keep junction temperatures below 60 °C. IPG’s 15 kW fiber-laser modules incorporate diamond heat spreaders and two-phase liquid cooling, adding USD 8,000 to the bill of materials. Coherent found mean-time-to-failure drops from 50,000 hours at 8 kW to 15,000 hours at 14 kW due to facet damage. Thermal-expansion mismatch between GaAs emitters and copper submounts cuts wall-plug efficiency by 5 percentage points over 10,000 hours. Alternative cooling such as spray or thermoelectric modules raises complexity and lowers system reliability, slowing adoption in cost-sensitive industries.

Segment Analysis

By Product: Fiber Lasers Anchor Industrial Demand

Lasers generated 38.32% of 2025 product revenue, underscoring their status as the largest slice of the photonics market. Fiber-laser systems from IPG and Trumpf dominate metal cutting, welding, and additive manufacturing. Coherent shipped 2 million edge-emitting diode bars in 2024 for sensing and pumping, highlighting deep penetration into LiDAR and medical pumping tasks. Modulators and switches are slated for a 4.91% CAGR through 2031 as co-packaged optics displace pluggable modules in 51.2-terabit switches. Although general-illumination LEDs face margin pressure, micro-LED displays for augmented reality and automotive head-up systems are drawing USD-scale investments from AMS OSRAM and Plessey.

The long tail of sensors, detectors, fibers, and optical components remains essential for system performance. Hamamatsu recorded 25% shipment growth in detectors during 2024, driven by biosensing and autonomous-vehicle demand. Corning’s bend-insensitive fiber met 5G fronthaul bend-radius requirements, shipping more than 100 million fiber-kilometers in 2024. Micro-optics such as isolators and circulators continue to enable telecom-grade reliability. While each niche is small, collectively they support the broader rise of the photonics market.

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

By Material: Compound Semiconductors Command Premium Pricing

Silicon retained 34.52% revenue share in 2025 due to dominant use in silicon-photonics transceivers and CMOS image sensors. Yet compound semiconductors fetch higher gross margins because performance hinges on direct bandgap and wide-bandgap attributes. Indium-phosphide underpins coherent 400G and 800G transceivers with laser linewidths below 100 kHz, an unattainable parameter for silicon alone. Gallium-nitride is replacing silicon carbide above 1,200 V in electric-vehicle inverters, with Infineon and Wolfspeed shipping 200 mm wafers into traction platforms. Polymers and plastics, while only a niche, are registering a 4.67% CAGR as flexible waveguides enter wearable biosensors and foldable displays.

Diamond and sapphire substrates address extreme thermal or mechanical demands in defense and laser markets. Glass and silica remain workhorses for optical fibers, lithography mirrors, and precision lenses, with Schott and Ohara supplying ultra-low-expansion grades for deep-ultraviolet scanners. The evolving material mix signals a steady shift toward compound and specialty platforms, a core theme inside the wider photonics market.

By Wavelength: Infrared Dominates Telecom and Sensing

Infrared held 46.18% of 2025 revenue, reflecting entrenched positions at 1,310 nm and 1,550 nm for fiber-optic links and at 905 nm and 1,550 nm for automotive LiDAR. Thermal imaging from 8-14 µm supports industrial safety and defense systems. Visible wavelengths serve display backlights and solid-state lighting, while emerging RGB laser projectors from Sony and Epson are opening premium entertainment niches. Ultraviolet, the smallest category today, is on course for a 5.02% CAGR as 193 nm lithography and far-UVC disinfection systems proliferate.

Photonics market size metrics track closely with these wavelength trends. Ultraviolet’s contribution to the photonics market size is modest today but grows disproportionately fast, whereas infrared retains the lion’s share due to telecom volumes. Stability in wavelength allocation is expected because eye-safety and atmospheric-transmission constraints lock application developers into established windows.

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

By End-User Industry: Automotive Segment Accelerates

Data and telecom represented 27.71% of 2025 revenue and remain the anchor for the photonics market. However, automotive applications are projected for the fastest 4.78% CAGR, lifted by regulatory mandates for advanced driver-assistance systems in China and Europe. Chinese OEMs alone consumed 60% of global LiDAR units in 2025, evidencing scale effects that push component costs lower. Consumer electronics absorb cutting-edge sensors for under-display fingerprint, facial recognition, and health metrics. Aerospace and defense provide a stable, qualification-intensive outlet for radiation-hardened lasers and detectors.

Industrial and manufacturing users deploy high-power lasers for cutting, welding, and additive processes. Medical and bio-instrumentation segments are transitioning toward point-of-care photonic diagnostics, energized by continuous glucose monitors cleared by the U.S. FDA. Each end-user vertical focuses on specific performance parameters, yet collectively they sustain the diversified demand profile that characterizes the global photonics market.

Geography Analysis

Asia Pacific commanded 41.37% of 2025 revenue, confirming its position as the largest regional block within the photonics market. China’s LiDAR ecosystem, Japan’s precision optics, and South Korea’s display backlights create a dense supplier network. China alone shipped 60% of global LiDAR units in 2025, with Hesai and RoboSense controlling 65% of that volume. India’s Production-Linked Incentive policy is drawing assembly lines from Southeast Asia into Bengaluru and Hyderabad, a shift expected to raise India’s photonics market share modestly by 2031. Regional governments continue to balance export controls with domestic content targets, shaping how the photonics market evolves.

North America remains the design nucleus for silicon-photonics transceivers and defense photonics. Intel, Broadcom, and a cluster of fabless startups claimed roughly 55% of data-center optical-module sales in 2024. Defense contracting funnels steady demand for night-vision and missile-seeker optics that require U.S. export-license compliance. Despite these advantages, cost-sensitive manufacturing is gradually migrating toward Mexico for assembly and test operations. Europe leverages equipment suppliers ASML, Trumpf, and Carl Zeiss, positioning the region as a value-added node in the photonics supply chain.

The Middle East is the fastest-growing geography, forecast for a 5.23% CAGR through 2031. Sovereign wealth funds in the United Arab Emirates and Saudi Arabia have earmarked USD 3 billion for hyperscale data centers that each require hundreds of petabits of optical connectivity. Regulatory incentives include 50-year tax holidays and relaxed data-residency mandates, attracting cloud platforms previously concentrated in Europe. South America and Africa remain nascent but show fiber-to-the-home and 5G backhaul opportunities that will incrementally enlarge the photonics market size over the next decade.