Silicon photonics and co-packaged optics at the heart of next-gen AI-driven data infrastructure

The silicon photonics industry is entering a period of rapid growth and diversification, according to Yole Group’s new report, Silicon Photonics 2025 – Focus on SoI, SiN, LNoI and InP Platforms.

As AI continues to drive exponential demand for bandwidth, the sector is transitioning to higher data rates, with 200G/channel links expected to become mainstream in 2026/27, and paving the way for 800G and 1600G transceivers. These solutions deliver the speed and energy efficiency that hyperscale data centers and AI clusters require. 

Martin Vallo, PhD, Senior Technology & Market Analyst, Photonics at Yole Group, said: “The industrial ecosystem brings together vertically integrated leaders such as TeraHop (former InnoLight), Cisco, Broadcom, and Marvell, alongside innovative startups including Ayar Labs, Lightmatter, Celestial AI, and Nubis Communications.

"Foundries and fabs like TSMC, GlobalFoundries, Intel, and STM, play a pivotal role in scaling technology, while equipment suppliers such as Applied Materials and ficonTEC enable high-performance manufacturing. Together, they fuel a dynamic industry delivering solutions for data communications, LiDAR, and emerging quantum technologies.”

Global competition is intensifying. China is scaling domestic capabilities, with TeraHop*, Hisense, Accezlink, amongst others, shipping millions of modules to power AI interconnects. Bolstered by government programs and academic collaboration, Chinese players are closing the gap with Western suppliers and positioning themselves as global challengers.

In addition to the silicon photonics market report, Co-Packaged Optics for Data Centers 2025 examines how packaging innovation is transforming next-generation connectivity. CPO technology integrates optical transceivers directly with switch ASICs or processors, enabling low-power, high-bandwidth links. While linear-drive pluggable modules remain competitive, CPO is expected to offer unmatched customization and scalability, with large-scale adoption targeted for 2028-2030.

With AI reshaping data infrastructure, silicon photonics and co-packaged optics represent critical enablers of tomorrow’s data center. Yole Group’s 2025 reports provide detailed market forecasts, technology roadmaps, and ecosystem insights needed to anticipate shifts, align strategies, and seize opportunities in this fast-moving domain.

Key takeaways
* 200G/channel will become the new mainstream, enabling 800G and 1600G transceivers to meet the performance and energy efficiency requirements of AI workloads.
* A diverse ecosystem is driving innovation, with vertically integrated leaders, startups, foundries, and equipment suppliers collaborating to scale solutions.
* China emerges as a key competitor, shipping millions of modules and closing the technology gap with Western suppliers.
* Co-packaged optics (CPO) is on track to transform data center architecture, with large-scale deployments projected between 2028 and 2030.