The Global Co-Packaged Optics Market 2026-2036

The global co-packaged optics (CPO) market stands at an inflection point, poised to fundamentally transform data center interconnect architecture over the coming decade. Driven primarily by the explosive growth of artificial intelligence workloads, particularly large language models and generative AI, CPO technology addresses critical bottlenecks in bandwidth, power consumption, and latency that conventional pluggable optical modules can no longer overcome.

Co-packaged optics integrates optical transceivers directly with switch ASICs or processors within the same package, dramatically shortening the electrical path between computing silicon and optical conversion. This architectural shift reduces power consumption from approximately 15 picojoules per bit with pluggable modules to around 5 picojoules per bit, with a projected path to below 1 picojoule per bit. The technology also enables significantly higher bandwidth density at the package edge, essential for next-generation switches operating at 51.2 terabits per second and beyond.

The market divides into two primary application segments: scale-out and scale-up networks. Scale-out applications encompass traditional data center switching fabrics using Ethernet or InfiniBand protocols, connecting racks and clusters across the facility. Scale-up applications target GPU-to-GPU and accelerator interconnects within AI training clusters, replacing copper-based solutions like NVIDIA's NVLink with optical alternatives that offer superior reach, bandwidth, and power efficiency. Initial CPO deployments are expected to target scale-up AI networks before expanding to broader scale-out infrastructure.

NVIDIA's announcement of Spectrum-X and Quantum-X silicon photonics switches at GTC 2025 marked a watershed moment for the industry, signaling that the dominant AI infrastructure provider is fully committed to CPO technology. These switches leverage TSMC's System on Integrated Chips (SoIC) technology with 3D hybrid bonding to achieve unprecedented integration density. Broadcom, the leading switch ASIC supplier, has pursued a complementary strategy with its Bailly CPO platform, emphasizing an open ecosystem approach that works with multiple packaging and photonics partners.

The CPO supply chain represents one of the semiconductor industry's most complex ecosystems, spanning photonic integrated circuit design, laser sources, electronic interface circuits, advanced packaging, optical alignment, and system integration. TSMC has emerged as a central player, providing both leading-edge logic processes and advanced packaging platforms including CoWoS and COUPE that enable tight integration of photonic and electronic chiplets. Critical bottlenecks remain in optical assembly and testing, where sub-micron alignment tolerances and specialized equipment create manufacturing challenges that the industry is actively working to resolve.

Key technology decisions facing the industry include the choice between 2.5D and 3D integration approaches, external versus integrated laser sources, and edge coupling versus grating coupling for fiber attachment. Most leading implementations have converged on external laser source architectures that keep temperature-sensitive lasers separate from heat-generating ASICs, improving reliability and enabling redundancy. Hybrid bonding technology is increasingly favored for achieving the interconnect density required for next-generation optical engines.

Hyperscale cloud providers including AWS, Microsoft Azure, Google, and Meta represent the primary demand drivers, with their massive AI infrastructure investments creating urgent requirements for CPO solutions. These companies collectively invest tens of billions of dollars annually in data center infrastructure and are actively evaluating or developing CPO technology for deployment beginning in 2026-2027.

The competitive landscape features established semiconductor giants alongside well-funded startups. Companies like Ayar Labs, Lightmatter, and Celestial AI are pioneering novel architectures including 3D photonic interposers and photonic fabric technologies that may reshape the market. Meanwhile, traditional optical component suppliers including Lumentum, Coherent, and Marvell are adapting their portfolios for CPO applications. As AI model sizes continue growing exponentially and data center power constraints tighten, CPO technology offers a compelling solution to interconnect challenges that will only intensify. The technology's ability to deliver higher bandwidth at lower power positions it as essential infrastructure for the AI era.

The Global Co-Packaged Optics Market 2026-2036 delivers comprehensive analysis of the rapidly emerging CPO industry, examining how this transformative technology is reshaping data centre interconnect architecture to meet the unprecedented bandwidth demands of artificial intelligence and machine learning workloads. As hyperscale operators and AI infrastructure providers confront critical limitations in power consumption, latency, and bandwidth density with conventional pluggable optical modules, co-packaged optics has emerged as the definitive next-generation solution, integrating optical transceivers directly with switch ASICs and accelerators to achieve dramatic improvements in performance and efficiency.

This authoritative report provides semiconductor industry professionals, investors, data centre operators, and technology strategists with detailed market forecasts projecting CPO growth from nascent commercial deployments through mass adoption, with granular segmentation by application (scale-out networking and scale-up AI interconnects), integration technology (2D, 2.5D, and 3D packaging), and end-use sector. The research examines the complete CPO value chain, from photonic integrated circuit design and laser sources through advanced semiconductor packaging and system integration, identifying critical bottlenecks, emerging solutions, and strategic opportunities across each segment.

Drawing on extensive primary research including interviews with industry leaders across the CPO ecosystem, the report delivers actionable intelligence on technology roadmaps from dominant players including NVIDIA and Broadcom, evaluates competing packaging approaches from leading OSATs and foundries, and assesses the readiness of hyperscale customers to deploy CPO at scale. Detailed company profiles provide strategic analysis of 55 organisations actively shaping the CPO landscape, while comprehensive benchmarking enables direct comparison of competing technologies, products, and ecosystem strategies.

Report contents include:

• Market Analysis and Forecasts
  • Ten-year market forecasts (2026-2036) for total CPO market size and revenue
  • Optical I/O for AI interconnect unit shipment and revenue projections
  • CPO network switch unit shipment and market size forecasts
  • Server board, CPU, and GPU/accelerator demand forecasts driving CPO adoption
  • Segmentation by EIC/PIC integration technology and packaging approach
  • Regional analysis and adoption timeline projections
• Technology Analysis
  • Comprehensive examination of photonic integrated circuit (PIC) architectures and silicon photonics
  • Optical engine design principles, components, and performance benchmarks
  • Detailed analysis of 2D, 2.5D, and 3D EIC/PIC integration approaches
  • Through-silicon via (TSV), fan-out, glass-based, and hybrid bonding packaging technologies
  • Fiber array unit (FAU) alignment challenges and solutions
  • Laser integration methods including external laser source architectures
  • Universal Chiplet Interconnect Express (UCIe) implications for CPO
• Application Analysis
  • Scale-out network switch CPO for Ethernet and InfiniBand fabrics
  • Scale-up optical I/O for GPU-to-GPU and AI accelerator interconnects
  • Comparison of CPO, pluggable optics, and copper interconnect approaches
  • Power efficiency analysis: CPO vs. pluggable vs. copper (pJ/bit benchmarks)
  • Latency performance comparisons across interconnect technologies
  • Migration roadmaps from copper to optical in AI infrastructure
• Industry and Supply Chain Intelligence
  • Complete CPO industrial ecosystem mapping across ten value chain segments
  • PIC design, ASIC/xPU, laser sources, wafer/substrate suppliers analysis
  • EIC, SerDes, PHY, and retimer supplier landscape
  • Connector and fiber infrastructure provider assessment
  • Foundry capabilities for silicon photonics and advanced packaging
  • OSAT packaging, assembly, and test service provider evaluation
  • System integrator and ODM/OEM positioning
  • Hyperscaler end customer requirements and adoption timelines
  • Ecosystem interdependencies and strategic implications
• Competitive Intelligence
  • NVIDIA vs. Broadcom strategic comparison in AI infrastructure and CPO
  • Product benchmarking: Spectrum-X, Quantum-X, Bailly platform specifications
  • Divergent ecosystem strategies and partnership analysis
  • Start-up innovation landscape: Ayar Labs, Lightmatter, Celestial AI, and others
  • Foundry platform comparison: TSMC COUPE/iOIS, GlobalFoundries Fotonix
• Challenges and Solutions
  • SerDes bottlenecks in high-bandwidth systems and mitigation approaches
  • Thermal management challenges in CPO module design
  • Optical alignment precision requirements and manufacturing solutions
  • Reliability considerations: redundancy, monitoring, and self-correction
  • Testing strategies for wafer-level and package-level optical validation
  • Standardisation efforts and interoperability considerations