AI data center optical interconnect market to hit $144 billion by 2030, an over ten-fold increase from 2024 figures, according to new projections — silicon photonics expected to account for nearly two-thirds of revenue, driven by co-packaged optics

The global data center optical interconnect market is projected to reach $144.4 billion by 2030, a dramatic increase from $13.7 billion in 2024, according to a new report by China Insights Consultancy (CIC) commissioned by Chinese laser-chip manufacturer Yuanjie Semiconductors. The report, based on data from LightCounting and industry expert interviews, reveals that silicon photonics will account for nearly two-thirds of the market's revenue, growing from 16.6% in 2020 to 63.7% by 2030.

Silicon photonics, which involves manufacturing photonic chips using the same silicon material and CMOS foundry processes used for regular semiconductors, drives the industry's shift towards denser, more efficient designs like co-packaged optics. The AI industry has invested over $15 billion in co-packaged optics, photonic chips, higher-speed transceiver modules, and fiber in recent years.

The transition from copper to photonics in data centers has been driven by the need for higher bandwidth, reduced signal loss, and faster speeds to accommodate the increasing power of GPUs and the volume of AI workloads. This shift has already accelerated, with optical transceivers converting electrical signals to laser light to carry larger amounts of data over greater distances at higher speeds.

One key innovation in this space is co-packaged optics (CPO), which integrates the optical engine directly onto the switch or accelerator package, reducing the electrical path to millimeters. This technology is essential for achieving terabits-per-second speeds needed for future data center networking.