Optical Encoder ICs Research: CAGR of 8.2% during the forecast period

QY Research Inc. (Global Market Report Research Publisher) announces the release of 2025 latest report "Optical Encoder ICs- Global Market Share and Ranking, Overall Sales and Demand Forecast 2025-2031". Based on current situation and impact historical analysis (2020-2024) and forecast calculations (2025-2031), this report provides a comprehensive analysis of the global Wire Drawing Dies market, including market size, share, demand, industry development status, and forecasts for the next few years.

The global market for Optical Encoder ICs was estimated to be worth US$ 184 million in 2024 and is forecast to a readjusted size of US$ 290 million by 2031 with a CAGR of 6.6% during the forecast period 2025-2031.

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Optical Encoder ICs Market Summary

Optical encoders have been the popular choice in the motion control market for many years. They are comprised of an LED light source (typically infrared) and photodetectors placed on opposite sides of an encoder disk. This disk is constructed of plastic or glass and contains a series of alternating transparent and opaque lines or slots. During the rotation of the disk, the LED light path is interrupted by the alternating lines or slots on the disk, which in turn produces the typical square wave A & B quadrature pulses used to determine shaft rotation and speed.

There are two main types of optical encoders ICs: transmission type and reflection type. In the transmission type encoder, a code wheel with fine slits is placed between a light emitter and a photosensor. As the wheel rotates, it transmits or blocks light, generating an on/off signal to detect the rotation angle. In the reflection type encoder, the light emitter and the photosensor are located on the same side of the code wheel. The rotation angle is measured based on the reflected or non-reflected light from the wheel's surface.

Optical Encoder ICs Market Drivers

D1: Strong Policy Support Boosts Semiconductor Industry Development

China's 14th Five-Year Plan identifies high-end sensor chips as a key research priority, with local governments establishing special funds to support optical encoder IC R&D. The U.S. CHIPS Act and EU Chips Act, with nearly $100 billion in combined investments, strengthen domestic semiconductor supply chains, creating favorable conditions for optical encoder IC manufacturers.

D2: Industrial Automation Upgrades Drive Surging Market Demand

With the accelerated adoption of Industry 4.0 and smart manufacturing, equipment like CNC machines and industrial robots requires increasingly precise motion control, making 24-bit+ high-resolution optical encoder ICs essential. The rapid development of collaborative and humanoid robots further expands application scenarios for advanced encoder chips.

D3: Asia-Pacific Manufacturing Growth Fuels Regional Expansion

As the global manufacturing hub, China continues to scale up industrial automation and robotics production, driving robust demand for optical encoder ICs. Meanwhile, Japan and South Korea's leadership in semiconductor equipment and precision manufacturing solidifies their position as major consumers and innovation centers for high-end encoder chips.

Optical Encoder ICs Market Challenges

C1: Technological Barriers in High-End Applications

Despite growing demand, developing ultra-high-resolution optical encoder ICs remains challenging due to precision optoelectronic alignment requirements and signal processing complexities. Key patents in nano-scale grating design and noise reduction algorithms are still concentrated among a few international leaders like Broadcom and Renishaw, creating entry barriers for new players.

C2: Environmental Sensitivity and Reliability Issues

Optical encoder ICs face inherent limitations in harsh industrial environments, as contaminants (dust, oil, moisture) can degrade performance. While encapsulation solutions exist, they increase unit costs, compared to inherently robust alternatives like magnetic encoders, particularly impacting price-sensitive automation segments.

C3: Intensifying Competition from Alternative Technologies

Magnetic and capacitive encoders are gaining traction in mid-range applications due to better durability and simpler assembly. This forces optical encoder IC suppliers to either accept margin erosion in industrial markets or accelerate R&D for hybrid solutions, requiring significant capital expenditure with uncertain ROI timelines.

Optical Encoder ICs Market Restraints

R1: Talent Shortage Hinders Technological Advancement

The specialized expertise required for optical encoder IC design and manufacturing is in short supply globally. The lack of skilled optoelectronics engineers and precision manufacturing specialists slows R&D progress and limits production capacity expansion, particularly in emerging markets.

R2: Macroeconomic Volatility Disrupts Market Stability

Global trade tensions, currency fluctuations, and supply chain uncertainties increase component costs and lead times. These macroeconomic factors make long-term investment planning difficult for both optical encoder IC manufacturers and their end-users in industrial automation sectors.

R3: Inherent Technical Limitations Constrain Applications

While offering superior precision, optical encoder ICs remain vulnerable to environmental contaminants like dust and oil mist. Their performance also degrades in extreme temperatures, restricting use in harsh industrial and outdoor applications where alternative technologies may be preferred.

Figure00001. China Optical Encoder ICs Market Size (US$ Million), 2024 vs 2031

Optical Encoder ICs

Above data is based on report from QYResearch: China Optical Encoder ICs Market Report 2025-2031 (published in 2025). If you need the latest data, plaese contact QYResearch.

According to the new market research report "China Optical Encoder ICs Market Report 2025-2031", published by QYResearch, China Optical Encoder ICs market size is projected to reach USD 91 million by 2031, at a CAGR of 8.2% during the forecast period.

Figure00002. China Optical Encoder ICs Top 8 Players Ranking and Market Share (Ranking is based on the revenue of 2024, continually updated)

Optical Encoder ICs

Above data is based on report from QYResearch: China Optical Encoder ICs Market Report 2025-2031 (published in 2025). If you need the latest data, plaese contact QYResearch.

According to QYResearch Top Players Research Center, China key manufacturers of Optical Encoder ICs include Broadcom, SEIKO NPC, IC-Haus, Time Vision Technology, Suzhou Ambition Microelectronics, etc. In 2024, China top five players had a share approximately 91.0% in terms of revenue.

Figure00003. Optical Encoder ICs, China Market Size, Split by Product Segment

Optical Encoder ICs

Based on or includes research from QYResearch: China Optical Encoder ICs Market Report 2025-2031.

In terms of product type, currently Reflective Type is the largest segment, hold a share of 68.75%.

In terms of product application, currently Industrial Automation is the largest segment, hold a share of 30.68%.

The report provides a detailed analysis of the market size, growth potential, and key trends for each segment. Through detailed analysis, industry players can identify profit opportunities, develop strategies for specific customer segments, and allocate resources effectively.

The Optical Encoder ICs market is segmented as below:
By Company
Broadcom
Nisshinbo Micro Devices
SEIKO NPC
IC-Haus
PREMA Semiconductor
Hamamatsu

Segment by Type
Transmissive Type
Reflective Type

Segment by Application
Industrial Automation
Machine Tool
Medical Equipment
Office Automation
Consumer Electronics
Semiconductor Equipment
Measurement Equipment
Others

Each chapter of the report provides detailed information for readers to further understand the Optical Encoder ICs market:

Chapter 1: Introduces the report scope of the Optical Encoder ICs report, global total market size (valve, volume and price). This chapter also provides the market dynamics, latest developments of the market, the driving factors and restrictive factors of the market, the challenges and risks faced by manufacturers in the industry, and the analysis of relevant policies in the industry. (2020-2031)
Chapter 2: Detailed analysis of Optical Encoder ICs manufacturers competitive landscape, price, sales and revenue market share, latest development plan, merger, and acquisition information, etc. (2020-2025)
Chapter 3: Provides the analysis of various Optical Encoder ICs market segments by Type, covering the market size and development potential of each market segment, to help readers find the blue ocean market in different market segments. (2020-2031)
Chapter 4: Provides the analysis of various market segments by Application, covering the market size and development potential of each market segment, to help readers find the blue ocean market in different downstream markets.(2020-2031)
Chapter 5: Sales, revenue of Optical Encoder ICs in regional level. It provides a quantitative analysis of the market size and development potential of each region and introduces the market development, future development prospects, market space, and market size of each country in the world..(2020-2031)
Chapter 6: Sales, revenue of Optical Encoder ICs in country level. It provides sigmate data by Type, and by Application for each country/region.(2020-2031)
Chapter 7: Provides profiles of key players, introducing the basic situation of the main companies in the market in detail, including product sales, revenue, price, gross margin, product introduction, recent development, etc. (2020-2025)
Chapter 8: Analysis of industrial chain, including the upstream and downstream of the industry.
Chapter 9: Conclusion.

Benefits of purchasing QYResearch report:

Competitive Analysis: QYResearch provides in-depth Optical Encoder ICs competitive analysis, including information on key company profiles, new entrants, acquisitions, mergers, large market shear, opportunities, and challenges. These analyses provide clients with a comprehensive understanding of market conditions and competitive dynamics, enabling them to develop effective market strategies and maintain their competitive edge.

Industry Analysis: QYResearch provides Optical Encoder ICs comprehensive industry data and trend analysis, including raw material analysis, market application analysis, product type analysis, market demand analysis, market supply analysis, downstream market analysis, and supply chain analysis.

and trend analysis. These analyses help clients understand the direction of industry development and make informed business decisions.

Market Size: QYResearch provides Optical Encoder ICs market size analysis, including capacity, production, sales, production value, price, cost, and profit analysis. This data helps clients understand market size and development potential, and is an important reference for business development.

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