United States Co-Packaged Optics Market Set for Rapid Expansion to US$ 2,401.0 Million by 2035, Fueled by AI Infrastructure and Hyperscale Data Centers

The Co-Packaged Optics Market size was at US$ 122.1 million in 2025 and is expected to reach US$ 2,401.0 million by 2035, growing with a CAGR of 34.7% during the forecast period 2026-2035.

The market is witnessing rapid growth as hyperscale data centers, cloud service providers, and AI infrastructure operators increasingly adopt high-bandwidth, low-power optical interconnect solutions to address rising data traffic and networking bottlenecks. The growing deployment of AI clusters, high-performance computing (HPC), and next-generation Ethernet switches is further accelerating demand for co-packaged optics across advanced networking environments.

Industry participants are increasingly focusing on integrating optical engines directly with switch ASICs to reduce power consumption, improve signal integrity, and enable higher port densities for future data center architectures. Companies investing early in advanced silicon photonics, optical packaging technologies, and ecosystem partnerships are expected to strengthen their competitive position as demand for scalable, energy-efficient networking infrastructure continues to expand.

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Key Industry Developments

United States:
✅ June 2026: Lightmatter joined the NVIDIA NVLink Fusion ecosystem, announcing Co-Packaged Optics (CPO) and Near-Packaged Optics (NPO) products compatible with NVIDIA optical and SerDes technologies. The collaboration enables high-bandwidth photonic interconnects for AI factories, reducing fiber and connector requirements while accelerating deployment of next-generation AI networking infrastructure.

✅ March 2026: Lightmatter unveiled vClickTM Optics, an industry-first detachable fiber array unit designed for advanced Co-Packaged Optics manufacturing and serviceability. The innovation addresses key CPO packaging challenges by supporting high-volume production, low insertion loss, and scalable optical interconnects for future AI accelerators and Ethernet switches.

✅ October 2025: Broadcom announced that its Co-Packaged Optics platform achieved one million cumulative flap-free 400G port device hours in collaboration with Meta. The milestone validated production-grade reliability, advanced thermal management, and significant power savings, reinforcing CPO readiness for hyperscale AI data center deployments.

Japan:
✅ June 2026: Hakusan Inc. (Furukawa Electric Group) announced construction of a new manufacturing plant to mass-produce TMT ferrules for very small form factor multi-fiber optical connectors. The expansion strengthens Japan's supply chain for next-generation AI data center optical connectivity, supporting future Co-Packaged Optics deployment through higher-volume connector production.

✅ March 2026: Furukawa Electric started mass production of a 13,824-count ultra-high-density optical fiber cable aimed at hyperscale AI data centers. The development enhances high-capacity optical infrastructure required for future CPO-based networking architectures, enabling greater bandwidth density and scalable AI communications.

Strategic Acquisitions & Partnerships
✅ NVIDIA & TSMC - Strategic Partnership / Manufacturing Expansion
(June, 2026)
NVIDIA announced it is working with TSMC to scale production of its next-generation Spectrum-X co-packaged optics (CPO) Ethernet switches. The collaboration is intended to accelerate commercialization of energy-efficient optical networking infrastructure for AI data centers by expanding advanced packaging and manufacturing capacity.

✅ Ayar Labs & NVIDIA - Strategic Partnership
(June, 2026)
Ayar Labs joined NVIDIA's NVLink Fusion ecosystem, integrating its optical I/O and co-packaged optics technology into NVIDIA's AI infrastructure platform. The collaboration enables hyperscalers and system builders to deploy higher-bandwidth, lower-power optical interconnects for next-generation AI clusters.

Key Players:
Broadcom Inc. | Intel Corporation | NVIDIA Corporation | Cisco Systems, Inc. | Marvell Technology, Inc. | Ranovus Inc. | Coherent Corp. | Lumentum Holdings Inc. | Furukawa Electric Co., Ltd. | Ayar Labs Inc.

Key Highlights: Top 5 Key Players in Co-Packaged Optics Market 2026
-Broadcom Inc.: Expanded its leadership in co-packaged optics by shipping the Tomahawk 6 (102.4 Tbps) Ethernet switch with third-generation Co-Packaged Optics (CPO), featuring 200G/lane capability, improved power efficiency, enhanced link stability, and optimized AI network scalability for hyperscale data centers.

-NVIDIA Corporation: Advanced AI networking through the introduction of Quantum-X Photonics InfiniBand and Spectrum-X Photonics Ethernet switches, integrating silicon photonics and co-packaged optics to significantly reduce power consumption while enabling ultra-scale GPU cluster connectivity for next-generation AI factories.

-Cisco Systems, Inc.: Strengthened its silicon photonics roadmap by developing co-packaged optics-based networking architectures for hyperscale AI infrastructure, focusing on lower power optical interconnects, higher bandwidth density, and scalable Ethernet switching for AI data centers.

-Marvell Technology, Inc.: Expanded its custom silicon and electro-optics portfolio with advanced co-packaged optical interconnect technologies designed for AI cloud infrastructure, supporting higher bandwidth, improved energy efficiency, and next-generation scale-up and scale-out networking architectures.

-Coherent Corp.: Demonstrated multiple co-packaged optics (CPO) technologies at OFC 2026, including 6.4T socketed silicon photonics CPO, external laser source modules, multimode VCSEL-based CPO, and 400G-per-lane InP modulator-on-silicon technology, supporting future AI and high-performance computing data center architectures.

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Main Drivers and Trends Shaping the Future of the Co-Packaged Optics Market
-AI Infrastructure Expansion: Rapid deployment of AI clusters, hyperscale data centers, and high-performance computing (HPC) is accelerating demand for co-packaged optics to overcome bandwidth limitations and reduce power consumption in next-generation networks.

-Power & Bandwidth Optimization: Co-packaged optics minimize electrical trace lengths between switch ASICs and optical engines, enabling higher data transmission speeds, lower latency, and improved energy efficiency compared with conventional pluggable optics.

-Cloud & Ethernet Evolution: Growing adoption of 800G and 1.6T Ethernet, together with increasing investments in cloud infrastructure, is driving interest in optical integration technologies capable of supporting future networking requirements.

-Technology Advancements: Innovations in silicon photonics, advanced semiconductor packaging, optical engines, and co-design of switching silicon with photonics are improving performance, scalability, and thermal management, supporting commercialization of co-packaged optics despite integration complexity and high manufacturing costs.

Regional Insights:
-North America: 46.3% (Largest share, driven by the concentration of hyperscale cloud providers, AI data center expansion, silicon photonics innovation, and strong investments by companies such as NVIDIA, Broadcom, and Corning.)

-Asia Pacific: 35.6% (Fastest-growing region, fueled by rapid deployment of AI infrastructure, hyperscale cloud data centers, and optical networking investments across China, Japan, South Korea, and India.)

-Europe: 12.1% (Supported by strong adoption of AI and cloud computing, advanced semiconductor ecosystem, energy-efficient networking initiatives, and investments in silicon photonics.)

-South America: 3.5% (Gradual growth driven by expanding cloud infrastructure, telecom modernization, and increasing data center investments, particularly in Brazil and Argentina.)

-Middle East & Africa: 2.5% (Emerging market supported by smart city initiatives, AI adoption, 5G deployments, and expanding hyperscale data center investments in the GCC and South Africa.)

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Market Segmentation Analysis:
-By Component: Optical Engines Lead Due to Performance Demands
Optical engines represent the core component of co-packaged optics solutions, enabling high-bandwidth, low-power optical signal transmission between switches and network infrastructure. Switch ASICs are integrated alongside optical engines to minimize electrical interconnect losses and improve overall system efficiency. Supporting components such as laser sources, optical connectors, fiber arrays, and packaging substrates play essential roles in ensuring reliable optical coupling, thermal management, and long-term operational stability, making them indispensable for next-generation high-speed data center and AI networking deployments.

-By Integration Approach: On-Board Integration Dominates Deployment
On-board integration remains the preferred approach, placing optical engines close to switch ASICs to reduce power consumption and latency while improving bandwidth density. Fully co-packaged integration is gaining adoption for hyperscale data centers seeking maximum energy efficiency and scalability in AI clusters. Hybrid integration approaches combine conventional pluggable optics with integrated optical modules, providing flexibility for gradual infrastructure upgrades while maintaining compatibility with existing networking equipment.

-By Data Rate: 800G and Above Accelerates Network Evolution
High-speed data rates of 800G and above are becoming the primary focus as hyperscale cloud providers and AI infrastructure require greater bandwidth for large-scale computing workloads. 400G deployments remain widely used across existing data center networks, balancing performance and cost. Lower-speed configurations continue serving enterprise networking and legacy infrastructure, although adoption is gradually shifting toward higher-capacity optical interconnects as traffic volumes continue to rise.

-By Application: Data Centers Remain the Largest Adoption Area
Hyperscale and enterprise data centers represent the leading application for co-packaged optics, driven by increasing cloud computing, AI training clusters, and high-performance computing requirements. Telecommunications networks are expanding adoption to support next-generation optical transport and 5G infrastructure. High-performance computing systems, research institutions, and specialized networking environments also contribute to market growth by demanding ultra-low latency, high-density optical communication solutions.

-By Technology Platform: Silicon Photonics Leads Commercial Adoption
Silicon photonics is the dominant technology platform due to its compatibility with CMOS manufacturing, scalability, and cost-efficient high-volume production. Indium phosphide technologies are used for high-performance laser integration and specialized optical applications requiring superior optical characteristics. Other emerging platforms, including heterogeneous integration and advanced photonic packaging technologies, continue to evolve, enhancing integration density, thermal efficiency, and performance for future co-packaged optical networking solutions.
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