Optical Interconnect Market

Market Definition

Optical interconnect refers to the transmission of data using light signals instead of electrical currents, enabling high-speed and low-latency communication between electronic components. The market includes transceivers, connectors, cables, and photonic circuits used in data centers, high-performance computing, and telecom systems to support fast, energy-efficient data communication. 

The report provides a comprehensive analysis of key drivers, emerging trends, and the competitive landscape expected to influence the market over the forecast period.

Optical Interconnect Market Overview

The global optical interconnect market size was valued at USD 15.09 billion in 2024 and is projected to grow from USD 15.97 billion in 2025 to USD 25.07 billion by 2032, exhibiting a CAGR of 6.65% during the forecast period. 

The market is growing steadily, driven by the increasing need for high-speed and low-latency data transmission across modern computing and communication systems. The expansion of cloud services, growth in data center traffic, and the deployment of 5G networks are key factors fueling demand. 

Developments in silicon photonics and integrated optics are further supporting market growth by enabling compact and scalable designs suitable for large-scale deployments.

Major companies operating in the optical interconnect industry are Broadcom, NVIDIA Corporation, Coherent Corp., Lumentum Holdings Inc., Molex, TE Connectivity, ZHONGJI INNOLIGHT RESERVED, Accelink Technology Co. Ltd, The Furukawa Electric Co., Ltd., Sumitomo Electric Industries, Ltd., Nokia, FiberMall Co., Ltd., Ciena Corporation, Juniper Networks, Inc., and Adtran.

• In February 2025, STMicroelectronics unveiled its next generation of proprietary silicon photonics and BiCMOS technologies to enhance optical interconnect performance in data centers and AI clusters. The technologies aim to support 800Gb/s and 1.6Tb/s optical modules by improving energy efficiency and enabling greater integration for high-speed data transmission.

These innovations are expected to accelerate the adoption of high-speed optical modules by advancing integration and energy efficiency, thereby contributing to the overall growth of the market.

Key Highlights

1. The optical interconnect market size was valued at USD 15.09 billion in 2024.
2. The market is projected to grow at a CAGR of 6.65% from 2025 to 2032.
3. North America held a market share of 41.01% in 2024, with a valuation of USD 6.19 billion.
4. The optical transceivers segment garnered USD 6.17 billion in revenue in 2024.
5. The metro & long-haul segment is expected to reach USD 9.71 billion by 2032.
6. The <10 km segment is expected to reach USD 14.29 billion by 2032.
7. The single-mode segment is expected to reach USD 14.56 billion by 2032.
8. The 10–50 Gbps segment is expected to reach USD 17.73 billion by 2032.
9. The data communication segment is expected to reach USD 14.74 billion by 2032.
10. The market in Asia Pacific is anticipated to grow at a CAGR of 6.89% during the forecast period.

Market Driver

Expansion of Cloud-Based Applications Drives Market Growth

The market is strongly driven by the growing adoption of cloud-based applications, which demand high-capacity, scalable, and energy-efficient connectivity solutions. 

As enterprises and cloud service providers increasingly migrate workloads to hyperscale cloud architectures, the demand for efficient data transmission is growing. This has led to a rising need for optical interconnects that support surging data traffic between data centers and cloud endpoints with low latency, high bandwidth, and improved power efficiency.

• In March 2025, Nokia showcased its latest optical networking innovations at the Optical Fiber Communication Conference (OFC50), including Wavelength Division Multiplexing (WDM) optical line systems, pluggable coherent optics, and 1.6 Terabits per second (Tb/s) intra-data center solutions. The solutions are aimed at addressing growing capacity demands from artificial intelligence (AI) workloads and data center expansion while enhancing power efficiency, automation, and network scalability.

This ongoing shift to cloud-driven data exchange continues to be a key market driver, fueling demand for innovative optical interconnect solutions that enable seamless, efficient connectivity across expanding cloud ecosystems.

Market Challenge

Interoperability and Integration Challenges

A major challenge in the optical interconnect market is the lack of standardized, high-speed optical interfaces between chiplets from different vendors. 

This gap creates interoperability issues, increases latency, and raises system integration costs, especially in AI and high-performance computing environments that rely on multi-vendor chiplet designs. To address this, companies are developing optical chiplets integrated with the Universal Chiplet Interconnect Express (UCIe) interface.

• In March 2025, Ayar Labs unveiled the world’s first optical chiplet with a Universal Chiplet Interconnect Express (UCIe) interface, designed for AI scale-up architectures. The chiplet delivers 8 Tbps bandwidth and supports interoperability among chiplets from different vendors, enabling high-performance, and energy-efficient communication within advanced multi-chip systems.

This enables consistent communication protocols across chiplets, enhances interoperability, and reduces integration complexity. Moreover, UCIe-enabled optical solutions allow vendors to accelerate deployment, improve performance, and lower total system costs, making optical interconnects more viable for large-scale, heterogeneous computing architectures.

Market Trend

Growing Adoption and Technological Advancement in Co-Packaged Optics

The market is significantly driven by the adoption of co-packaged optics (CPO) technology. CPO involves integrating optical components directly with electronic processors, which reduces power consumption and signal loss by minimizing the distance electrical signals travel. 

This integration enables higher bandwidth density and improved system performance, making it well-suited for data centers and high-performance computing environments. 

Moreover, increasing data traffic continues to drive the demand for energy-efficient, compact, and scalable solutions. CPO addresses these needs by enhancing power efficiency and reducing cooling requirements, which lowers operational costs.  

• In March 2025, Nubis Communications and Samtec collaborated to introduce a co-packaged CPX platform designed to support both copper and optical interconnects within a unified 6.4T footprint. The solution combines Nubis’ 200G per lane silicon photonics IC (Puma) with Samtec’s Si-Fly HD interconnect systems, enabling high-density, low-power data transmission for AI data center networks.

The platform is intended to reduce design complexity and accelerate the adoption of co-packaged optics by offering per-link flexibility between copper and optical connections. The deployment of CPO technology is thus a key factor supporting the expansion of the optical interconnects market, enabling networks to meet rising capacity and speed demands efficiently.

Optical Interconnect Market Report Snapshot

Segmentation	Details
By Category	Optical Transceivers, Cable Assemblies, Others
By Interconnect Level	Metro & Long-Haul, Board/Rack-level, Chip/Board-level
By Distance	<10 km, 1–100 km, >100 km
By Fiber Mode	Single-mode, Multimode
By Data Rate	10–50 Gbps, >100 Gbps
By Application	Data Communication, Telecommunications, Others
By Region	North America: U.S., Canada, Mexico
	Europe: France, UK, Spain, Germany, Italy, Russia, Rest of Europe
	Asia-Pacific: China, Japan, India, Australia, ASEAN, South Korea, Rest of Asia-Pacific
	Middle East & Africa: Turkey, U.A.E., Saudi Arabia, South Africa, Rest of Middle East & Africa
	South America: Brazil, Argentina, Rest of South America

Market Segmentation

• By Category (Optical Transceivers, Cable Assemblies, Others): The optical transceivers segment earned USD 6.17 billion in 2024 due to their widespread use in high-speed data center and telecom network upgrades.
• By Interconnect Level (Metro & Long-Haul, Board/Rack-level, Chip/Board-level): The metro & long-haul segment held 43.20% of the market in 2024, due to increased deployment of optical links in regional and national communication networks.
• By Distance (<10 km, 1–100 km, >100 km): The <10 km segment is projected to reach USD 14.29 billion by 2032, owing to the growing demand for short-reach connections within hyperscale data centers.
• By Fiber Mode (Single-mode, Multimode): The single-mode segment is estimated to reach USD 14.56 billion by 2032, owing to its suitability for long-distance and high-capacity data transmission.
• By Data Rate (10–50 Gbps, >100 Gbps): The 10–50 Gbps segment is anticipated to reach USD 17.73 billion by 2032, owing to its cost-effective deployment in enterprise networks and mid-tier data centers.
• By Application (Data Communication, Telecommunications, Others): The data communication segment is forecast to reach USD 14.74 billion by 2032, owing to rising cloud usage and increasing intra-data center traffic.

Optical Interconnect Market Regional Analysis

Based on region, the market has been classified into North America, Europe, Asia Pacific, Middle East & Africa, and South America.

North America accounted for a substantial share of 41.01% in 2024 in the optical interconnect market, with a valuation of USD 6.19 billion. This dominance is primarily driven by continued investments by major cloud service providers, telecom operators, and hyperscale data center operators in the United States and Canada. 

Early adoption of advanced interconnect technologies by these stakeholders has further strengthened the region’s market position.

• For instance, in October 2024, Equinix, Inc. partnered with GIC and Canada Pension Plan Investment Board to raise over USD 15 billion for the expansion of its xScale data center portfolio in the U.S. The initiative aims to meet the growing demand from hyperscale, AI, and cloud service providers by adding more than 1.5 gigawatts of capacity across multiple campuses.

The expansion of hyperscale data centers is increasing the demand for optical interconnects, as these facilities require high-speed, low-latency, and energy-efficient data transmission to support complex workloads. The presence of major industry players further supports the uptake of high-bandwidth optical components, such as transceivers and integrated photonic modules, across the region.

The optical interconnect industry in Asia Pacific is expected to register the fastest growth in the market, with a projected CAGR of 6.89% over the forecast period. 

This growth is being driven by large-scale cloud infrastructure development across China, India, Japan, and Southeast Asia, along with the rapid expansion of fiber-optic networks to support the rising broadband and mobile data traffic. Countries across the region are actively developing regional AI ecosystems, creating strong demand for high-bandwidth and energy-efficient interconnect solutions.

• For instance, in June 2024, VNG GreenNode and NVIDIA launched a large-scale AI Cloud infrastructure in Bangkok, Thailand. This project includes one of Southeast Asia’s first AI-ready hyperscale data centers, equipped with 3.2 Tbps InfiniBand connectivity and thousands of NVIDIA H100 GPUs.

The deployment reflects the growing need for optical interconnect technologies capable of supporting advanced AI workloads and high-performance computing environments. 

The rising presence of domestic cloud service providers, alongside increasing local manufacturing of optical components is enhancing regional supply chain stability and further supporting the long-term expansion of the market in Asia Pacific.

Competitive Landscape

The competitive landscape of the optical interconnect market is shaped by continuous investment in product innovation, technology licensing, and strategic partnerships. Companies are focusing on enhancing the durability, performance, and scalability of their interconnect solutions to meet the evolving demands of hyperscale data centers, cloud infrastructure, and AI computing environments.

• In December 2024, 3M Company and US Conec Ltd. entered into a strategic licensing agreement to commercialize the 3M Expanded Beam Optical Interconnect technology. The collaboration combines 3M’s advanced optical innovations with US Conec’s expertise in high-density connectivity systems to deliver scalable, low-maintenance interconnect solutions optimized for hyperscale data centers and advanced network infrastructures.

The collaboration aims to provide scalable and reliable interconnect systems with lower maintenance requirements, targeting the needs of hyperscale data centers and edge computing environments. Companies are also focusing on supply chain alignment, standardized product designs, and modular architectures to support the deployment and expansion of next-generation network infrastructure.

List of Key Companies in Optical Interconnect Market:

• Broadcom
• NVIDIA Corporation
• Coherent Corp.
• Lumentum Holdings Inc.
• Molex
• TE Connectivity
• ZHONGJI INNOLIGHT RESERVED
• Accelink Technology Co. Ltd
• The Furukawa Electric Co., Ltd.
• Sumitomo Electric Industries, Ltd.
• Nokia
• FiberMall Co., Ltd.
• Ciena Corporation
• Juniper Networks, Inc.
• Adtran

Recent Developments (Acquisition/Product Launch)

• In June 2025, AMD acquired Enosemi to enhance its capabilities in high-performance interconnect technologies for next-generation AI computing systems. The acquisition supports AMD’s strategy to advance optical interconnect development, enabling greater bandwidth density and energy efficiency to meet the growing demand of data transmission for large-scale AI workloads.
• In May 2025, Broadcom Inc. introduced its third-generation co-packaged optics (CPO) technology with 200G/lane capability. This new product targets the growing bandwidth, power, and scalability requirements of AI-driven scale-up and scale-out data center networks.