Global optical interconnect revenue is projected to reach 92 billion U.S. dollars by 2028, driven largely by rapid expansion in AI-focused data centers, according to a recent report. The forecast points to a compound annual growth rate of about 65 percent from 2025 through 2028, fueled by a shift toward higher-speed technologies such as 1.6T, 3.2T, and CPO/NPO architectures.
Ai data centers drive surge in demand
The growth reflects accelerating capital spending by major technology companies building infrastructure to support artificial intelligence workloads. As data traffic intensifies between GPUs and network systems, demand is rising for high-speed optical modules, silicon photonics, and laser chips.
Global optical-link shipments are expected to climb from 110 million units in 2025 to 300 million units by 2028, marking a 40 percent annual increase. During the same period, the share of demand from data centers is projected to rise from 71 percent to 89 percent. Products exceeding 800G speeds could account for 89 percent of deployments, up from 37 percent, while 1.6T transceivers may see shipment growth of more than 200 percent.
Price targets adjusted for Chinese suppliers
The analysis raised price targets for several Chinese optical component makers while lowering expectations for one firm. Eoptolink’s target was nearly doubled to 701 yuan, while Dongshan Precision’s target increased to 350 yuan. Tianfu Communication also saw its target lifted to 419 yuan. In contrast, T&S Communications was downgraded, with its target cut slightly to 152 yuan due to weaker earnings forecasts and a relatively high valuation.
Pricing and next-generation technologies support growth
Revenue growth is also expected to be supported by rising prices. Average selling prices for optical connections are projected to increase by 18 percent annually through 2028 before stabilizing.
Shipments of 3.2T devices are expected to begin in 2027 at around 4 million units, rising sharply to 35 million units the following year. Under baseline estimates, CPO and NPO technologies could reach 18 million and 56 million units respectively by 2028, with significantly higher figures under more optimistic assumptions.
Silicon photonics and chip demand expand rapidly
Adoption of silicon photonics is forecast to increase from 29 percent of high-speed modules in 2025 to 60 percent by 2028. This shift is expected to push total optical chip demand to 1.714 billion units, representing a 62 percent growth rate.
Demand for key components is also set to rise sharply. External-modulated laser chip shipments could reach 718 million units, growing at 34 percent annually, while continuous-wave laser chips may surge to 987 million units, more than doubling over the period.
Supply constraints emerge as key risk
Despite strong growth projections, supply-side challenges are beginning to surface. Manufacturing constraints in EML and CW laser chips, including yield limitations and upstream capacity shortages, may restrict output. In response, module manufacturers are increasingly securing long-term supply agreements to lock in critical components.
The report also highlighted uncertainty around the commercialization timelines for CPO and NPO technologies, which remain dependent on cloud provider spending and design progress at major platform companies.
Outlook tempered by valuation and execution risks
While the outlook for optical interconnects remains strong, several risks could affect how quickly revenue translates into earnings. Tight chip supply, uncertain adoption of new architectures, and elevated valuations among listed companies all pose potential challenges.
The projected rise to a 92 billion dollar market underscores the growing importance of optical connectivity in AI infrastructure. However, the pace of gains will likely depend on which companies can secure advanced chip supply and efficiently scale next-generation technologies into sustained profitability.
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