Optical Interconnect Market Size, Share & Trends Analysis Report By Product (Optical Transceivers, PIC-based Interconnects), By Interconnect Level, By Fiber Mode, By Data Rate, By Application, By Distance, By Region, And Segment Forecasts, 2024 - 2030

Optical Interconnect Market Size & Trends

The global optical interconnect market size was estimated at USD 14.56 billion in 2023 and is projected to grow at a CAGR of 11.2% from 2024 to 2030. The surge in data traffic drives this growth due to increased internet usage, cloud computing, and data centers, necessitating high-speed data transfer capabilities. Advancements in optical technology, such as silicon photonics and advanced fiber optics, are enhancing performance and efficiency, attracting various industries. The rollout of 5G networks also demands advanced optical interconnect solutions for higher bandwidth and lower latency. In addition, data centers are increasingly adopting optical interconnects to support edge computing and faster data processing.

Optical interconnects are more energy-efficient than traditional electrical interconnects, making them useful for data centers and high-performance computing environments focused on reducing energy consumption. The trend towards smaller electronic devices demands advanced interconnect solutions capable of supporting higher data transfer rates in limited spaces, with optical interconnects providing a viable solution. In addition, the increasing demand for High-Performance Computing (HPC) systems in applications such as scientific research and financial modeling necessitates extremely high data transfer rates, driving market growth. Advancements in manufacturing techniques have also reduced costs and increased the reliability of optical interconnects, making them accessible to a broader range of applications.

Government and institutional investments in advanced communication infrastructure, including fiber optic networks, further boost the demand for optical interconnect solutions. The adoption of artificial intelligence and machine learning technologies, which require rapid data transfer, supports the market growth. The growing media and entertainment industry, driven by high-definition video streaming and Virtual Reality (VR) and Augmented Reality (AR) applications, increases the need for high-speed data transfer. In addition, the continuous expansion and upgrading of telecommunication infrastructure, especially in developing regions, creates a significant demand for optical interconnect solutions to support higher bandwidth requirements.

Product Insights

The optical transceivers segment led the market with the largest revenue share of 34.6% in 2023. The growth is driven by the exponential growth in data traffic from cloud computing, big data, and IoT, necessitating high-speed data transmission solutions. The expansion of data centers and the rollout of 5G networks have further strengthened the demand for optical transceivers, which provide essential bandwidth and speed. Technological advancements, such as the development of higher-capacity transceivers, have improved their performance and reliability, leading to broader adoption.

The cable assemblies segment is expected to grow at a significant CAGR during the forecast period, due to the rapid expansion of data centers, which require reliable and high-performance interconnect solutions. The increasing demand for high-speed connectivity in applications such as cloud computing, IoT, and big data analytics drives the need for advanced cable assemblies that support higher data rates and maintain data integrity over long distances. The deployment of 5G networks necessitates optical interconnect solutions, with cable assemblies playing a vital role in connecting 5G infrastructure components. In addition, the ongoing expansion and upgrading of telecommunication infrastructure, along with the adoption of cable assemblies in industrial and commercial applications, further fuel their demand.

Interconnect Level Insights

Based on interconnect level, the metro and long-haul segment led the market with the largest revenue share of 43.2% in 2023, due to increased data traffic from internet usage, video streaming, cloud services, and IoT, necessitating high-capacity networks. The expansion of 5G networks has driven demand for these interconnects, which support the high bandwidth and low latency required for advanced 5G capabilities. Telecommunications companies are upgrading their infrastructure with metro and long-haul optical interconnects to enhance network efficiency and data transmission speed. Technological advancements such as DWDM and advanced modulation formats have enhanced the capacity and performance of metro and long-haul networks, making them cost-efficient and preferred for large-scale deployments by governments and enterprises.

The chip and board-level segment is expected to grow at a substantial CAGR during the forecast period, due to the demand for high-performance computing in applications such as AI, machine learning, and big data analytics, where superior performance over traditional electrical interconnects is essential. Optical interconnects consume less power than electrical ones, reducing heat generation and cooling needs and leading to more energy-efficient systems. Advancements in silicon photonics have enabled the integration of optical components directly onto silicon chips, allowing for higher data transfer rates and improved signal integrity. The growing data bandwidth requirements in data centers, HPC, and telecommunications further drive the need for optical interconnects, which offer enhanced signal integrity over longer distances compared to electrical interconnects.

Fiber Mode Insights

Based on fiber mode, the single fiber mode segment led the market with the largest revenue share of 72.3% in 2023, due to its ability to support extremely high bandwidth and data rates over long distances, making it useful for data centers, telecommunications, and high-performance computing. Single-mode fibers minimize signal loss and dispersion, which is essential for long-haul communication networks. Their low attenuation and dispersion ensure signal integrity and reliability over extended distances, which is essential for 5G network deployment, as they meet the high data rates and low latency requirements of 5G technology. The widespread support and standardization of single-mode fiber technology have further facilitated its adoption across various industries.

The multi-fiber mode segment is anticipated to grow at the fastest CAGR during the forecast period, due to its high-density connectivity, which enables simultaneous transmission of multiple data streams over a single cable, essential for modern data centers and telecom networks. These solutions offer cost efficiency by consolidating multiple fibers into one cable, reducing the expense and complexity of the cabling infrastructure. The rapid expansion of data centers drives the need for scalable, high-density solutions that manage numerous connections and data pathways while minimizing cable clutter. Multi-fiber solutions support high data bandwidth and throughput, meeting the demands for rapid data transmission in high-performance computing and large-scale networking environments.

Data Rate Insights

Based on data rate, the 50 - 100 Gbps segment led the market with the largest revenue share of 31.2% in 2023, due to growing data demands for cloud computing, big data analytics, and video streaming, which require higher bandwidth for efficient data transfer. Data centers are increasingly adopting these speeds to handle growing data loads and improve performance, balancing high capacity with cost. The expansion of High-Performance Computing (HPC) applications and the rise of AI workloads also drive demand for 50 - 100 Gbps optical interconnects, which support the intensive data processing and transfer rates needed for these technologies. Advances in optical technology, including improved modulation techniques such as PAM-4, have enabled efficient and reliable 50 - 100 Gbps speeds.

The 10 - 50 Gbps segment is expected to grow at a substantial CAGR during the forecast period, due to its wide range of applications across enterprise networks, telecommunications, and data centers. It offers a cost-effective solution for high-speed data transmission, balancing performance and affordability, which appeals too many organizations upgrading their network infrastructure. As an intermediate step between lower-speed options and higher-speed solutions such as 100 Gbps, this range is practical for infrastructure upgrades. It enhances network efficiency by providing sufficient performance improvements while maintaining manageable costs and complexity.

Application Insights

Based on application, the data communication segment led the market with the largest revenue share of 61.2% in 2023, due to the explosion of data traffic from cloud computing, video streaming, social media, and IoT applications, which necessitates efficient optical interconnect solutions for high-speed and low-latency data handling. The expansion of data centers globally has increased the need for optical interconnects to manage large data volumes and ensure reliable connectivity. The growth of cloud computing and high-speed internet services further drives demand for advanced optical solutions to support distributed networks and meet consumer expectations. In addition, telecommunications networks are upgrading to higher data rates, with optical interconnects playing a vital role in improving connectivity and communication efficiency.

The telecommunications segment is anticipated to grow at a substantial CAGR during the forecast period, due to the deployment of 5G networks, which drives demand for high-speed, low-latency optical interconnects essential for handling new network technologies. Increasing data traffic from mobile devices, streaming services, and IoT applications heightens the need for optical interconnects that provide the necessary bandwidth and speed. Telecommunications companies are upgrading their networks to support higher data rates and improve efficiency, with optical interconnects playing an essential role in these upgrades. In addition, optical interconnects offer cost efficiency compared to traditional copper options and support global connectivity initiatives and the growing demand for high-speed internet services.

Distance Insights

Based on distance, the less than 10 km segment led the market with the largest revenue share of 47.3% in 2023, due to its suitability for high-speed data transfer in data center interconnects and metro networks. These optical interconnects are ideal for short-distance connections within facilities and urban infrastructures, offering cost efficiency compared to longer-distance solutions. Their affordability and ease of deployment make them favored for network upgrades and expansions aimed at higher bandwidth and faster data rates. The increasing demand for local and regional connectivity drives the segment's growth.

The more than 100 km segment is poised for a substantial CAGR during the forecast period, due to the rising need for long-haul optical interconnects to manage increasing global data traffic and support international communications. The expansion of fiber networks to connect larger geographic areas and the rollout of 5G networks drive demand for these long-distance solutions, which are essential for high-capacity data transmission. The surge in data consumption and bandwidth requirements further supports the need for optical interconnects exceeding 100 km. In addition, emerging applications such as global financial transactions and large-scale research collaborations necessitate reliable long-distance connections.

Regional Insights

North America dominated the optical interconnect market with the largest revenue share of 38.9% in 2023, due to its leadership in adopting advanced technologies, including optical interconnects. The region's substantial presence of data centers and cloud computing facilities drives demand for high-speed optical solutions. In addition, its well-developed telecommunications infrastructure requires ongoing upgrades, further boosting demand for optical interconnects. The active investment in 5G network deployment also contributes to the market growth.

U.S. Optical Interconnect Market Trends

The optical interconnect market in U.S. is poised for a substantial CAGR during the forecast period, due to significant investments in data center expansion driven by the demand for cloud computing and big data analytics. The ongoing rollout of 5G networks further fuels growth as it requires advanced optical interconnect solutions for connecting base stations, core networks, and data centers. Technological advancements in optical technologies, including Dense Wavelength Division Multiplexing (DWDM) and silicon photonics, are enhancing performance and reducing costs.

Europe Optical Interconnect Market Trends

The optical interconnect market in Europe is expected to grow at a significant CAGR during the forecast period, due to the EU's Digital Single Market strategy, which promotes investment in high-speed broadband and 5G infrastructure. Leading data center hubs in countries such as Ireland, the Netherlands, Germany, and the Nordics are expanding rapidly, driving demand for advanced optical interconnects. European countries are leaders in 5G rollout and fiber-optic network expansion, with substantial investments in nations such as Germany, the UK, and France.

Asia Pacific Optical Interconnect Market Trends

The optical interconnect market in Asia Pacific is anticipated to grow at the fastest CAGR during the forecast period, driven by rapid urbanization and industrialization, which increases the demand for high-speed internet and advanced communication networks. Government initiatives, such as China's "New Infrastructure" strategy and India's "Digital India" program, are promoting digital transformation and boosting investment in 5G, data centers, and AI. The region's growing internet penetration, mainly in countries such as India and Indonesia, further fuels the need for high-speed broadband services. Significant investments in expanding and upgrading broadband infrastructure, including fiber-to-the-home (FTTH) networks, are also driving demand for optical interconnect solutions.

Key Optical Interconnect Company Insights

Key players in the industry have strengthened their market presence through a strategic mix of product launches, expansions, mergers and acquisitions, contracts, partnerships, and collaborations. These initiatives serve as vital tools for enhancing market penetration and strengthening their competitive edge within the industry. For instance, in March 2024, Quintessent, an optical products manufacturer, closed an oversubscribed seed funding round of USD 11.5 million led by Osage University Partners. The funds will support the development of ultra-high-speed optical interconnects using heterogeneous silicon photonics and quantum dot (QD) lasers. This new photonic connectivity is essential for high-speed computing required by AI applications. Quintessent collaborates with Tower Semiconductor, which provides silicon photonics foundry services at its California facility.

Recent Developments

• In June 2024, Intel Corporation unveiled its integrated optical input/output (I/O) chiplet at the Optical Fiber Communication Conference (OFC). The OCI chiplet, designed for GPUs and CPUs, offers low power consumption, high bandwidth, and extended-reach I/O connectivity. Supporting 64 PCIe 5.0 channels with a total throughput of 4 Tbps over 100 meters using fiber optics, this chiplet is essential for AI/HPC applications and next-generation data centers and enables high-performance connections for GPU and CPU clusters.

• In March 2024, Marvell Technology, Inc., an American semiconductor company, unveiled the Spica Gen2-T, a cutting-edge 5nm 800 Gbps transmit-only PAM4 optical DSP. Developed specifically for use with TRO (Transmit Retimed Optical) modules, this new DSP significantly reduces power consumption in 800 Gbps optical modules by over 40%. Additionally, it remains compatible with standard optical modules and host devices that adhere to IEEE 802.3 standards.

• In March 2024, StarIC Inc. partnered with GlobalFoundries to advance silicon photonics innovation by developing a breakthrough library of high-speed foundational blocks for the GF Fotonix 45SPCLO process. This library includes silicon-proven Trans Impedance Amplifiers (TIAs) and Micro Ring Modulator (MRM) drivers and supports PAM4 and NRZ data rates over 100GS/s. This addition enhances StarIC Inc.'s growing portfolio of IPs for silicon photonics applications.

Optical Interconnect Market Report Scope

Global Optical Interconnect Market Report Segmentation

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2017 to 2030. For this study, Grand View Research has segmented the global optical interconnect market report based on product, interconnect level, fiber mode, data rate, application, distance, and region.

• Product Outlook (Revenue, USD Billion, 2017 - 2030)

  • Cable Assemblies

  • Indoor Cable Assemblies

  • Outdoor Cable Assemblies

  • Active Optical Cables

  • Multi-source Agreements

  • Connectors

  • LC Connector

  • SC Connector

  • ST Connector

  • MPO/MTO Connector

  • Optical Transceivers

  • Free Space Optics, Fiber, and Waveguides

  • Silicon Photonics

  • PIC-based Interconnects

  • Optical Engines

• Interconnect Level Outlook (Revenue, USD Billion, 2017 - 2030)

  • Metro and Long-haul Optical Interconnect

  • Board-to-Board and Rack-Level Optical Interconnect

  • Chip and Board-Level Optical interconnect

• Fiber Mode Outlook (Revenue, USD Billion, 2017 - 2030)

  • Single Fiber Mode

  • Multifiber Mode

• Data Rate Outlook (Revenue, USD Billion, 2017 - 2030)

  • Less than 10 GBPS

  • 10 - 50 Gbps

  • 50 - 100 Gbps

  • More than 100 Gbps

• Application Outlook (Revenue, USD Billion, 2017 - 2030)

  • Data Communication

  • Telecommunication

• Distance Outlook (Revenue, USD Billion, 2017 - 2030)

  • Less than 10 Km

  • 11 - 100 Km

  • More than 100 Km

• Regional Outlook (Revenue, USD Billion, 2017 - 2030)

  • North America

    • U.S.

    • Canada

    • Mexico

  • Europe

    • UK

    • Germany

    • France

  • Asia Pacific

    • China

    • India

    • Japan

    • Australia

    • South Korea

  • Latin America

    • Brazil

  • MEA

    • UAE

    • South Africa

    • KSA