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August 2025
The global co-packaged optics (CPO) market size is calculated at USD 95.04 million in 2025 and is forecasted to reach around USD 1,055.11 million by 2034, accelerating at a CAGR of 30.66% from 2025 to 2034. The market sizing and forecasts are revenue-based (USD Million/Billion), with 2024 as the base year.
The global co-packaged optics (CPO) market size accounted for USD 72.97 million in 2024 and is predicted to increase from USD 95.04 million in 2025 to approximately USD 1,055.11 million by 2034, expanding at a CAGR of 30.66% from 2025 to 2034.
Artificial Intelligence is playing a transformative role in the co-packaged optics market. The explosive growth in AI systems and tools has created a need for ultra-high bandwidth and low-latency data transfer within hyperscale data centers. Nowadays, traditional pluggable optical receivers are unable to meet high-performance requirements, as they consume more power and occupy more space, thereby delivering lower scalability. This is where AI comes into play. By integrating AI tools, it enables faster data movement with a significantly reduced power consumption rate, making it a popular technology. Companies such as NVIDIA, Google, and Microsoft have already begun building massive clusters of AI and are looking forward to CPO solutions to maintain steady growth.
Beyond driving demand, AI also plays a vital role in the development and deployment of CPO technology. Machine learning tools are now being used to optimize optical component design, predict signal losses, and improve thermal and power management across co-packaged optics systems. Various AI tools can enable engineers to identify bottlenecks more quickly and also assist them with complex, interconnected architectures. In the manufacturing domain, AI-driven quality control systems are helping ensure precision when assembling fiber arrays, photonic integrated circuits, and packaging materials, which are critical components for the reliability of co-packaged optics modules.
Through all these factors, we can see how AI is not only helping create demand but also shaping the market in terms of innovation, production, efficiency, and deployment, thus making it a cornerstone for technology and next-gen computing.
The co-packaged optics (CPO) market refers to the ecosystem of technologies, components, and solutions where optical transceivers and photonic elements are integrated within the same package or near high-speed electronic devices such as switch ASICs, GPUs, or other processors. This architecture reduces electrical interconnect distances, lowers power consumption, and enables ultra-high bandwidth density, making it crucial for hyperscale data centers, AI/HPC systems, and next-generation networking infrastructure. This innovation is primarily utilized in high-performance computing, data centers, telecommunications, and AI systems, where there is a growing demand for low-latency and high-bandwidth solutions.
Co-packaged optics is becoming an increasingly important technology for supporting the ever-expanding needs of hyperscale data centers, 5G networks, and cloud computing infrastructures, as it provides faster data throughput with comparatively lower power consumption. The market is expected to grow at a rapid pace throughout the forecast period, driven by an increase in data traffic, the adoption of AI applications, and a shift toward more energy-efficient systems. As the demand for faster and more efficient data transmission continues to grow, CPO will remain a vital player in the development of next-generation networking and computing infrastructures.
| Report Coverage | Details |
| Market Size by 2034 | USD 1,055.11 Million |
| Market Size in 2025 | USD 95.04 Million |
| Market Size in 2024 | USD 72.97 Million |
| Market Growth Rate from 2025 to 2034 | CAGR of 30.66% |
| Dominating Region | North America |
| Fastest Growing Region | Asia Pacific |
| Base Year | 2024 |
| Forecast Period | 2025 to 2034 |
| Component, Integration / Packaging Type, Reach / Interconnect Length, End-Use Application, and Region | |
| Regions Covered | North America, Europe, Asia-Pacific, Latin America, and Middle East & Africa |
The co-packaged optics (CPO) market is growing rapidly, driven by increasing demand for high-speed data transmission, fueled by AI and machine learning, as well as cloud services and massive data centers. CPO, which integrates optics into ASICs or switch chips, decreases power consumption, latency, and improves bandwidth efficiency, and is becoming an essential aspect for future 800G and 1.6T networks. The expansion of cloud computing is also expected to significantly boost the market, leading to increased bandwidth and more effective data transport systems to accommodate large-scale data processing.
The surge in demand for high-speed data processing and transmission is another growth factor for the co-packaged optics market. As data centers and high-performance computing environments face the challenges of bandwidth bottlenecks and escalating power consumption, co-packaged optics technology offers a solution by integrating optical and electronic components within a single package. This integration thus minimizes signal loss, reduces latency, and enhances energy efficiency, enabling operators to meet the increasing requirements for data throughput. The adoption of AI, machine learning, and real-time analytics further accelerates the need for co-packaged optics. As a result of all this, leading technology firms and hyperscale data center operators are seen making significant investments in co-packaged optics to develop and update their infrastructure.
Despite significant growth potential, the market has its fair share of challenges. Creating and implementing CPO solutions requires expensive techniques that merge optical components with silicon chips. Upgrading data center infrastructure to enable CPO technology also raises capital costs. These high initial expenses can be challenging for smaller businesses. Moreover, the lack of standardized interfaces and interoperability between different vendors' solutions can create integration challenges, leading to slower market growth.
Scalability issues are another reason that could hamper the growth of the co-packaged optics market, as addressing the increasing demands of hyperscale data centers is a challenging task. The integration and production of optical components on such a wide scale requires consistent performance and cost efficiency. Inadequacy in this field may lead to failure in achieving all the intended benefits for large-scale organizations.
The co-packaged optics (CPO) market is experiencing significant growth, presenting numerous expansion opportunities. Emerging applications in quantum computing, scientific research, and smart city infrastructure are expected to drive the future demand for co-packaged optics.
The growing emphasis on sustainability and operational efficiency is also fueling market expansion. Data centers are significant energy consumers, and the need to reduce power consumption without compromising performance has become a strategic priority for operators worldwide. Co-packaged optics address this challenge by enabling higher-density and lower-power interconnects, resulting in cost savings and a reduced environmental impact. Regulatory initiatives and industry standards focused on green data centers further encourage the adoption of energy-efficient optical technologies. Additionally, the adoption of silicon photonics is a key trend driving the market, as it directly integrates optical components into silicon chips, thereby enhancing the performance of these devices. This integration enhances performance, reduces costs, enables higher scalability, and minimizes power consumption. Silicon photonics also increases data transmission speeds, making it suitable for high-performance applications. Leading firms such as Intel, Broadcom, and Cisco have already begun making significant investments in this technology to enhance their co-packaged optics solutions.
Which Component Dominated the Co-Packaged Optics Market in 2024?
The optical engines/transceivers segment held the dominant share in the co-packaged optics market as of 2024. This is due to their critical role in enabling high-speed optical data transmission within and between data centers. Co-packaged transceivers integrate multiple optical and electrical components in a single module, significantly reducing power consumption and physical footprint compared to traditional pluggable optics. The demand for transceivers is further being fueled by the growing need for scalable, high-density interconnected solutions in hyperscale data centers and next-generation network architectures. Continuous advancements in transceiver design, such as the adoption of silicon photonics and advanced packaging techniques, are further enhancing performance and reliability, making them an indispensable aspect in modern optical networks.
The photonic integrated circuits (PICs) are set to be the fastest-growing segment in the forecasted years. This is because they represent the future of scalable, energy-efficient optical networking. PICs integrate multiple photonic functions, such as lasers, modulators, detectors, and filters, onto a single chip, which helps significantly reduce cost, size, and power consumption without sacrificing efficiency. They also enable greater system integration and can keep up with the demands of hyper-scale data centers, a capability that traditional transceivers alone cannot achieve.
What Type of Integration Is Currently Dominating the Co-Packaged Optics Market in 2024?
True packaged optics continue to dominate the market because they integrate the optics and the ASIC into the same package, enabling the shortest electrical connections. This helps to drastically reduce power consumption and signal loss, which are the two biggest challenges in this field. Several companies are already considering the adoption of true packaged optics, as they are critical for supporting AI training clusters, cloud computing, and 5G core networks.
On-board optics segment is set to experience the fastest rate of market growth from 2025 to 2034 with this growth being attributed to their role as a bridge between pluggable optics and fully integrated, packaged optics. This segment involves placing optics very close to the switch ASIC, but not inside the same package, allowing for easier thermal management and greater design flexibility. This makes it particularly popular for Tier 2 cloud providers, telecom operators, and enterprises that want higher bandwidth density without the heavy capital investments.
Why Did Intra-Rack Lead the Co-Packaged Optics Market in 2024?
The intra-rack segment led the co-packaged optics (CPO) market in 2024, largely because most data center operators want to upgrade their infrastructure and handle growing traffic within a single rack. These types of racks are crucial for managing power consumption and facilitating seamless data transfer between switches and servers. The advantage of this segment lies in its ability to align well with current industry demands, making it highly adaptable. It strikes the right balance between cost efficiency, technical feasibility, and immediate performance gains, making it a popular choice in the global co-packaged optics market.
Intra-package reach is emerging as the fastest-growing segment as of 2024. This is due to its ability to offer unmatched improvements in bandwidth density, ultra-low latency, and reduced signal loss compared to others. Unlike Intrarack, which focuses on efficiency across servers and switches, intra package places the optics directly alongside the switching chips, thus removing the traditional limitations of electrical connections.
Which End User Segment Held the Largest Share in the Co-Packaged Optics Market Last Year?
Data centers are the dominant segment in the co-packaged optics market as of 2024 with this dominance attributed to the rapid growth of cloud computing, big data analytics, and AI-driven workloads, which have increased demands for data center infrastructure and spurred the adoption of high-speed, energy-efficient optical interconnects. It enables data center operators to achieve higher port densities, lower power consumption, and improved scalability, thus boosting demand as operators aim to optimize performance and reduce operational costs in complex and distributed environments.
AI-driven High-performance computing (HPC) is seen to be the fastest-growing segment this year. HPC environments, such as supercomputing centers and AI training clusters, require interconnect solutions that can support massive bandwidth and minimize signal loss over both short and long distances. The integration of co-packaged optics with advanced switching and processing technologies allows HPC operators to achieve breakthrough performance levels, supporting scientific research, financial modeling, and complex simulations. The adoption of co-packaged optics in HPC is expected to accelerate further in the coming years, as organizations continue to pursue computing and other data-intensive initiatives.
Which Distribution Channel Enjoyed a Prominent Position in the Co-Packaged Optics Market Last Year?
Direct OEMs continue to dominate the market this year. This dominance is due to large companies, such as NVIDIA and Cisco, preferring to design, test, and deliver their solutions directly to hyper-scale data centers and telecom operators. This enables them to have complete control over product quality, intellectual property, and to integrate with existing networking infrastructures. Direct OEM sales also enable faster customization, making them a popular choice in today’s market.
Contract manufacturing partnerships are the fastest-growing segment as of this year. As the demand for co-packaged optics increases along with the rising integration of AO workloads and machine learning tools, OEMs are finding it challenging to scale production processes in-house. Partnering with contract manufacturers enables them to expand their manufacturing capacities, reduce costs, and introduce products to the market more quickly. This approach also allows small-scale companies to commercialize their technologies without any massive upfront investments.
Why Is North America Dominating the Co-Packaged Optics Market?
North America is currently leading the co-packaged optics market. This dominance is driven by a growth in data center technologies, high-speed networking requirements, and increased investments in cloud computing infrastructure. The presence of major cloud service providers, advanced research institutions, and a robust ecosystem of optical component manufacturers in the region, especially in the U.S.A. and Canada, has positioned North America as a leading force in technological innovation and adoption.
The regional co-packaged optics market also benefits from rapid digital transformation, the increase of 5G networks, and a rising demand for energy-efficient optical solutions in hyperscale data centers. Technology giants like Google, Amazon, and Microsoft are already heavily investing in next-generation data center infrastructure.
What Are the Advancements in the Asia-Pacific Region?
The Asia Pacific is expected to be the fastest-growing region during the forecasted period in the co-packaged optics market. The rapid digital transformation in countries such as China, Japan, and South Korea drives this growth. The region's robust manufacturing base, coupled with supportive government policies and substantial investments in research and development, is driving innovation in co-packaged optics technology. Additionally, the presence of major tech companies and semiconductor manufacturers in the Asia-Pacific is also helping in accelerating the adoption and development of these advanced optical solutions. The market's growth is further accelerated by the increasing implementation of 5G networks, the expansion of cloud services, and the continuous evolution of AI and IoT applications, positioning the Asia-Pacific region as a key player in the global co-packaged optics market.
The United States is at the forefront of technological innovation and adoption, thanks to leading technology firms that are investing heavily in co-packaged optics to support data center modernization and the deployment of 5G networks.
The primary reasons for the country’s co-packaged optics market growth are the recent adjustments in trade policies, which have introduced new tariff structures affecting a range of semiconductor and photonic components used in co-packaged optics assemblies. Components such as laser sources, optical engines, and electrical integrated circuits have been re-classified under newly revised duty schedules, leading to increased import costs for manufacturers. These changes are pushing executives to reassess vendor relationships and total landed cost models. This is due to significant investments in hyperscale data centers and AI research initiatives, which are driving up the rapid adoption of co-packaged optics. Furthermore, the application of tariffs to substrates and advanced photonic packaging processes has put pressure on assembly and module production. Suppliers are now examining alternative manufacturing locations, including nearshore facilities and free-trade zones, to mitigate the financial impact of the crisis. This supply chain realignment is influencing lead times, inventory strategies, and logistics planning, as companies seek to mitigate the effects of unpredictable policy shifts.
We can see how the U.S. continues to adapt quickly in an environment of evolving trade dynamics, strategic ability, and engineering innovation, helping to maintain its competitive positioning in the global co-packaged optics market.
The value chain begins with the sourcing of highly specialized raw materials such as silicon wafers, indium phosphide, and gallium arsenide. These materials are necessary for fabricating lasers and optical trans receivers due to their superior light-transmitting properties. Other components, such as glass substrates, optical fibers, and advanced polymers, are also required to support light transmission, as they minimize signal loss.
Key players: Corning, Coherent, Sumitomo Electric, Shin-Etsu
The next stage of the CPO value chain involves designing optical engines and photonic integrated circuits, which are essential to making the technology function effectively. This stage involves semiconductor and silicon photonics teams developing laser, modulator, and detector solutions that can be controlled by software at scale. This stage is characterized by innovation, with several companies pioneering the development of optical components.
Key players: Ayar Labs, Intel, Marvell, Broadcom
The next stage and the complex stage of this market is the advanced packaging and module assembly. Unlike traditional optics, where pluggable transceivers can be easily replaced, CPO integrates optical and electronic components into a single package. This requires 2.5D and 3D packaging techniques as well as a precise alignment of optical fibers. This stage also transforms these separate chips into a working product that can be deployed at scale. It is a stage where designs become tangible solutions.
Key players: TSMC, NVIDIA, NeoPhotonics, Lumentum
By Component
By Integration / Packaging Type
By Reach / Interconnect Length
By End-Use Application
By Distribution Channel
By Region
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