The industry is responding to an increasingly critical problem by rapidly scaling silicon photonics: 6.4-terabit links are expected by the early 2030s, a projection reflecting the escalating bandwidth demands of artificial intelligence and high-performance computing. Current accelerator architectures are experiencing an interconnect bottleneck, where expensive hardware sits idle while waiting for data, according to the report, Silicon Photonics, LPO/LRO and NPO/CPO: Global Market 2027-2037. This shift is not simply about faster data transmission; silicon photonics moves information using photons instead of electrons, addressing fundamental limitations of copper interconnects. Reflecting this potential, photonic quantum computing attracted roughly US$2.1 billion in private capital in 2025, surpassing investment in superconducting systems and signaling a broader market transformation.
Data Center Transition: CPO, NPO, and LPO/LRO Architectures
Silicon photonics has become a foundational element for data movement within and between servers, rather than providing incremental efficiency gains. Artificial intelligence and high-performance computing applications demand unprecedented data transfer rates, pushing conventional copper interconnects to their physical limits and creating a situation where powerful accelerators are hampered by data access speeds. This constraint is driving a fundamental shift in data center architecture toward optical solutions, which move information via photons rather than electrons, as photons offer faster transmission with reduced signal loss. Optical transceivers currently dominate the silicon photonics market, with data rates historically doubling every few years from 100G to 800G. Commercial 1.6-terabit transceivers arrived in 2026, and 3.2T is anticipated to sample around 2027, with 6.4T links expected in the early 2030s.
However, even these advancements are insufficient to overcome the limitations of short copper traces connecting optical engines to ASICs, leading to the development of co-packaged optics (CPO) and near-package optics (NPO). These architectures position the optical engine directly onto the ASIC substrate, minimizing latency and maximizing bandwidth. Alongside these, linear-drive pluggable and receive optics (LPO/LRO) are gaining traction by reducing the power consumption of digital signal processing (DSP) in the link. A key challenge for silicon photonics remains the inability to create a practical, pure-silicon laser due to the material’s indirect bandgap. This has fostered a diverse ecosystem of complementary materials, including III-V compounds, lithium niobate, silicon nitride, polymer, and plasmonics, and advanced heterogeneous integration techniques. Beyond data communication, the technology is attracting significant investment in emerging fields; for example, photonic quantum computing drew $2.1 billion in funding.
The report notes that this surge in funding reflects the potential of room-temperature operation and compatibility with CMOS foundries. The transition to CPO, NPO, and LPO/LRO is not merely a technological upgrade, but a restructuring of the data center landscape, driven by the demands of artificial intelligence and the need to fully utilize expensive accelerator hardware.
photonic quantum computing has matured into a credible commercial segment, attracting roughly US$2.1 billion in private capital in 2025 and overtaking superconducting systems, thanks to room-temperature operation and CMOS-foundry compatibility.
