New Trends of Optical Transceiver Market in Data Centers

Posted on Dec 19, 2023 by

The modern digital landscape is fueled by data, and the demand for efficient data management has never been higher. As data centers continue to play a pivotal role in this ecosystem, the optical transceiver market has emerged as a key player in enhancing data center interconnectivity. This article delves into the trends shaping the optical transceiver market in the context of data centers.

Data Center Optical Transceiver Market Size

The optical transceiver market within data centers has experienced significant growth in recent years, driven by the escalating need for high-speed data transfer, low latency, and reliable connectivity. According to industry reports, the market size has expanded steadily, with a compound annual growth rate (CAGR) reflecting the surging demand for data center infrastructure.

According to the Optical Transceivers for Datacom & Telecom Market report by Yole Group, the revenue generated by optical transceivers in 2022 reached approximately US$11 billion. Projections indicate substantial growth, with expectations to reach US$22.2 billion by 2028. This forecasted increase reflects a compound annual growth rate of 12% for the period spanning 2022 to 2028.

Data Center Optical Transceiver Market Size

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What Boosts the Optical Transceiver Market in Data Centers?

The impetus behind this market boost is rooted in the escalating demand for capacity in the data communication (datacom) sector, driven particularly by the expanding requirements of large-scale cloud service providers, commonly referred to as Data Center Hyperscalers (DC hyperscalers).

Increased Investment in Data Centers

The digital transformation across various industries has led to a substantial increase in data center investments. Enterprises are recognizing the strategic importance of robust data infrastructure to support their operations. As a result, there is a heightened focus on expanding and upgrading data center facilities, driving the demand for advanced optical transceivers to facilitate high-speed data transfer within and between data centers.

Rapid Growth of Data Center Traffic

The proliferation of online services, streaming platforms, and the continuous expansion of digital content contribute to the exponential growth of data center traffic. To handle this surge effectively, data centers require scalable and high-performance interconnect solutions. Optical transceivers, with their ability to transmit data over optical fibers at high speeds, play a crucial role in meeting the escalating demands for bandwidth and low-latency connectivity.

Silicon Photonics Becomes the Mainstream

One noteworthy trend shaping the optical transceiver market in data centers is the increasing adoption of silicon photonics technology. Silicon photonics involves the use of silicon-based components to generate, manipulate, and detect light. This technology has gained prominence due to its ability to integrate seamlessly with existing semiconductor processes, providing a cost-effective and scalable solution for high-speed data transmission.

Silicon photonics offers several advantages, including improved energy efficiency, smaller form factors, and the ability to transmit data over longer distances without signal degradation. As data centers strive to optimize their infrastructure for performance and cost-effectiveness, silicon photonics has emerged as a game-changer in the optical transceiver market. The ongoing evolution involves accelerating short- and medium-range communication transceivers within data centers, transitioning from 100G QSFP28 modules and 400G QSFP-DD modules to rates of 800G and 1.6T.

The integration of silicon photonics into optical transceivers enables the development of compact and power-efficient devices, aligning with the growing emphasis on sustainability in data center operations. Additionally, the compatibility with established semiconductor manufacturing processes makes silicon photonics a cost-effective solution compared to traditional optics.

Recent authoritative market analyses indicate that silicon photonics presently holds about a 20% share of the Ethernet optical transceiver market. Indium phosphide remains the predominant technology in the current market landscape. However, projections suggest that in the next five years, the market share of silicon photonics technology will experience a rapid surge, reaching approximately half of the market. This shift positions silicon photonics as the mainstream solution.


The optical transceiver market in data centers is experiencing a transformative phase, driven by increased investment in data centers, the rapid growth of data center traffic, and the mainstream adoption of silicon photonics technology. The transition towards silicon photonics is evident in the development and deployment of optical transceivers with higher data rates and improved efficiency. As data center operators seek to maximize the capabilities of their infrastructure, the mainstream adoption of silicon photonics in optical transceivers becomes a pivotal trend in the evolving landscape of data centers.

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