Product Code: 69940
The optical interconnect market is anticipated to grow at a CAGR of about 15% over the forecast period 2020 to 2025. Optical interconnect will play an increasing role in the future of intelligent networks. The transport of information over distances as small as centimeters benefits from the multi-terabit capacity of optical fibers when data rates exceed 10 Gb s-1. Presently, directly modulated VCSEL arrays, parallel fiber ribbons, along with detector arrays, are highly being applied to optical backplane capacity issues. In the future, additional higher functionality is highly expected as an emerging trend for optical interconnects, which includes features such as cross-connect switches and data packet routing in the optical domain.
- The growing demand for communication bandwidth is expected to drive the market. Due to the emergence of a large number of new services in different types of communications and their value-added entities, the demand for bandwidth has gone up more than ever before. Optical interconnect drive it possible in providing more bandwidth and bring great advantage to computing performance as compared to electrical interconnects.
- With optics, over the next decade, it is believed that the energy-requiring for cross-chip communication would approach less than 0.5 pJ b-1 and to 0.1 pJ b-1 for communication such as off-chip communication technology. By utilizing the ability to move data affordably, both the power consumption and the total cost for such future multicore processor systems are expected to be reduced with improving bandwidth.
- The demand for mobile cloud computing is also expected to aid the growth of the market. Future networks set to provide a broad range of services over a multitude of technologies that carries a high range of traffic profiles. According to Cisco, the distribution of global cloud mobile traffic increases approx 90% in 2019 compared to 2018, having a distribution of 88%. The emerging mobile cloud computing applications impose numerous challenges on network operators to enable on-demand service provisioning. On handling the rising demands, wired and wireless networks, together with IT infrastructures, need to be part of a converged platform. Flexible and programmable optical networks integrate and merge IT and wireless technologies effectively and efficiently. The use of time shared optical network (TSON) for the interconnection of wireless access networks, and IT resource provides a path for the growth of the market.
- Further, the impact of Covid-19 has affected the market growth due to low demand by consumer segments in the automotive and consumer electronics segment. Players such as 3M are currently manufacturing medical products to assist in the fight of Covid-19. 3M has doubled production of N95 respirators to 1.1 billion per year at its global manufacturing facilities, including in the U.S., Asia, and Europe. This has led to the reduced manufacturing for optical interconnect cables.
- However, as the ability to work from home has become an absolute necessity, a player such as Nexcom (Taiwan) announced in May 2020, it can now help telecom providers and data centers across the world to virtualize and expand capacity. For meeting current network demands for faster speeds, the NC 220FMS3 module provides a PCIe3.0 x16 interface and two QSFP28 ports, each supporting 100Gb/s Ethernet connectivity. The module provides high-speed connectivity without any packet loss. The 100 G optical transceivers (providing 100Gb/s ethernet), their form factor type, and standard are developed according to the cost and power consumption, which are regarded as the main drive in the development for interconnect market, which potentially provides the demand of optical interconnect.
Key Market Trends
Data Center to Account for High Market Share
- Current data center networks, which are based on electronic packet switches, experiences an exponential increase in network traffic due to cloud computing development. Optical interconnects emerged as a promising alternative that offers high throughput, low latency, and reduced power consumption.
- According to IEEE Communications, all-optical networks could provide up to 75% energy savings in the data centers. Especially in large data centers used in enterprises, the use of power ef?cient, high bandwidth, and low latency interconnects is of paramount importance, and there is signi?cant interest in the deployment of optical interconnects in these data centers.
- Currently, optical technology is utilized in data centers is only for point-to-point links, which is in the same way as point-to-point optical links that were used in older telecommunication networks (opaque networks). However, optically switched interconnects are still in the research phase.
- Further, the bandwidth capacity needs to increase along with reduced power consumption within data center networks, which has increased the demand for efficient interconnects. These functions are not available with traditional interconnects which are copper based, thus further enhancing the utility, and in turn, the need for optical interconnect market.
- Moreover, companies are innovating new solutions to support the bandwidth speed providing low latency. For instance, in March 2020, Acacia Communications announced it is sampling multiple variants in its product range of 400G pluggable optical transceiver modules, which includes 400ZR, OpenZR+, and Open ROADM MSA.
- Acacia's 400G pluggable module family features a list of interoperability solutions in QSFP-DD, OSFP, and CFP2-DCO pluggable form factors for the cloud data center interconnects (DCIs) and service provider networks. These solutions are designed to enable network operators to address increasing bandwidth demand through simplified network architecture, reducing both capital and operational expenditures.
North America To Witness High Market Growth
- The rapid penetration of internet is expected to raise the growth of the market in this region. Moreover, according to Cisco Systems, the cloud traffic in 2021 is estimated to be around 6844 exabytes per year in North America, which is highest in comparison to other regions.
- Also, North America has various players that provide optical interconnect products and solutions, along with players who are also keen to innovate new solutions for the improvement in interconnect bandwidth density at around 10x lower power.
- For instance, in March 2020, Ayar Labs announced that it had received a strategic investment from Lockheed Martin Ventures, where the funds will be used to accelerate the commercialization of Ayar Labs' patented monolithic in-package optical I/O (MIPO) solution for applications that require high bandwidth, low latency, and power-efficient short-reach interconnects.
- Moreover, data movement within the data center is becoming a critical feature, and the rise in the ample of new businesses leveraging data center services in the United States, and Canada will leverage more machine-to-machine (M2M) traffic. To overcome this problem, IBM focuses on providing optical switches in the data center as a key to resolve the problem. IBM is undertaking to build reconfigurable optical switches using silicon-photonic technology. If implemented, this optical solution becomes a new trend in the optical interconnect market.
- Further, OEM players are highly focused on developing high speed, high performance, reliable integrated optical modules for datacenter, FTTx, optical networking, and CPRI/LTE applications. OEM players such as uSenlight Corporation has partnered with MaxLinear, Inc. in April 2020, and selected MaxLinear's MxL93542, Telluride PAM4 DSP, to develop its next-generation 400G-DR4 and FR4 optical modules. MaxLinear's MxL935xx Telluride PAM4 DSPs are critical components in the development of high-speed, mega-scale data centers based on 100Gbps single lambda optical interconnects.
- These SOCs (System on chip) are the world's first DSPs with integrated electro-absorption modulated laser (EA-EML) drivers for 100/400Gbps optical interconnects and breakout mode clocking support for 400Gbps DR4 optical modules. The MxL93542 400G PAM4 DSP allows companies like uSenlight to develop a 400Gbps optical interconnect module in a compact form factor for intra-datacenter applications with a transmission distance up to 2 kilometers.
- Furthermore, in July 2019, U.S. military researchers announced that they would be spending USD 1.2 million with two U.S. military prime contractors. These contractors will explore ways of using optical interconnects on high-performance embedded computing boards to enhance bandwidth, power efficiency, channel density, and link reach. Officials of the U.S. Defense Advanced Research Projects Agency (DARPA) in Arlington, have been provided contracts to the Raytheon Co. and BAE Systems for the Photonics in the Package for Extreme Scalability (PIPES) program. This significantly drives the market in the coming period.
The optical interconnect market is fragmented in nature and is characterized by the presence of key vendors and other prominent vendors. The key vendors are increasingly focusing on creating awareness about the optical Interconnect development courses and their benefits, along with new innovation and acquisitions. Further global vendors are trying to stabilize themselves in the market. Key players are 3M, Sumitomo Electric Industries, etc. Recent developments in the market are -
- March 2020 - Keysight Technologies, Inc. announced a new simulation workflow capability that seamlessly connects PathWave Advanced Design System (ADS) with VPI Design Suite from VPIphotonics, enabling designers to predict the signal integrity of Electrical-Optical-Electrical data links. With this new seamless design flow linking simulations of the electronic circuits at the transceivers with simulations of the optical fiber link, the company focuses to jointly deliver a unique solution that offers the investigation and optimization of overall system performance.
- July 2019 - Cisco agreed to pay USD 2.6 billion to acquire Acacia Communications to allow growth in Cisco's switching, routing, and optical networking portfolio. Upon completion of this acquisition, Acacia employees will join Cisco's Optical Systems and Optics business in the networking and security business, which comes under Cisco's leadership.
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Table of Contents
- 1.1 Study Deliverables
- 1.2 Study Assumptions
- 1.3 Scope of the Study
2 RESEARCH METHODOLOGY
3 EXECUTIVE SUMMARY
4 MARKET DYNAMICS
- 4.1 Market Overview
- 4.2 Market Drivers
- 4.2.1 Growing Demand For Communication Bandwidth
- 4.2.2 Demand For Mobile Cloud Computing
- 4.3 Market Restraints
- 4.3.1 Slow Commercialization of Optical Interconnection Related Technologies
- 4.4 Industry Value Chain Analysis
- 4.5 Industry Attractiveness - Porter's Five Forces Analysis
- 4.5.1 Threat of New Entrants
- 4.5.2 Bargaining Power of Buyers/Consumers
- 4.5.3 Bargaining Power of Suppliers
- 4.5.4 Threat of Substitute Products
- 4.5.5 Intensity of Competitive Rivalry
5 MARKET SEGMENTATION
- 5.1 By Fiber Mode
- 5.1.1 Single-Mode
- 5.1.2 Multi-Mode
- 5.2 By Connector Type
- 5.2.1 LC
- 5.2.2 SC
- 5.2.3 Other Connector Types
- 5.3 By Applications
- 5.3.1 Telecommunication
- 5.3.2 Data Communication
- 5.4 By End-Users
- 5.4.1 Military & Aerospace
- 5.4.2 Automotive
- 5.4.3 Consumer Electronics
- 5.4.4 Other End-Users
- 5.5 Geography
- 5.5.1 North America
- 184.108.40.206 United States
- 220.127.116.11 Canada
- 5.5.2 Europe
- 18.104.22.168 Germany
- 22.214.171.124 United Kingdom
- 126.96.36.199 France
- 188.8.131.52 Rest of Europe
- 5.5.3 Asia-Pacific
- 184.108.40.206 India
- 220.127.116.11 China
- 18.104.22.168 Japan
- 22.214.171.124 Rest of Asia-Pacific
- 5.5.4 Latin America
- 5.5.5 Middle-East and Africa
6 COMPETITIVE LANDSCAPE
- 6.1 Company Profiles
- 6.1.1 3M Company
- 6.1.2 Sumitomo Electric Industries, Ltd.
- 6.1.3 Molex Electronic Solutions
- 6.1.4 Amphenol Corporation
- 6.1.5 TE Connectivity
- 6.1.6 Go!Foton, Inc.
- 6.1.7 Finisar Corporation
- 6.1.8 Corning Incorporated
- 6.1.9 Cisco Systems, Inc.
- 6.1.10 Huawei Technologies Co., Ltd.
7 INVESTMENT ANALYSIS
8 MARKET OPPORTUNITIES AND FUTURE TRENDS