Data center demand to drive optical transceiver market growth through 2035, ETDatacenters
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The global market for optical transceiver modules is set to experience sustained expansion, with demand forecast to grow at a 12-15 per cent compound annual growth rate from 2026 to 2035. This growth is predominantly driven by the accelerating deployment of 800G and 1.6T modules within hyperscale data centers, which are upgrading infrastructure to handle surging data traffic from AI workloads and cloud computing.
Data centers are expected to be the most significant end-use sector, accounting for 55-65 per cent of the total value demand. The market is also being reshaped by the densification of 5G and early 6G networks, alongside the rising adoption of co-packaged optics (CPO) and linear pluggable optics (LPO). Operators should evaluate current and future optical transceiver requirements for upcoming data center expansions and network upgrades.
Supply chains for these critical components remain concentrated in Asia, though trade policies and export controls are prompting a gradual relocation of manufacturing to locations such as Mexico, Thailand, and Vietnam. While price erosion is observed in commodity 400G modules, premium pricing for advanced 800G and CPO modules is sustaining overall market value growth. It is important to assess the impact of 800G/1.6T module adoption on data center network architecture and power consumption.
Asia-Pacific leads as the largest market and manufacturing hub, with China alone contributing over 30 per cent of global demand. North America follows, driven by substantial data center investments from hyperscalers like Amazon, Google, and Microsoft. Europe exhibits steady growth from telecom network upgrades and data center expansions. Digital infrastructure stakeholders are advised to monitor global supply chain developments and regional manufacturing shifts for optical components to mitigate potential risks.
The report highlights that supply constraints for advanced photonic ICs and indium phosphide lasers are anticipated to ease gradually after 2027 as new fabrication capacity becomes available. However, geopolitical tensions and export controls are expected to continue fragmenting the global supply chain.
Source
- datacenters.economictimes.indiatimes.com (2026-09-27) - Original article: Data center demand to drive optical transceiver market growth through 2035, ETDatacenters - https://datacenters.economictimes.indiatimes.com/news/cloud-colocation-connectivity/data-center-demand-to-drive-optical-transceiver-market-growth-through-2035/134530059