This article dives into the fast-changing world of co-packaged optics (CPO) and how it’s shaking up high-performance networking and AI interconnects. Pulling from IDTechEx’s latest market report, let’s look at why the industry is moving past traditional pluggable optical modules, the packaging breakthroughs making CPO possible, and what all this could mean for future data centers and AI systems.
The Limits of Traditional Pluggable Optics
For over twenty years, pluggable optical transceivers have anchored data-center networking. Their flexibility and easy replacement, plus a huge support ecosystem, made them essential for operators running big infrastructures.
But switch ASIC bandwidth keeps climbing, and the electrical links between front-panel pluggables and switching silicon are hitting a wall. Long electrical traces mean more power draw, more signal loss, and extra latency—problems that really start to limit performance scaling.
Why Incremental Approaches Fall Short
Some near-package optical approaches try to fix this by pushing optics closer to the switch. Sure, they help a bit, but they still don’t fit neatly into the old pluggable model and can’t solve the main electrical bottlenecks.
As bandwidth density keeps increasing, it’s clear the industry needs a real architectural change, not just tweaks.
Co-Packaged Optics: A Structural Change
Co-packaged optics flips the script on how optics and electronics work together. Instead of keeping them separate, CPO puts the optical engine right next to the switching ASIC.
This slashes interconnect distance, which cuts down resistance, latency, and power use. You get shorter, cleaner electrical links, so higher data rates don’t have to cost more energy per bit.
It’s a way forward that lets switch performance scale way past what front-panel pluggables can handle.
Advanced Packaging as the Key Enabler
Making CPO happen isn’t just about optics—it’s a packaging game-changer. The industry needs a toolbox of advanced integration tricks, like:
These methods pack photonic and electronic components tightly, letting them act like a single, unified system.
Industry Momentum and High-Profile Deployments
Big names in semiconductors and networking are already rolling out CPO in real products. At GTC 2025, NVIDIA showed off its Spectrum X Photonics and Quantum X Photonics switch platforms, both built on co-packaged optics.
They’re using TSMC’s SoIC X platform, which stacks components vertically using bumpless hybrid bonding at crazy-small scales. It’s wild how tightly advanced packaging and CPO adoption are now linked.
A Growing Ecosystem Around 3D Integration
Broadcom and other big players are also jumping onto TSMC’s COUPE platform for their CPO designs. This shift toward shared manufacturing and packaging tech really shows how 3D integration is becoming the new standard for next-gen networking.
Market Outlook and Long-Term Impact
IDTechEx expects the CPO market to explode in the coming years. They predict a 37% compound annual growth rate (CAGR) from 2026, with the market topping $20 billion by 2036.
Network switches will probably grab most of that revenue. One CPO-enabled switch could pack in up to 16 photonic integrated circuits (PICs), so the optical content per system is about to jump in a big way.
Implications for AI and Data-Center Architectures
Optical interconnects for AI systems might soon make up about 10% of the CPO market. Most of the time, there’s one PIC for each accelerator.
AI workloads just keep pushing for more bandwidth and less latency. It’s looking like CPO could end up as a key technology for building scalable, energy-efficient compute fabrics.
Here is the source article for this story: Co-packaged optics market to grow at 37% CAGR to $20bn by 2036