Scope of the report 7

What we got right and wrong 8

Methodologies & definitions 9

Acronyms 10

Companies cited in this report 12

About the authors 13

Impact of COVID-19 14

Executive summary 17

From telecommunication to fiber-optic communication 42

• Introduction to tele- and data communication
• Fiber-Optic Communication (FOC)

Fiber-optic communication network architectures 56

• Generic diagram of FOC network
• Network devices for telecom and datacom

Fiber-optic communication application trends 62

• Macro-trends
• Datacom vs. Telecom
• Global IP traffic forecast
• Technical challenges – Shannon limit

Optical transceiver market forecast 79

• Optical transceiver revenue growth forecast by segment (2020 vs. 2026)
• OT revenue growth forecast by Datacom applications (2020 vs. 2026)
• OT revenue growth forecast by Telecom applications (2020 vs. 2026)

Optical transceiver introduction – Technology & trends 99

• Key technologies
• PDMs and form factors
• Segmentation

Optical transceiver applications – DATACOM trends 124

• Focus on intra-rack / inter-rack / inter-DC interconnection
• Form factors – Interfaces used in data centers vs. Data rates of OT
• Status of migration to higher speed

Optical transceiver applications – TELECOM trends 133

• Focus on Metro Core / Metro Access interconnection
• Focus on 5G and wireless optical transmission interconnection
• Status of migration to higher speed

Optical transceiver trends 147

• 400G and beyond
  • Drivers & benefits
  • Key applications
• Faceplate pluggable optics – What next?
  • Faceplate-pluggable model (FPP)
  • Co-Packaged Optics (CPO)
  • Roadmaps
• Switch ASIC trends

Optical transceiver technology 181

• Key parameters in fiber-optic communication
  • Bandwidth & distance/ Modulation / Parallelization / Multiplexing
  • Toward higher throughput
• Key components (Laser diode & photodiode)
• Key parts of optical transceiver: 400G QSFPDD DR4 &100G QSFP28 CWDM

Optical transceiver industry 239

• Market shares
• 2018-2020 revenue growth/decline for OT suppliers
• Recent Mergers & Acquisitions (M&A)
• Supply chain & strategy
• Focus on China and U.S.-China relationship in the photonics industry

HUGE DEMAND FOR CAPACITY DUE TO EXPANDING DATA CENTER

For the past 50 years, mobile technology innovations have been rolled out each decade. Mobile bandwidth requirements have evolved from voice calls and texting to ultra-highdefinition (UHD) video and a variety of augmented reality/virtual reality (AR/VR) applications. In spite of deep implications of the COVID-19 outbreak for the telecom infrastructure supply chain, consumers and business users worldwide continue to create new demand for networking and cloud services. Social networking, business meetings, video streaming in UHD, e-commerce and gaming will drive the continued application growth.
The average number of devices connected to the internet per household and per capita is increasing. With the advent of new digital devices with increased capabilities and intelligence, we observe higher adoption rates each year. Expanding machine-to-machine applications, such as smart meters, video surveillance, healthcare monitoring, connected drives, and automated logistics, contribute in a major way to device and connection growth and push the expansion of data center infrastructure.
Revenue generated by the optical transceiver market reached around $9.6B in 2020 and is expected to reach $20.9B in 2026 at a 14% Compound Annual Growth Rate for 2020-2026 (CAGR2020-2026). This growth is driven by high volume adoption of high data rate modules above 100G by big cloud service operators and national telecom operators to increase in fiberoptic network capacity.

1. NEW TECHNOLOGY REQUIREMENTS PAVE THE WAY FOR CO-PACKAGED OPTICS

The evolution of multiple technologies has enabled data rates of 400G, 600G, 800G and beyond across data center infrastructure as well as in longhaul
and metro networks.
400GbE deployments are ramping across data center networks. Many cloud providers and telecom operators are now looking to 800Gbps optical ecosystem to increase bandwidth capacity and keep pace with the growing demand for data. 800G optical modules can support more configurations, for example 2x 400GbE, 4x 200GbE or 8x 100GbE.
Today’s Ethernet switch Application Specific Integrated Circuits (ASICs) are running at a 50Gbps lane rate driven by 50G PAM-4 modulation technology. In line cards, a retimer is typically needed to synchronize PAM-4 data from the switch to the optical interface. In 400G optical modules, an additional silicon gearbox chip can be used to convert 50G PAM-4 electrical inputs and outputs (I/Os) to 100G per wavelength optical I/Os in order to connect to 100G optics. Depending on the application and transmission reach 400G offer various optical interfaces, including 400G SR4, 400G DR4, 400G FR4 and 400G LR4.
We anticipate high popularity of 800G modules as they take advantage of 100G single-wavelength optics already proven in 400GbE systems and thus can be technically and cost-effectively implemented in QSFPDD and OSFP form factors.
Current form factors will be limited in their ability to support more than 800G capacity in terms of required electrical and optical densities and thermal
aspects. Power consumption is another challenge. The largest contributor is the electrical interface between the switch ASIC and optical module, particularly for QSFP-DD and OSFP. As a result of discrete electrical device implementation power dissipation and thermal management are becoming limiting factors for future pluggable optics.
Co-Packaged Optics (CPO) is a new approach that brings the optics and the switch ASIC close together and aims to overcome challenges mentioned above. Furthermore, CPO technology is considered as a new deployment model of the whole ecosystem and alternative to the pluggable optics.
Detailed information on CPO can be found in our brandnew report Co-Packaged Optics for Data Centers, which will be released in October 2021.

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3. CAN CHINA CATCH UP WITH THE US ON OPTICAL TRANSCEIVERS?

4. The global optical transceiver industry has been impacted by deteriorating US-China relations. The US government has entered into a trade war, with the ban on ZTE and Huawei, to limit the impact of China on the global economy. For many laser and photonics companies, China represents one of the largest markets and growth opportunities.
   As tension between the US and China escalates, China wants to maintain its economic growth by ensuring a secure and controllable technology
   supply chain as well as building domestic technology sectors to be self-sufficient in those US parts impacted by tariffs. American companies cannot sell in China because they would become targets of consumer boycotts. The loss of revenue for American photonic companies will far exceed that of their Chinese counterparts.
   China also plays an irreplaceable role in the global industrial chain thanks to its value in manufacturing. It would be very difficult to break down the manufacturing chain into high-end devices that might present national security concerns and lower-end devices for which intellectual property sharing and jointventures would remain permitted. Yet if the US imposes new tariffs this decoupling may happen, and it will adversely affect the whole optical communication supply chain.
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Acacia Communication, Accelink, Adtran, ADVA, Alibaba, Amazon Web services, Apple, Applied optoelectronics Inc (AOI), Arista, ATOP, Baidu, Broadcom, Broadex, ChampionONE, Ciena (Cyan), CIGtech, Cisco, ColorChip, Crealights, E.C.I. Networks, , Emcore, Eoptolink, Facebook, Fiberhome, Finisar (now II-VI), Foxconn Interconnect Technology (FOIT), Fujitsu Networks, Fujitsu Optical components, Gigalight, Google, HG Genuine Optics, Hisense Broadband, Huawei, Huawei, HUBER+SUHNER Cube Optics AG, IBM+Softlayer cloud services , II-VI, Infinera (Coriant, Transmode), InnoLight, Inphi, Intel, IPG Photonics (Menara Network), J.P. Morgan, Juniper Networks, Lumentum, Luxshare, Macom, Mellanox, Microsoft, NEC, NeoPhotonics, Nokia (Alcatel Lucent), NTT Electronics, Oclaro, OE Solutions, Oplink (MOLEX), Padtec, Rackspace, Ranovus, Renesas (Integrated Device Technology), Rockley Photonics, Sicoya, Skorpios technologies, Source Photonics, ST, Sumitomo, Tencent, Verizon , Xtera, Yahoo, ZTE, and more.