The rise of generative AI is pushing data center interconnects toward 800Gbps, 1.6Tbps, and even higher bandwidths, bringing the limitations of traditional copper cables in energy consumption, density, and heat dissipation closer to a breaking point. Micro LED Co-Packaged Optics (CPO) is emerging as a significant variable in the capital market's reassessment of interconnect technology pathways, offering "lower energy consumption per unit and higher integration density." However, whether it becomes the "ultimate solution" still depends on progress in mass production packaging, reliability, and customer adoption.
On March 5, A-shares related to the Micro LED concept saw noticeable gains. Stocks such as Focus Lightings Tech Co.,Ltd., Shenzhen Liantronics Co.,Ltd., and Shenzhen Absen Optoelectronic Co.,Ltd. hit the daily increase limit, with investor focus centered on this new alternative path for high-speed data center interconnects.
According to the latest research from TrendForce, transmission speeds in global large-scale data centers have commonly reached 400Gbps, with demand shifting towards 800Gbps and 1.6Tbps since 2025. The report indicates that copper cable solutions face challenges in transmission density and energy efficiency. In contrast, Micro LED CPO offers lower energy consumption per bit transmitted, positioning it as a potential alternative to optical interconnects and potentially rewriting the cost and power consumption trade-offs between "optical and copper" in short-reach interconnect scenarios.
It is noteworthy that TF Securities referenced a Microsoft Research and Azure initiative called the MOSAIC project in a report last year. This project attempts to use a "wide and slow" architecture based on Micro LEDs to overcome the traditional trade-off between optical and copper solutions. The report further suggested that adopting CPO technology could amplify the system-level power efficiency advantages of Micro LED links.
The shortcomings of copper cables are becoming increasingly apparent, with energy consumption and distance emerging as bottlenecks for expansion. TrendForce believes that the large-scale application of generative AI has pushed data centers into a compute-intensive phase, significantly accelerating the pace of interconnect bandwidth upgrades. As transmission speeds evolve to 800Gbps and beyond, the issues of signal loss at high frequencies and high system energy consumption associated with copper cables become harder to ignore.
Energy consumption pressures are directly impacting operations. Data from TrendForce shows that when traditional copper cables operate at 1.6Tbps, the energy consumption per bit can exceed 10 pJ/bit. Concurrently, the power consumption of corresponding optical transceiver modules can reach approximately 30W, which increases operational costs and creates significant thermal management challenges.
The report also notes that energy costs already account for over 30% of data center operational expenses, with the interconnect system contributing nearly 20% of that. Therefore, the energy efficiency of interconnects has become a key constraint for the further expansion of computing clusters.
TF Securities' report further emphasized that link technologies involve a fundamental trade-off between transmission distance, power consumption, and reliability. Copper links offer high energy efficiency and strong reliability but are extremely limited in distance (<2m). Even with active copper cables, the distance is only expected to increase to 5-7m, and challenges intensify with further bandwidth increases.
The core advantage of Micro LED CPO lies in reducing energy consumption per bit to 1-2 pJ/bit. Against the backdrop of "bandwidth leaps and rigid energy constraints," TrendForce positions Micro LED CPO as a pathway with substitution potential. The key is the deep integration of Micro LED chips (smaller than 50 micrometers) with CMOS driver circuits. Under the CPO architecture, optical devices are co-packaged with switch chips and driver circuits, shortening signal paths, reducing losses, and improving stability.
TrendForce research indicates that Micro LED CPO can reduce energy consumption per bit to 1-2 pJ/bit, merely 5% of traditional copper cable solutions. For example, a traditional optical transceiver module for 1.6Tbps consumes about 30W, whereas a system using the Micro LED CPO architecture could see total power consumption drop to approximately 1.6W—a reduction of nearly 95%. This has direct implications for easing data center cooling demands and power density constraints within server racks.
Density and reliability are also reasons for betting on this solution. TrendForce points out that Micro LED chips possess characteristics such as long lifespan, fast response time, and strong resistance to interference. Combined with the high integration density of CPO, this enables transmission densities exceeding 0.5 Tbps/mm², saving rack space and better meeting high-density deployment requirements.
From MOSAIC to CPO: The path towards pluggable validation and system-level power reduction. TF Securities' report cited the MOSAIC project by Microsoft Research and Azure, which proposes using Micro LEDs as transmitters and CMOS sensors as receivers within a "Wide-and-Slow" (WaS) architecture. This approach uses a large number of parallel, low-speed channels instead of a few high-speed channels, thereby reducing reliance on lasers, ADCs/DACs, and complex DSP and FEC components.
The report stated that the Microsoft team built an end-to-end prototype system with 100 channels, each operating at 2Gbps. Testing showed that MOSAIC maintained stable transmission capabilities over distances up to 30 meters, with simulation data suggesting potential reach beyond 50 meters. Regarding power consumption, data from the prototype link indicated that the MOSAIC digital backend consumed only 0.4W, with the entire link consuming between 3.1W and 5.3W, compared to 9.8W to 12W for mainstream optical links.
MOSAIC also brings the scaling method of "increasing channels while reducing per-channel speed" to the forefront. Calculated at 2Gbps per channel, an 800Gbps unidirectional link would require about 400 Micro LED channels without redundancy. With lightweight ECC, the number of channels could increase to 460, and hot-standby channels could be configured for enhanced reliability. TF Securities also noted that adopting CPO technology would yield greater benefits for MOSAIC, as the lower data rates for chip-to-chip interconnects allow direct driving of Micro LED modulation, reducing the power consumption and complexity associated with high-speed signal conversion.
Key focus areas in the industry chain: Epitaxy and chips, mass transfer, advanced packaging, and optical components. If Micro LED CPO moves towards commercialization, the impact extends beyond simply "replacing the light source" to systematically driving advancements in manufacturing and packaging capabilities. Three critical segments warrant attention: upstream epitaxial wafers and chips, midstream mass transfer and advanced packaging, and supporting optical and receiver-side components.
As a leading domestic compound semiconductor company, San'an Optoelectronics possesses the largest Micro LED epitaxial wafer production capacity in China, having established a mass production line for 6-inch wafers. Its subsidiary, San'an Integration, has capabilities in optical communication chip foundry services, with related products already in the validation stage with major clients.
HC Semitek is described as a first-tier company in domestic Micro LED chip technology. It operates the world's first mass production line for 6-inch Micro LEDs, achieving a production yield exceeding 90%. Its optical communication samples targeting short-reach optical interconnects for AI servers have been sent to leading customers for validation.
From a component perspective, TF Securities believes that if the MOSAIC approach gains traction, key beneficiaries would include Micro LEDs, multi-core imaging fiber, TIR lenses, CMOS sensors, and Micro LED optical connectors.
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