Advanced Micro Devices is accelerating its efforts to build out its optical interconnect supply chain, aiming to reduce its dependence on the NVIDIA ecosystem, which is drawing significant market attention towards companies involved with continuous wave lasers.
According to the latest report from TrendForce, AMD has recently significantly increased the pace of its external laser procurement. The company is reportedly negotiating large-scale purchase agreements for high-power continuous wave laser chips to secure future production capacity and mitigate supply chain risks associated with being tied to NVIDIA's ecosystem.
Simultaneously, the agency forecasts that the market for co-packaged optics and near-packaged optics will surge from around $100 million in 2025 to over $39 billion by 2030, highlighting optical interconnects as a core battleground in AI infrastructure competition.
This development has quickly captured the capital market's focus. Currently, the CW production capacity of Lumentum and Coherent is reportedly booked until 2028, with existing contracts for EML lasers making Lumentum's CW capacity particularly tight.
The Core Bottleneck: CW Lasers for AI Accelerator Interconnects
The global market for CW lasers is highly concentrated, with Lumentum holding approximately a 90% market share, leading to extremely tight capacity. Securing second and third suppliers may be an "inevitable move" for AMD.
Analysis from user @tuolaji2024 on platform X suggests the primary driver for AMD's search for CW laser suppliers is the explosive demand from its MI series AI accelerators for optical interconnects. All silicon photonics solutions, including CPO and NPO architectures, require external CW lasers as a light source.
TrendForce's report further substantiates this view. Since 2024, indium phosphide substrate supply has remained persistently tight, with lasers and photodetectors becoming strategically critical components that the industry is fiercely competing to secure.
It has been noted that both Lumentum and Coherent have reported severe supply shortages for InP capacity, with order visibility extending to 2028 and long-term agreements covering the late 2020s.
The large-scale commercialization of CPO still faces multiple challenges, including manufacturing yield, maintainability, fiber connector standardization, and InP laser supply constraints. Scaling up CPO switches requires integrating a large number of optical engines, placing significant pressure on overall system-level yield.
Dual-Track Development and Upstream Resource Lockdown
TrendForce points out that as data transmission rates advance from 100Gbps per channel to 200Gbps and even 400Gbps, the limitations of traditional copper interconnects in signal loss, compensation costs, and power consumption are becoming increasingly pronounced. Moving optical connections closer to the switch ASIC to shorten the electrical path has become a key design priority for next-generation AI data centers.
From a deployment perspective, NPO is the preferred transitional solution for many cloud service providers in the near to medium term. Its advantages include shortening electrical transmission distances, reducing power consumption, while retaining modularity, maintainability, and flexible multi-vendor procurement capabilities. Companies like Alibaba and Tencent have listed NPO as a core mid-term strategy and are promoting related open standards through the Open Data Center Committee. Meta and Microsoft also prioritize NPO development, building an open optical interconnect ecosystem through the OCI-MSA. Amazon has adopted a multi-vendor strategy, collaborating with STMicroelectronics on NPO-related efforts.
CPO is more suitable for long-term, high-power-density, and high-integration application scenarios. Within the NVIDIA ecosystem, some small and medium-sized CSPs tend to adopt NVIDIA's fully integrated AI systems based on CPO, valuing their system integration efficiency and platform consistency advantages.
On the supply chain strategy front, analysis indicates that hyperscale cloud providers will extend their influence upstream, securing capacity in advance at the laser, epitaxial wafer, and even InP substrate levels to avoid being "constrained" by NVIDIA. In the optical fiber domain, Corning has secured investments, capacity expansion support, and long-term purchase commitments from Meta, NVIDIA, and Amazon, with fiber being viewed by major CSPs as a strategic asset for AI infrastructure.
Market Outlook and Evolving Technology Landscape
TrendForce predicts the CPO/NPO market will surpass $39 billion by 2030, with growth expected to accelerate significantly between 2028 and 2029 as scaled-out architectures begin incorporating optical interconnect technology. Meanwhile, the market for pluggable optical transceivers is projected to maintain a substantial size of around $26 billion by 2030.
The agency emphasizes that the future of optical interconnects will not be dominated by a single technology. Multiple architectures, including linear-drive pluggable optics, NPO, and CPO, will coexist long-term. The specific adoption path will depend on a comprehensive set of factors for different application scenarios, including power efficiency, transmission distance, cost, technological maturity, and supply chain control requirements.
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