Co-Packaged Optics (CPO): Mapping the Market and Supply Chain Ecosystem Behind AI Datacenters

Optical transceiver power consumption in AI datacenters will surpass 2.5 GW by 2030 under legacy pluggable architectures. As a result, the total transceiver market revenue is projected to grow from $9.7 billion in 2025 to over $84.3 billion by 2030, with co-packaged optics (CPO) emerging as a major source of market growth.

Understanding the growing CPO opportunity requires more than a market forecast. The transition is changing how the optical transceiver supply chain operates, changing the traditional linear ‘buy-and-sell’ model toward a highly collaborative 'co-creation' approach. Bringing semiconductor foundries, ASIC designers, silicon photonics companies, OSATs, laser vendors, and precision equipment manufacturers into an ever more interconnected ecosystem.

TechInsights’ latest co-packaged optics (CPO) market report maps this changing competitive landscape and global supply chain. Examining the companies participating across the ecosystem, along with key supply bottlenecks, geopolitical risks, and the strategic outlook for the market.

Optical transceiver power consumption in AI datacenters will surpass 2.5 GW by 2030 under legacy pluggable architectures. (Source: TechInsights)

Why Co-Packaged Optics (CPO) Matters for AI Datacenters

The rapid scaling of AI and high performance computing (HPC) clusters is increasing the power and bandwidth demands placed on datacenter networking infrastructure.

In traditional pluggable architectures, optical modules sit on a switch's front panel and connect to the main processing chip through electrical traces on a circuit board. As bandwidth requirements increase, those electrical connections create growing power and signal-integrity challenges. Co-packaged optics addresses this problem by placing the optical transceivers directly next to the switch or AI accelerator chips in the same package. Reducing that distance from inches to millimeters can provide several advantages:

• Lower power consumption: Moving optics closer to the processing chip reduces the distance electrical signals must travel, lowering the energy required to move data.
• Higher bandwidth and density: Shorter connections support higher data rates and allow more bandwidth to be packed into a smaller area.
• Improved Signal Integrity: Shorter electrical paths reduce signal loss and interference, supporting reliable high-speed data transmission.

While CPO offers powerful advantages, it does come with trade-offs. Integrating optics close to high-throughput ASICs creates thermal management challenges and can require more sophisticated cooling. Initial costs are higher, while service and maintenance models have to adapt to tighter integration between optical and electronic components. However, there is a clear consensus that it will be a crucial technology for the next generation of networking, as copper traces struggle to support future power and reach requirements.

What Will Shape the Co-Packaged Optics (CPO) Market Through 2030?

The AI datacenter power challenge is causing a two-tier market: the ongoing dominance of refined pluggable modules and the rapid rise of CPO, which is projected to capture nearly $29.9B in market share by 2030.

To guide this transition, the industry is undergoing a material and structural pivot. As supply bottlenecks for critical components intensify, the most resilient players will be those who control their own material science and IP. Ultimately, success in this landscape will be defined by the skill to balance aggressive scaling with radical energy innovation.

TechInsights' Co-Packaged Optics (CPO) market analysis builds on the wider market forecast with an end-to-end view of the competitive landscape and global supply chain. The analysis reviews vendor strategies across major ecosystem tiers, maps key industry standards, including the Optical Internetworking Forum (OIF) and the Optical Compute Interconnect (OCI) Multi-Source Agreement (MSA), and assesses geopolitical, yield, thermal, and manufacturing bottlenecks shaping the development of the CPO market.