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According to a latest report by market analysts, Yole Développement, the global optical transceivers market is expected to reach more than USD 17.7 billion by 2025, double than its value of USD 7.7 billion in 2019, growing at a CAGR of 15% during the period. This growth will be driven by high volume adoption of expensive high data rates including 400G and 800G, modules by big cloud service operators. Therefore, such players invest more and more in new datacenters and top of that telecom operators have also increased their investments into the 5G networks that use wireless optical transceivers.

High demand from datacenter and telecom operators have been confirmed as follows:

• The datacom market growth, about 20% CAGR between 2019 and 2025, will be driven by the adoption of expensive higher data rate optical modules which migrate from core/spine networks down to inter-rack connections.
• The revenue growth of telecom optical modules will be driven by coherent technologies for DCI optical transport solutions and 5G optical transceivers deployment in Asia. Yole’s analysts announce 5% CAGR during this period.
• The sharp difference in growth revenues is caused by lower sales expectation in 2020 due to the COVID-19 pandemic. In addition, the total revenue is expected to moderately increase in 2020 with the effect of the pandemia. Indeed, COVID-19 is naturally affecting telecommunications globally and sales of optical transceiver modules. However, demand for optical modules by data-center operators is very strong in China, pushed by the local government. Its strategy is mainly focused on the 5G deployment and the development of cloud data centers.

According to Pars Mukish, Business Unit Manager, Solid-State Lighting (SSL) & Display at Yole, the state of the art of fiber-optic communication technologies has advanced dramatically over the past 25 years. The highest capacity of commercial fiber-optic links available in the 1990s was only 2.5-10 Gb/s while today they can carry up to 800 Gb/s. The last decade of developments have enabled higher efficiency digital communication systems and solved problems with degraded signals. Network traffic growth has been increasing at an enormous pace over the decades and across all the network architectures from the long-haul, mobile access to intra-DC networks.

This growth has been driven by streaming UHD videos, which need ever higher data throughput, and now newly emerging digital applications and services requiring fast access to the digital networks. It appears that the success and demand for existing applications continuously drives scale and capacity of the underlying network infrastructure (including OTs) to points where further applications are enabled, renewing the cycle. Fiber optic networks consist of a set of optical network devices connected by optical fiber links, able to provide transport and related functionalities of optical channels carrying signals to final client.

Datacom is linked with cloud services in DCs and often excludes voice services. Typical transmission distance is up to 100 km. Telecommunication is any communication over a distance, typically over 100 km. Telecom includes voice services, wireless networks as well as data communication. A transceiver gets its name from being both an optical transmitter that converts an electrical signal into a light signal, and an optical receiver that accepts the light signal and converts it back into an electrical signal. The OTs are widely used in server network cards, switches, routers and wireless base station equipment in a variety of network architectures and applications. Distances covered start from less than 50 meters for server and storage interconnections in data centers and enterprise networks to more than 800 km in telecom networks.

As analyzed by Yole’s team in the new Optical Transceivers for Datacom & Telecom 2020 report, the evolution of multiple technologies has enabled transmission speed of 400G and beyond in long haul and metro networks. Today’s trend of migration to 400G speeds stem from cloud operators’ demand to interconnect data centers. Furthermore, exponential increase of capacity of digital communication networks and growing numbers of optical ports impact optical module technology hugely. The new form factors are increasingly universal and designed to reduce their size and thus power consumption. Inside modules the optics and integrated circuits are getting closer together.

Therefore, silicon photonics might represent a key enabling technology for further development of optical interconnect solutions needed to address growing traffic. This technology will play an important role in 500m–80km distance applications. Industry is working on heterogeneous integration of InP lasers directly onto silicon chips. The advantage is scalable integration and elimination of the cost and complexity of the optical package. Reduced efficiency and lower optical power at high temperature are the typical challenges for these lasers.

For Eric Mounier, PhD, Fellow Analyst at at Yole, besides increasing speed by integrating amplifiers, the higher data throughput is also achieved by integrating state-of-the-art digital signal processing chips providing different multi-level modulation techniques such as PAM4 or QAM. Another technique to increase data rates is parallelization or multiplexing that enables increasing capacity using parallel fibers or different wavelengths onto a single fiber. Progress in integration of optical component technologies has led to dramatic reductions in complexity and cost of optical transceivers. The massive growth in bandwidth has yielded a 10 to 100-fold decrease in cost per transmitted bit.

Yole and its partner System Plus Consulting have deeply investigated the optical transceivers technologies and related markets. The Optical Transceivers for Datacom & Telecom 2020 report gives a deep understanding of the global landscape of fiber-optic communication and classifies its technologies for newcomers to this field. Analysts examined the application landscape, and associated technologies and propose a complete review of the optical transceiver industry and future trends. Including drivers of network traffic growth, macro trend analyses for both Datacom and Telecom, a review of trends in data centers impacting the optical module market, detailed ASP evolution, this report aims to reveal a detailed description of this industry.