Optical Interconnect Market size is set to grow by USD 16.80 billion from 2024-2028, Adoption of cloud database boost the market, Technavio

NEW YORK, July 26, 2024 -- The global optical interconnect market size is estimated to grow by USD 16.80 billion from 2024-2028, according to Technavio. The market is estimated to grow at a CAGR of 20.62% during the forecast period. Adoption of cloud database is driving market growth, with a trend towards demand for millimeter wave connectivity. However, high cost of optical interconnectors poses a challenge. Key market players include 3M Co., Amphenol Corp., Cisco Systems Inc., Corning Inc., FIBERONE LLC, Fischer Connectors Holding SA, Fujikura Ltd., Fujitsu Ltd., Furukawa Electric Co. Ltd., II VI Inc., InnoLight Technology Ltd., Japan Aviation Electronics Industry Ltd., Lumentum Holdings Inc., Molex LLC, NINGBO LONGXING TELECOMMUNICATIONS EQUIPMENT MANUFACTURING CO. LT, NVIDIA Corp., Radiall SA, Sterlite Technologies Ltd., Sumitomo Electric Industries Ltd., and TE Connectivity Ltd..

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Market Driver

The global optical interconnect market is anticipated to experience growth due to the increasing demand for high bandwidth applications in 5G networks. ISPs face the challenge of managing 5G wireless backhaul traffic effectively. Two typical network architectures for wireless backhaul traffic are small cell and millimeter wave. The demand for optical interconnect components will rise as they are used to connect millimeter wave connectivity, which is economical and energy-efficient for deploying future 5G networks. The data transmission requirement is expanding rapidly and is expected to continue growing during the forecast period. Millimeter wave connectivity is extensively used in small cell backhaul networks, making it a significant growth opportunity for the optical interconnect market. 

The optical interconnect market is experiencing significant growth due to the increasing demand for efficient data communication solutions. Trends like machine learning and real-time data processing are driving the need for high-bandwidth, low-latency networks. Optical engines and ML/AI networks are at the heart of this transformation. Edge computing and data-intensive technologies require network interconnection solutions that can handle large data traffic. Both single mode fiber and multimode fiber segments are in focus, with single mode fiber leading the way for long-distance data transmissions and high-performance computing applications. 5G networks and the data communication segment are key drivers, particularly in the areas of cloud services, large-scale datacenters, and data storage. Semiconductor companies and infrastructure software solutions are investing heavily in this space. IoT, driverless vehicles, and wireless communication are also contributing to the increased bandwidth requirements. Overall, the optical interconnect market is poised for continued growth in the coming years. 

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Market Challenges

• The optical interconnect market offers a range of interconnectors with varying average selling prices (ASP). The price can fluctuate based on factors such as applications, package weight, bandwidth, split ratios, custom wavelength, coupling ratio, sample rate, and channels. Interconnectors with high bandwidths up to ±200 nm and center wavelengths up to 2,000 nm have a higher ASP. These interconnectors are capable of analyzing signals from standard cables like USB, coaxial, and Ethernet, with several automatic measurements. However, the high cost of these interconnectors represents a significant capital expenditure for industries, which could potentially hinder the growth of the global optical interconnect market during the forecast period.
• The Optical Interconnect Market is experiencing significant growth due to increasing data traffic in cloud storage, deep learning, and hyperscale datacenters. Efficient data communication is crucial for next-generation applications like 5G services, driverless vehicles, smart gaming, and the Internet of Things. Optical interconnect technologies, such as fiber mode, offer higher bandwidth requirements and lower latency compared to copper-based interconnects. However, challenges remain. Alignment and packaging, compatibility, and interoperability are key concerns for datacenter companies. The commercialization of 5G services and high-performance computing demands for big data analytics, artificial intelligence, and high-bandwidth data centers networks. Telecommunications networks and data communication infrastructure require optical interconnect solutions to meet the needs of cloud computing, big data, and fiber optics. To address these challenges, optical interconnect manufacturers must focus on developing innovative solutions that cater to the unique requirements of various industries while ensuring seamless integration with existing infrastructure. Optical interconnect solutions must be designed to meet the evolving needs of next-generation applications and services.

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Segment Overview 

This optical interconnect market report extensively covers market segmentation by  

1. Fiber Type
   • 1.1 Single-mode fiber
   • 1.2 Multimode fiber
2. Connectivity 
   • 2.1 Rack level
   • 2.2 Long-haul level
   • 2.3 Chip and board level
3. Product Type
   • 3.1 Optical transceivers
   • 3.2 Connectors
   • 3.3 Cable assemblies
   • 3.4 Others
4. Geography 
   • 4.1 APAC
   • 4.2 North America
   • 4.3 Europe
   • 4.4 South America
   • 4.5 Middle East and Africa

1.1 Single-mode fiber-  Single-mode optical fibers are the most common type of fibers used for long-distance communication in fiber optics. These fibers allow light to travel directly through the core without bouncing at the edges, resulting in less signal deformation and lower attenuation. Single-mode fibers have a small core diameter of 8-9 microns and a larger cladding diameter of 125 microns, reducing reflections and enabling longer transmission distances. Major vendors in this market include Sterlite Technologies Ltd., The 3M Co., and Molex, LLC. Applications of single-mode fibers span across telecommunications, education, CATV companies, military, ships, aerospace, data centers, medical cases, and telemetry. The advantages of single-mode fibers include faster transmission over long distances, lower integrity loss, and cost-effectiveness. The market for single-mode fibers is expanding due to these advantages and the increasing demand for long-distance communication in various industries.

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Learn and explore more about Technavio's in-depth research reports

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Research Analysis

The optical interconnect market is experiencing significant growth due to the increasing demand for high-speed data transmission in various industries. Cloud computing, big data analytics, artificial intelligence, and high-performance computing are driving the need for advanced optical interconnect technologies. Data centers, telecommunications networks, and IoT are key areas where optical interconnects are finding extensive applications. The market is segmented into multimode fiber and single mode fiber segments based on the type of fiber used. Optical interconnects offer increased bandwidth, making them ideal for short-distance data transmissions in data centers and hyper-scale datacenters. The commercialization of 5G services and the rise of high-efficiency processing in high-performance computing applications are further boosting the market. Alignment and packaging are critical factors influencing the performance and cost of optical interconnects. The market is expected to grow significantly in the coming years due to the increasing demand for high-speed data transmission in various applications, including data center networks, driverless vehicles, and data analytics.

Market Research Overview

The optical interconnect market is experiencing significant growth due to the increasing demand for high-speed data communication in various industries, including cloud computing, big data analytics, artificial intelligence, high-performance computing, and telecommunications networks. Optical interconnect technologies, such as single mode fiber and multi-mode fiber, are becoming essential for next-generation applications and services that require increased bandwidth and real-time data processing. Optical interconnect solutions offer compatibility and interoperability, making them ideal for network interconnection in data centers, hyperscale datacenters, and large-scale cloud service providers. The market is also driven by the commercialization of 5G networks, IoT, and edge computing, which require high-bandwidth, efficient data communication. Optical engines, ML/AI networks, and infrastructure software solutions are key components of optical interconnects, enabling machine learning, real-time data processing, and high-efficiency processing. Copper-based interconnects are being replaced by optical interconnects due to their higher performance and bandwidth capabilities. The data communication segment and data communication applications are the primary drivers of the optical interconnect market. The market is expected to grow significantly in the coming years due to the increasing demand for data-intensive technologies and the need for high-performance networking in various industries.

Table of Contents:

1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation

• Fiber Type
  • Single-mode Fiber
  • Multimode Fiber
• Connectivity
  • Rack Level
  • Long-haul Level
  • Chip And Board Level
• Product Type
  • Optical Transceivers
  • Connectors
  • Cable Assemblies
  • Others
• Geography
  • APAC
  • North America
  • Europe
  • South America
  • Middle East And Africa

7 Customer Landscape
8 Geographic Landscape
9 Drivers, Challenges, and Trends
10 Company Landscape
11 Company Analysis
12 Appendix

About Technavio

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With over 500 specialized analysts, Technavio's report library consists of more than 17,000 reports and counting, covering 800 technologies, spanning across 50 countries. Their client base consists of enterprises of all sizes, including more than 100 Fortune 500 companies. This growing client base relies on Technavio's comprehensive coverage, extensive research, and actionable market insights to identify opportunities in existing and potential markets and assess their competitive positions within changing market scenarios.

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