Market and Technology Trends

Co-packaged Optics for Datacenter 2023

By Yole Intelligence — Mar 2023

Co-packaged optics deployment will be greatly accelerated by optical input/output for high performance computing, creating a window of opportunity by 2033 valued at $2.6B.

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Co-Packaged Optics gain attention in high-performance computing

Over the past 50 years, mobile technology innovations have been rolled out each decade. Mobile bandwidth requirements have evolved from voice calls and texting to ultra-high-definition (UHD) video and a variety of augmented reality/virtual reality (AR/VR) applications. Despite the profound implications of the COVID-19 outbreak for the telecom infrastructure supply chain, consumers and business-users worldwide continue to create new demand for networking and cloud services. Social networking, business meetings, video streaming in UHD, e-commerce, and gaming applications will continue to drive growth.

The average number of devices connected to the internet per household and per capita is increasing. With the advent of new digital devices with increased capabilities and intelligence, we observe higher adoption rates each year. In addition, expanding machine-to-machine applications such as smart meters, video surveillance, healthcare monitoring, connected drives, and automated logistics significantly contribute to device and connection growth and push the expansion of data center infrastructure.

The co-packaged optics (CPO) community faces hard times because of budget cuts, because pluggables can already achieve the cost savings and low power that CPO promises. The full-scale deployment of CPO will only happen when pluggables run out of steam. It will be hard to compete with pluggable modules for at least the next two generations of switch systems, which will remain preferable for a long time yet. CPO has gained a lot of attention recently due to its networking power efficiency in data centers (DCs). Our analysis shows that power consumption savings from networking are negligible when compared to total power consumption in a DC. Only a few CPO players, Broadcom, Intel, Marvell, and some others, will bring proprietary solutions to the market. To satisfy the market demands and convince end-users of CPO viability, multi-vendor business models and considerable cost and power savings must be proven.

Intense competition between CPO and pluggable optics might happen with the arrival of a 6.4T optical module as late as 2029. Multiple technological hurdles in the CPO system are expected to be solved by this time. However, the transceiver industry is continuously working on innovations to drive the pluggable optics market. Before CPO systems achieve volume shipments for networking applications, a co-packaging approach will be used in pluggables, and optical engines will gain more popularity in high-performance computing and disaggregated future systems. The industrial ecosystem, including Ayar Labs, Intel, Ranovus, Lightmatter, AMD, GlobalFoundries, and others, around Machine Learning (ML) system vendors Nvidia and HPE, has achieved decent progress, with a plan to ship products in volume between 2024 and 2026.

Revenue generated by the CPO market reached around $38M in 2022 and is expected to reach $2.6B in 2033, at a 46% Compound Annual Growth Rate for 2022-2033. Projections of rapidly growing training dataset sizes shows that data will become the main bottleneck for scaling ML models, and as a result we might see a slow-down in artificial intelligence (AI) progress. Using optical Input/Output (I/O) in ML hardware can help to overcome the negative outcomes of this analysis. These negative prospects are the main driver in adoption of optical interconnects for next generation High Performance Computing (HPC) systems.

Photonic Integrated Circuits enable co-packaging for power- and cost-effective optical interconnects

We anticipate high popularity for 800G and 1.6T pluggable modules, since they take advantage of 100G and 200G single-wavelength optics and thus can be technically and cost-effectively implemented in QSFP-DD and OSFP-XD form factors. Pluggable form factors will be limited in their ability to support 6.4T and 12.8 capacity in terms of required electrical and optical densities, thermal management, and energy efficiency. As a result of discrete electrical device implementation, power dissipation and thermal management are becoming limiting factors for future pluggable optics. Co-packaging using a silicon photonics technology platform aims to overcome the challenges mentioned above.

Fibers are getting closer and closer to the chipset. Bringing in data using light to the point where it is centrally processed is one of the main goals of architecture designers. This trend started a decade ago with proprietary designs for optical assemblies mounted on printed circuit boards (PCBs). The idea of these embedded optical interconnects (EOI) has continued in the Consortium for On-Board Optics (COBO) to develop specifications to permit the use of board-mounted optical modules in the manufacturing of networking equipment. CPO is an innovative approach that brings the optics and the switch application specific integrated circuit (ASIC) very close together. Since it is challenging with today’s technology to surround the 50T switch chip with 16 3.2Tbps optical modules, near packaged optics (NPO) tackle this by using a high-performance PCB substrate – an interposer – that sits on the host board, in contrast to CPO, where the modules surround the chip on a multi-chip module substrate. The NPO interposer is more spacious, making the signal routing between the chip and optical modules easier while still meeting signal integrity requirements. In contrast, CPO confines the modules and host ASIC much closer to each other with the lower channel loss and lower power consumption.

Networking hardware is seeing more common components, as technology advances enable tighter integration of communication and computing technologies in commercial systems. Moreover, artificial intelligence models are growing in size at an unprecedented rate and the capabilities of the traditional architectures - copper-based electrical interconnects - for chip-to-chip or board-to-board will become the main bottleneck for scaling machine learning. As a result, new very-short-reach optical interconnects have emerged for high-performance computing (HPC) and its new disaggregated architecture. Disaggregated design distinguishes the compute, memory, and storage components found on a server card and pools them separately. Using optical-based interconnect for various processing units (xPUs), specifically central processing units (CPUs), data processing units (DPUs), graphics processing units (GPUs), field programmable gate arrays (FPGAs) and ASICs, memory, and storage by means of advanced in-package optical I/O technology can help to achieve the necessary transmission speeds and bandwidths.

Data center operators will prefer proven low-cost and flexible solutions

Today, the optical pluggable module market supply chain is well established. It comprises discrete or integrated component suppliers, optics companies producing transmitter and receiver optical subassemblies (TOSAs and ROSAs), multiplexers, digital signal processors (DSPs) and PCBs, and assembly/test integrators. In such a multi-vendor market model, many different suppliers are involved. Moreover, the interoperability of multiple different pluggable modules in one switch box contributes to the flexibility of the industry. These are today principal advantages over CPO, which will rely heavily on silicon photonics. With highly integrated optics and silicon chips, new engineering capabilities and foundries will be highly desired, which will not be acceptable for traditional mid-sized players. Only the billion-dollar club of optics suppliers can afford to switch from pluggables to CPO.

It is important to point out that despite the mainstream deployment of high-end CPO solutions, mostly for big cloud operators, there are still plenty of smaller enterprise data centers that haven’t adopted the latest interconnect technologies, and thus the technology exchange is much slower. This means that even if CPO becomes a mainstream technology, pluggable modules will remain in high demand for several applications where CPO is not technically or economically feasible, such as long-haul applications and edge data centers. We anticipate that pluggable technology will not be phased out in the next 10 years. However, the pluggable optics industry may consolidate, while the CPO market will be shaped to enable a multi-vendor business model.

In 2020, the optical interconnect and switch equipment industry started intensive and broad discussions on the further development of CPO. Several strategic collaborations have since been announced, and the first proofs-of-concept have appeared. Evidence that the industry takes it seriously is that standards bodies like the Optical Interconnect Forum (OIF), COBO, and the multisource agreement (MSA) groups have established internal projects to create specifications for CPO. Two of the big four hyperscale cloud operators – Meta and Microsoft – actively supported the penetration of CPO into their cloud networks.

In 2022, several thousand CPO engines were shipped for pilot testing. This year, we will see some macroeconomic headwinds that will negatively impact budget-intensive projects, particularly for emerging technologies such as CPO. Recent news indicates that most of the main CPO proponents have suspended support for CPO programs. Even end-users have stopped looking at CPO. Broadcom remains the last CPO supplier. There are several reasons why CPO is losing attractiveness. The first reason is the well-established industrial ecosystem around pluggables. Also, new optics technologies for pluggable form factors, including thin film lithium niobate (TFLN), barium titanate (BTO), carbon and polymer modulators, can help achieve the required low power and can be introduced to the market without any change to existing network system designs. Whichever technology is the best in terms of performance, power, cost, and manufacturability can prosper in the market.

The situation of CPO for AI/ML systems is different. The potential for billions of optical interconnects, chip-chip and board-board, in the future drives big foundries to prepare for mass production. Since most of the photonics manufacturing intellectual property (IP) is held by non-foundry firms, big foundries such as Tower Semiconductor/Intel, GlobalFoundries, ASE Group, TSMC, and Samsung are preparing silicon photonics process flows to accept any Photonic Integrated Circuit (PIC) architecture from design houses. All of them are joining forces in industry consortiums such as Peripheral Component Interconnect Express (PCIe), Compute Express Link (CXL), and Universal Chiplet Interconnect Express (UCIe). The common specification of chiplet interconnect enables the construction of large system-on-chip (SoC) packages that exceed maximum reticle size. This allows intermixing components from different vendors within the same package and improves manufacturing yields by using smaller dies. Each chiplet can use different silicon manufacturing processes suitable for a specific device type or computing performance/power draw requirement.

Key Features

Drivers of network traffic growth
Optical module evolution
Review of trends in data centers impacting the optical module market
Forecast for CPO market for 2020-2033 split by system architecture
Comprehensive introduction to CPO
A quick look at the switch ASIC evolution
Analyses of integration and packaging aspects, including timelines
CPO industry analysis, including deployment models
CPO challenges that need to be overcome to succeed

What’s new?

Market breakdown by technology architecture (EOI/NPO/CPO/Optical I/O)
Evaluation of CPO for HPC AI/ML applications
Review different CPO approaches from different vendors

Product's objectives

To provide the context of why DC operators explore CPO technology
- IP traffic growth, new applications as market drivers, other trends in data centers impacting the optical module technology, market and industry
To provide market forecast split by technology architecutres
To review the industry and the potential impact on the supply chain
- There is no broad consensus on CPO as a future technology
- Industrial eco-system, supply chain of selected players
To examine technology approaches for CPO
- Applications: Networking & Processing
- CPO technology architectures: EOI, OBO, NPO, CPO, Optical I/O
- Roadmaps of CPO adoption
- Examples of particular solutions from selected players
To discuss CPO challenges and compare with pluggable optics
To review the global challenge and focus on the POWER / ENERGY aspect

Glossary

Definitions – Pluggable optical modules vs. CPO

What is co-packaged optics (CPO) in networking?

What is co-packaged optics (CPO) in processing?

Diverse co-packaging approaches

Objectives of this report

Scope of this report

Methodologies & definition

About the authors

Companies cited

What we got right, what we got wrong

Who should be interested in this report?

3-Page summary

Executive summary

Global Context

Global trends in datacom

CPO Market

Technologies – Time to market
Technologies – Assumptions for market forecast
Revenue and Shipments forecast comparison – 2022 vs. 2023
DATACOM Optical modules shipments forecast (2020-2033)
DATACOM Optical modules revenue forecast (2020-2033)
Shipments forecast for Optical engines – split by technology
Revenue forecast for Optical engines – split by technology
ASP forecast of Optical engines – split by technology
Shipments forecast FOR CPO Optical engines – split by Data rates
Revenue forecast for CPO Optical engines – split by Data rates
ASP forecast FOR CPO Optical engines – split by Data rates
Conclusion

Industry & supply chain

Introduction
Mapping the CPO ecosystem’s key players
End-users: DC operators
M&As and partnerships
Standardization
Supply chain of selected CPO players
Deployment models for pluggable modules and CPO: comparison
Deployment models for pluggable modules and CPO: comparison
CPO Industry – Research

CPO Introduction

Global picture: drivers & applications paradigm shift
Evolution of integrated optics paralleling pluggable optics
What is co-packaged optics (CPO)?
Timeline of CPO adoption along network architecture
Timeline of CPO adoption for different applications
Beyond pluggable optics: overview
Beyond pluggable optics: cross-sections of co-packaging approaches
Comparison of optical interconnect capabilities
Electrical interfaces: SerDes
Key technology aspects in the optics evolution
What needs to fit together?
Other CPO applications: HPC & disaggregated systems
Roadmap of optical I/O technology

Technology trends

Near-Packaged Optics (NPO)
Co-Packaged Optics in networking
CPO architectures by diverse industrials
- Broadcom
- Intel
- Ranovus
- OpenLight
Co-Packaged Optics in processing:
Optical I/O (New Optics Applications)
Optical I/O architectures by diverse industrials
- Nvidia
- Ayar Labs
- Intel
- Lightmatter
- AIO Core

Current Status of Pluggable Optics

Outlook

Challenges - DC Energy Analysis
CPO Challenges
Conclusion

Appendix

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Co-packaged Optics for Datacenter 2023

Co-packaged optics deployment will be greatly accelerated by optical input/output for high performance computing, creating a window of opportunity by 2033 valued at $2.6B.

Co-Packaged Optics gain attention in high-performance computing

Photonic Integrated Circuits enable co-packaging for power- and cost-effective optical interconnects

Data center operators will prefer proven low-cost and flexible solutions