Optical Interconnect Market

Optical Interconnect Market Outlook (2022-2032)

The global optical interconnect market was valued at US$ 10.2 Billion in 2021, and is projected to register a Y-o-Y increase of 13.7% in 2022 to be valued at US$ 11.6 Billion. During the 2022-2032 period of assessment, demand is expected to rise at a 12.5% value CAGR, likely to reach US$ 37.6 Billion by the end of the said forecast period.

Report Attributes	Details
Anticipated Base Year Value (2021)	US$ 10.2 Billion
Expected Market Value (2022)	US$ 11.6 Billion
Projected Forecast Value (2032)	US$ 37.6 Billion
Global Growth Rate (2022-2032)	12.5% CAGR
Growth Rate of the U.S (2022-2032)	11.9% CAGR
Expected Market Value of China (2032)	US$ 1.2Billion
Growth Rate of U.K (2022-2032)	11.4% CAGR
Key Optical interconnect market Players	II-VI Incorporated Lumentum Operations LLC Molex LLC InnoLight Technology Ltd. Fujitsu Ltd.

Overall, the optical interconnect market landscape is poised to yield an absolute dollar opportunity worth US$ 26 Billion until 2032. Sales of optical interconnect systems for data communication will continue to flourish, with a documented CAGR of 13.7% from 2015-2021.

Moreover, multimode fiber will continue to remain the primary fiber mode, likely to register a CAGR worth 12.1% from 2022 to 2032. The U.S will remain at the forefront, generating an opportunity worth US$ 8.6 Billion during the forecast period.

Prominent Optical Interconnect Market Growth Drivers

Increasing Need for Increased Bandwidth Capacity leads to increase in Optical Interconnect Demand

The major factor boosting the optical interconnect market is the increasing demand for advanced bandwidth requirements with the reduced power consumption within data centers networks, bandwidth capacity needs to be enhanced. This has largely increased the demand for efficient interconnects. Growing development of hyper scale datacenters around the globe also escalating the growth of the optical interconnects market.

Microsoft, Amazon Web Services, and Google Inc., all these cloud service providers are executing high data rate optical interconnects in their datacenters. Emerging trend of smart gamming, wireless communication and driverless vehicle expected to increase data traffic across the network leads to increase in demand for optical interconnects.

Rise in deployment of data centres to boost the growth of the market

Worldwide, data centre budget allocations are rising significantly. The growth of the market is anticipated to the increasing deployment of data centre across the globe. Most companies and government rely on data centres to deliver a business value greater than their cost. Cloud computing and data analytics have increased investments on large data centers which would possibly contribute to the increment in adoption of the optical interconnection.

A survey of AFCOM states many companies will invest more in data centres in upcoming years. Also many companies will renovate their data centres, also the space dedicated to data centre will increased significantly from 5,000 to 50,000 square feet. This requirement of data centre for large enterprises interconnect solution increase the demand of the market significantly.

Recent Technological Advancements to Bode Well for Market Growth

Recent years have witnessed major disruptions in the global IT industry. With major emphasis on precision of optic interconnects, governments are augmenting capabilities by incorporating advanced systems such as Big Data Analytics and the Internet of Things (IoT) among others. Innovative progression in optical interconnect to offer high processing speed and storage capabilities is a key factor driving interest in optic interconnect market.

Key Challenges Affecting Optical Interconnect Market Growth

High Costs Associated with Applications of Optical Interconnect to Hamper Market Growth

The growth of the optical interconnect market is affected by high cost. Due this high cost issue associated with optic interconnect technology hampered the commercialisation of the optic interconnect technology. This will be resulting a major impeding factor to the market growth. Installation of application related optic interconnect requires specialized tools with expert technicians this will also increase the cost of the project, this will hamper the growth of the market. Also, a major problem in the implementation of optical interconnects is how to perform the alignment and packaging of such systems this will hinder the growth of the market.

Country-wise Analysis

How Opportunistic will the Market for Optical interconnect be across the U.S?

According to Fact.MR’s study, the U.S is poised to yield an absolute dollar opportunity worth US$ 8.6 Billion, expanding at a 11.9% value CAGR from 2022 to 2032. By the end of the said forecast period, a market valuation of US$ 12.7 Billion has been projected for the industry across the country.

US held the largest share of the overall optical interconnect market. The rapid penetration of the internet is expected to raise the growth of the market in this US. Also, the growth of the market can be attributed to the presence of some leading datacenter companies such as Microsoft, Google, Amazon, Facebook, and Apple in the US. As all these companies have a large number of hyperscale datacenters installed in US region, the growth of the optical interconnect market in US is high.

Also the initiatives taken by telecommunication companies to start 5G services in US is expected to drive the market growth in during the forecast period. For instance, in November 2020, North America was expected upgrade about 4% of its mobile subscriptions to 5G. this will create the scope for optic interconnect market as a powerful interconnect is required to enable cell towers and other applications to handle 5G transmissions.

Will China emerge as an Attractive Optical interconnect Market?

The optical interconnect market in China is projected to grow at the second highest CAGR during the forecast period. The growth of the market can be attributed to the increased adoption of advanced technologies such as big data, AI and IoT in China. Moreover, the increment in deployment of datacentres in China will lead to increase in growth of the market.

Major Datacentre companies of China have established their centres in the region, this will also boost the growth of optical interconnect market in China. Also the growth of the market is attributed to increased demand for high bandwidth networks for broadband and mobile connectivity in China. For instance, Alibaba Cloud has been significantly investing in SiPh technology in recent years. Alibaba Cloud partnered with Hisense Broadband and Elenion Technologies for technological development.

Consequently, deployment of advanced optical interconnect market is rising significantly across the East Asian giant. As per Fact.MR’s estimates, the Chinese market is poised to register a CAGR of 11.7% from 2022 to 2032, reaching US$ 1.7 Billion and yielding a dollar opportunity worth US$ 1.2 Billion

Country-wise Forecast CAGRs for the Optical Interconnect Market

U.S	11.9%
U.K	11.4%
China	11.7%
Japan	11.0%
South Korea	10.1%

Category-wise Insights

By Application, which category is likely to make Maximum Usage of Optical interconnect market?

Data Communication to hold major sway during the forecast period

As per Fact.MR, the data communication segment is projected to lead the optical interconnect market from 2022 to 2032, flourishing at a CAGR of 12.2%. Growing adoption of cloud services, as well as the rising technological advances in machine learning, artificial intelligence, and deep learning affect the growth of the optical interconnect marker. 

Increasing technological advances in machine learning also growing adoption of cloud services, artificial intelligence and deep learning will positively affect the growth of the optical interconnect market. Increasing data traffic also show rise in demand of optic interconnect market. Also the increasing use of driverless cars, wireless networking, smart gaming accelerates the growth of the demand for optic interconnect market.

Which Fiber Mode will account for the maximum optical interconnect market revenue?

Multimode fiber segment to grow at the highest CAGR

Based on fiber mode, the multimode fiber segment of the market is projected to grow at a higher CAGR of 12.1% from 2022 to 2032. Multimode fiber optical interconnects have been used in data centers and high-performance computing applications for short-distance data transmissions.

In addition, cloud computing offers a wide range of advantages, such as lower infrastructure cost and better connectivity, contributing to its higher adoption rate worldwide. The increase in use of cloud computing has generated the high-efficiency processing requirement in datacentres.

Competitive Landscape

Prominent manufacturers of optical Interconnect market are eyeing technological innovations in order to provide the most accurate and precise system arrangements to their customers. As the threat of technology looms large over the world, companies are forging collaborative agreements with government entities to enhance their presence across major geographies. In addition, the vendors are likely to leverage upgradation and product differentiation to gain an edge over other competitors in the market.

• In April 2020, NVIDIA Corporation acquired a US-based provider of optical interconnects Mellanox Technologies, Ltd. Through this acquisition, NVIDIA Corporation combines it datacenter with high-performance networking technologies of Mellanox.
• In December 2020, Corning Inc. expand its Cabarrus County fiber optic cable plant in Concord, by spending US 450 Million, this will generate new jobs and make it the largest facility of its type in the world.
• In November 2020, Ayar Labs initiated funding for manufacturing chip solutions based on optical networking principal's architecture. The amount raised was US$ 35 Million. This funding will be used to continue developing its product and working on further commercialization

Key Segments Covered in the Optical Interconnect Market Study

• Optical Interconnect Market by Product Type :

  • Optical Interconnect Cable Assemblies
    • Indoor Cable Assemblies
    • Outdoor Cable Assemblies
    • Active Optical Cables
    • Multi-Source Agreements
  • Optical Interconnect Connectors
    • LC Connectors
    • SC Connectors
    • ST Connectors
    • MPO/MTO Connectors
  • Optical Transceivers
  • Free Space Optics, Fiber and Waveguides
  • Silicon Photonics
  • PIC-based Interconnects
  • Optical Engines

• Optical Interconnect Market by Interconnect Level :

  • Metro and Long-haul Optical Interconnect
  • Board-to-Board and Rack-level Optical Interconnect
  • Chip- and Board-level Optical Interconnect

• Optical Interconnect Market by Fiber Mode :

  • Single Mode Fiber
  • Multimode Fiber

• Optical Interconnect Market by Data Rate :

  • Less than 10 Gbps
  • 10 Gbps to 40 Gbps
  • 41 Gbps to 100 Gbps
  • More than 100 Gbps

• Optical Interconnect Market by Application :

  • Data Communication
  • Telecommunication
  • Others

• Optical Interconnect Market by Distance :

  • Less than 1 Km
  • 1 Km to 10 Km
  • 11 Km to 100 Km
  • More than 100 Km

• Optical Interconnect Market by Region :

  • North America
  • Europe
  • Asia pacific
  • Middle East and Africa
  • Latin America