• The implementation of semiconductor architectures with embedded optical interconnect (I/O) technologies is gaining traction this year.
• The shift from copper to optical technologies will bring more bandwidth with reduced power needs.
• Shipments of embedded optical modules are set to grow at a CAGR of 50% through 2033.
• Of the various types of I/O solutions — OBO, NPO and CPO — the latter will bring the biggest generational shift in AI computing by enabling huge bandwidth scaling, lower power consumption and AI supercomputing scaling.
• By 2027, broad adoption of NPO and CPO will help push integrated revenue growth to triple digits YoY, while the share of capacity shipped in the total will hit double digits.
• By 2033, over half of all revenues and capacity shipped will come from integrated semiconductor optical I/O solutions.
• NVIDIA, Intel, Marvell and Broadcom are currently leading the way towards CPO, but the evolutionary path will be gradual.

Seoul, Beijing, Berlin, Buenos Aires, Fort Collins, Hong Kong, London, New Delhi, Taipei, Tokyo – July 15, 2025

Embedded or integrated semiconductor optical modules are starting to gain traction, with the shipments of On-Board Optics (OBO), Near-Packaged Optics (NPO) and Co-Packaged Optics (CPO) solutions projected to grow at a CAGR of 50% through 2033, according to Counterpoint Research’s Silicon Photonics (SiPh) and Co-Packaged Optics (CPO) Report.

Pluggable optical solutions have been around since 2016, but integrated solutions — namely OBO, NPO and CPO — are now bringing massive improvements in transport capacity and especially processing for AI systems, delivering much higher bandwidth against far less power consumption and enabling the dense, high-bandwidth fabrics AI clustering requires in order to scale.

Semiconductor Optical Interconnect Shipments by Tech and Share of Total Capacity Shipped

“It’s like going from ADSL to FTTH broadband but at the chip level. All this additional speed and efficiency is going to usher in the next stage of AI computing,” said Associate Director Leo Liu, adding, “OBO was the first iteration, with products from companies like Applied Optoelectronics seeing wider adoption in 2023. But CPO is the big game-changer with virtually the entire transport layer being optical.”

CPO will bring the biggest generational shift in AI computing by enabling:

• Huge bandwidth scaling through ultra-high speeds, low latency and ‘speed-of-light’ throughput between critical components like GPUs and accelerators.

• Lower power consumption at scale.

• AI supercomputing scaling by delivering the dense, high-bandwidth fabrics AI clustering requires to scale.

NVIDIA, Intel, Marvell and Broadcom are currently leading the way towards CPO, but the evolutionary path will be gradual.

By 2027, broad adoption of NPO and CPO will help push integrated revenue growth to triple digits YoY, while the share of capacity shipped in the total will hit double digits, according to the Counterpoint report. By 2033, over half of all revenues and capacity shipped will come from integrated semiconductor optical I/O solutions.

Less Copper, More Optics: Evolution of Optical Communication

“The shift towards ‘less copper, more optics’ means that as we move from OBO to NPO to CPO, far less copper is being used at each stage, resulting in non-linear performance improvements,” said Research Associate David Wu. Ultimately, we can expect to see an 80x generational leap in performance, with the 3D CPO likely to perform 80x better than current solutions.

Gradual replacement of copper with optical brings benefits beyond better chip performance. “What this really means is the delivery of high-speed, high-bandwidth data movement needed for scalable AI clustering, a key step towards democratizing and scaling AI supercomputing capabilities,” noted Liu.

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