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[Market News] AI Fuels High-Speed Interconnects, NVIDIA, Google, AWS Boost Optical Transceiver Module Demand

AI Fuels High-Speed Interconnects, NVIDIA, Google, AWS Boost Optical Transceiver Module Demand

According to TechNews, TrendForce notes that the rise of AI applications has greatly increased the need for high-speed optical communications. The industry is now centered on three expansion models for AI server and data center architectures—Scale Up, Scale Out, and Scale Across. Among these, the optical communication module market driven by Scale Out is emerging as the main battleground for future data transmission, TrendForce adds.

TrendForce states that AI servers rely on GPUs, TPUs, and other devices for parallel computing, with results connected through high-speed interconnects. This architecture demands a high level of “scalability,” meaning the capacity to expand from a single server to clusters of dozens or even hundreds.

Three Models of Data Center Expansion: Scale Up, Scale Out, Scale Across

The three expansion models—Scale Up, Scale Out, and Scale Across—each serve distinct purposes. Scale Up focuses on high-speed interconnects within server racks, relying mainly on copper transmission. Scale Across, a concept recently proposed by NVIDIA, refers to long-distance links between data centers and depends entirely on optical fiber, without involving silicon photonics CPU technology.

Scale Out, by contrast, emphasizes large-scale parallel computing across servers, enabling massive data throughput and near-unlimited scalability. This model relies on optical communications, with different optical module solutions adopted depending on distance and speed requirements. It is worth noting that although optical communications are primarily applied in Scale Out, there is also significant demand in Scale Up scenarios.

Surging Demand for Optical Modules

According to TrendForce, demand for optical transceiver modules is set to grow sharply. The global AI server market is expected to ship over 20 million units in 2025 and peak in 2029. Although shipment growth in 2029 is projected to slow to 8.7%, demand for high-end optical transceiver modules is forecast to surge. With 800G transceiver modules becoming mainstream, demand will keep expanding, driven by major buyers such as NVIDIA, Google, Meta, and AWS.

Taiwan Poised to Benefit as Optical Module Supply Chains Diversify

Currently, Chinese manufacturers dominate the global optical transceiver module market with more than 50% share. However, as U.S.–China tech decoupling accelerates, major international companies are pushing supply chains to shift out of China toward the U.S., Southeast Asia, and Taiwan, as per TechNews.

TrendForce notes that Taiwan, with its complete semiconductor ecosystem—combining strengths in silicon photonics, IC design, and foundry services—is well positioned to play a critical role in the AI-driven transformation of optical communications.

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(Photo credit: Google)


Source: https://www.trendforce.com/news/

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