ECOC 2025 Tech Focus: Optics in the Age of AI — Where Do We Go from Here?
Updated: 21 hours ago
Introduction
The rapid rise of AI has completely changed the logic of the optical communications industry. Forecasting by linear trends no longer works; in its place are explosive bandwidth demand and fast-changing product generations. In its ECOC 2025 talk, Cignal AI analyzed the new normal in data center and telecom optics markets and discussed the dominance of pluggable optics and the challenges facing emerging technologies.
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Key Points
1. The new normal brought by AI
Non-linear growth: traditional linear models cannot predict AI-driven optics demand, and module shipments have surged.
Data:
22.5 million high-speed modules shipped in 2024.
Expected to reach 39 million in 2025.
Speed evolution:
400G is still growing.
Demand for 800G modules is surging (+75%).
1.6T is already being demonstrated, and 3.2T is expected to emerge in 2029.
2. Cost as the driver: 50 cents/Gbps
The industry's long-term target: 50 cents per gig.
Today: even though modules are in short supply, prices still fall by about 10% every six months.
Forecast: originally expected in 2027, the target may now be reached early, in 2026.
3. Data center vs. telecom markets
Datacom optics:
Market size exceeds US$15 billion in 2025 and reaches US$24 billion in 2029.
Far larger than the telecom segment.
Telecom optics:
Market of about US$5 billion in 2025, reaching US$8 billion in 2029.
Growth comes from pluggable coherent optical modules.
4. The dominance of pluggable optics
Inside the data center: high-speed pluggable modules (400G, 800G, 1.6T).
Data center interconnect (DCI):
2024: growth driven by 400ZR / ZR+.
2026: 800ZR becomes a key technology for AI workloads spanning data centers.
2027-2028: 1600ZR begins deployment, and long-haul transport also moves to pluggables.
Trend: IP-over-DWDM replaces traditional transponders, and more than 50% of optical transport spending will go to pluggable modules.
5. Emerging technologies to watch
Optical circuit switching (OCS)
Google's real-world results: 40% lower power, 30% lower cost and 30% higher throughput.
Market size: expected to reach US$1.6 billion by 2029.
Challenge: the main customer is still Google, while other applications are being developed.
Co-packaged optics (CPO)
Strengths: potential for low power and high reliability.
Barriers: difficult maintenance, vendor lock-in risk, and a lack of early adopters.
View: "CPO is inevitable, not imminent".
Coherent Lite
Goal: challenge IMDD in 10 km LR applications.
Limitation: the IMDD-LR market is limited and currently a niche application.
Outlook: could become a more widely used technology in the 3.2T generation, which requires building the supply chain in advance.
Conclusion
Cignal AI's analysis points out:
AI has changed the rules of the game: optics demand has entered a new normal, and traditional linear forecasts no longer work.
The cost curve keeps falling: 50 cents per gig may be reached early, and price pressure is driving rapid industry evolution.
Datacom is far ahead of telecom: the data center market is more than three times the size of telecom.
Pluggable optics become the core: they not only dominate inside the data center but will also replace the traditional architecture of telecom long-haul networks.
New technologies penetrate gradually: OCS, CPO and Coherent Lite each have potential but are still in the exploration stage; true industrialization will come in the next 3 to 5 years.
Overall, the optics industry in the AI era is entering a combined phase of "rapid evolution + cost pressure + trials of new technologies." The real key is who can find the best balance among reliability, power and cost, and take the lead in an open ecosystem.
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