CPO_ Co-Packaged Optics Technology Discussion_ Key Takeaways from the JPM Taiwan Conference. Tue Feb 25 2025

Summary of Key Points from the Conference Call on Co-Packaged Optics Technology Industry and Company Involved - Industry: Co-Packaged Optics (CPO) Technology - Company Discussed: TSMC (Taiwan Semiconductor Manufacturing Company) Core Insights and Arguments - Definition and Importance of CPO: CPO utilizes semiconductor technology to create optical engines (OE) that function as optical transceivers, significantly reducing the size of key components such as signal modulators and light generation systems. This technology addresses issues like space constraints in data centers and rising power consumption, particularly as data rates increase to 3.2T to 6.4T, where CPO becomes advantageous, and beyond 6.4T, it becomes essential [4][5][6] - Stages of Adoption: The implementation of CPO is categorized into three stages: 1. OE on circuit boards (already deployed) 2. OE on substrates (expected meaningful adoption in data center switches) 3. OE on interposers (in R&D phase, earliest deployment expected in 2027 or later) [4][5] - Role of TSMC: TSMC is anticipated to play a crucial role in OE production due to its capabilities in various process nodes and hybrid bonding. The company has developed the COUPE (Compact Universal Photonic Engine) platform, which is already in its second generation [4][5] - Challenges Facing CPO: - Thermal Management: Critical issue as optical signals are sensitive to heat, complicating heat dissipation when close to electronic ICs. - Manufacturing Complexity: Involves sophisticated integration techniques due to different process nodes for PICs (65nm) and EICs (7nm). - Repairability: Traditional optical modules are easily replaceable, necessitating some level of pluggability for OEs [4][5] - Beneficiaries of CPO Technology: Foundries and OSATs (Outsourced Semiconductor Assembly and Test) are positioned to benefit from the development of CPO technology. Additionally, larger IC substrates will be required to accommodate the increased number of components [4][5] Other Important but Potentially Overlooked Content - Market Context: The discussion highlights the growing demand for efficient data transmission solutions in the context of rising data center power consumption and the need for reduced latency in AI data transmission [4][5] - Analyst Certification and Disclosures: The report includes standard disclaimers regarding potential conflicts of interest and the objectivity of the research, emphasizing that J.P. Morgan may have business relationships with TSMC [3][10][12] This summary encapsulates the critical points discussed in the conference call regarding CPO technology and its implications for TSMC and the broader semiconductor industry.