TSMC(US:TSM)2025-07-24 05:04Summary of Co-packaged Optics (CPO) in the Semiconductor Industry Industry Overview - The report focuses on the semiconductor industry, specifically the co-packaged optics (CPO) technology, which is critical for next-generation AI servers to meet increasing bandwidth demands and improve power efficiency [4][9][32]. Key Insights 1. CPO Market Potential: - CPO transceivers could generate a revenue market of US$7-14 billion by 2030E [4]. - Silicon photonics, including CPO, may drive a US$6-9 billion revenue market by 2030E, contributing 2-3% sales upside to companies like TSMC and ASE [4][6]. 2. Technological Transition: - The industry is expected to transition to CPO technology as AI data center switches move to the 3.2T/port era around 2027-28E, followed by integration with xPU in 2028-30E [4][11][74]. - Traditional optical transceivers will coexist with CPO for the next 2-3 years as the technology matures [5][6]. 3. Market Growth: - The optical transceiver serviceable addressable market (SAM) is projected to grow from US$12 billion in 2025E to US$32 billion by 2030E, with a CAGR of 22% [13]. - CPO solutions are expected to capture 20% of the optical transceiver market by 2030E [13]. 4. Impact on Key Players: - TSMC is expected to strengthen its position in Cloud AI through CPO development, while ASE could gain significant market share in fiber array units and switch board packaging [6]. - Traditional optical suppliers like Lumentum and Marvell may face mixed implications due to the rise of CPO, but pluggable transceivers will maintain volume for the near term [6]. 5. Fibre Optics vs. Copper: - The shift from copper to fiber optics in data centers is driven by the superior performance of fiber in bandwidth, speed, and distance [18][21]. - Data centers are projected to account for 4% of global copper demand by 2030E, up from 1.5% in 2024 [17]. Challenges and Considerations 1. Technical Challenges: - Major challenges for CPO include precise coupling, packaging, thermal management, and reliability [5][11]. - The industry must mature CPO technology by 2027-28 to meet the demands of the 3.2T switch integration [11]. 2. Adoption Hesitance: - Hyperscalers may adopt CPO gradually, needing assurance of system reliability and interoperability across different solution providers [71][72]. 3. Production Complexity: - CPO systems require advanced packaging techniques and rigorous testing to ensure reliability, which poses production challenges [68][70]. Conclusion - CPO technology is poised to disrupt the optical module supply chain, offering significant growth opportunities for semiconductor companies while addressing the increasing demands of AI data centers. The transition from traditional optical solutions to CPO will require careful management of technological challenges and market dynamics.