Silicon Photonics Market Size, Share & Industry Analysis, By Component (Photodetectors, Optical Waveguides, Wavelength-Division Multiplexing (WDM) Filters, Laser, and Optical Modulators), By Product (Transceivers, Active Optical Cables, Optical Multiplexers, Optical Attenuators, and Others), By Application (Data Center and High-Performance Computing, Consumer Electronics, Healthcare & Life Sciences, Aerospace, Defense and Security, Automotive, and Others), and Regional Forecast, 2024-2032

The global silicon photonics (SiPh) market size was valued at USD 2.24 billion in 2023. The market is projected to grow from USD 2.69 billion in 2024 to USD 15.83 billion by 2032, exhibiting a CAGR of 24.8%. North America dominated the global market with a share of 35.27% in 2023.

Silicon photonics (SiPh) is a technology that utilizes silicon’s properties for the manipulation of light signals. It combines silicon substrate and optical devices to provide faster, reliable, and cost-effective data transfers as compared to the traditional data transfer methods. It integrates silicon-based Integrated Circuits (ICs) with photonic components to transmit, detect, and modulate the light. Thus, this technology is expected to be highly useful in the miniaturization and power consumption of optical communication devices.

Rising penetration of 5G technology and the growing focus of businesses on developing energy-efficient communication solutions with higher bandwidth will boost the market growth during the forecast period. Similarly, increasing demand for components in sensing and communication applications used across different industries, such as healthcare, automotive, and agriculture will drive the growth of the market.

Furthermore, rising investments by SiPh technology providers to bring advancements in the product by expanding their product portfolio will also promote the market growth during the forecast period.

• For instance, in February 2024, DustPhotonics, a silicon photonics solution provider, raised USD 24 million in a Series B funding round. This funding would be used to boost the production of Carmel-4 and Carmel-8 products which are mainly used for 400Gbps and 800Gbps applications.

The COVID-19 pandemic caused a sudden shift in the demand for semiconductor devices and chips. For instance, Applied Materials withdrew its business operations in 2020 as the pandemic had severely impacted the company’s supply chain and manufacturing operations. This factor had a massive impact on consumer behavior due to huge supply chain interruptions in manufacturing, automotive, and other industries. However, the COVID-19 outbreak expanded the scope of SiPh in the healthcare sector by bringing advancements in biomedical imaging. This led to an increase in the demand for SiPh chips during the pandemic and post-pandemic periods mainly in the healthcare sector.

IMPACT OF GENERATIVE AI

Implementation of Gen-AI Across Silicon Photonics Enhanced Data Transmission Speed With Improved System Performance

Integration of AI with silicon photonics brings advancements in various fields, including imaging, optical communication, and sensing. The integrated AI aims to optimize the photonic device designs for enhancing the overall performance and delivering automated experience to accelerate the research and development activities among end-users. The Artificial Intelligence (AI) integrated SiPh devices help cater to the longer reach internal communication needs of the hyperscale data centers with low-latency and low operational cost with improved signal-to-noise ratios. Growing integration of AI and Machine Learning (ML) capabilities with SiPh technology can bring developments in densely packed Photonics Integrated Circuits (PICs) with enhanced thermal efficiency and increased data transmission speed.

Furthermore, combining AI with SiPh can enhance the capabilities of imaging systems for various applications, such as medical diagnostics and microscopy. This integration helps enhance the image quality, assists in disease diagnosis, and delivers real time image analysis. Additionally, SiPh helps make efficient data transfer in AI/ML applications by improving real-time system performance and decision-making capabilities.

• For instance, in October 2023, Jabil, Inc., a design and supply chain solution provider, declared that it will acquire Intel’s current silicon photonics-based pluggable optical transceiver product portfolio and its future products. This acquisition can fulfill the needs of hyperscale and AI cloud data centers by offering complete photonics capabilities.

Increasing integration of gen-AI has boosted the demand for HPCs and high speed data transmission with interconnected GPUs to bring development in the market.

Companies, such as NVIDIA, Intel, IBM, TSSMC, NTT, Cisco Systems, Huawei, and many others are integrating AI with silicon-based ICs to bring accelerate the growth of the silicon photonics industry. Hence, the integration of gen AI with SiPh can help increase the data transmission speed and improve system performance.

• For instance, in September 2023, Taiwan Semiconductor Manufacturing Co. (TSMC) announced that it was betting on the SiPh technology to enhance the growth of the semiconductor industry by integrating with chatbots, such as ChatGPT and Bard with lower latency.

Silicon Photonics (SiPh) Market Trends

Integration of SiPh With Biomedical Imaging to Enhance Disease Detection Will Fuel Market Growth

The use of SiPh in the biomedical imaging sector provides various benefits, such as miniaturization, high sensitivity, and multiplexing capabilities, which is important for advanced imaging techniques in biomedicine. The SiPh technology integrated with high resolution imaging techniques helps researchers visualize the biological structure, which helps detect the disease and tissue characterization with high resolution images.

The rising integration of the silicon photonics technique with biomedical imaging can bring innovations in the healthcare sector to deliver personalized medicines, accurate disease diagnosis, and better patient outcomes. This integration aims to improve the capabilities of healthcare practitioners with enhanced biomedical research.

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Silicon Photonics Market Growth Factors

Surge in Demand for High-Speed Data Transfer to Drive Market Growth

Nowadays, the demand for High Performance Computing (HPC) is rising among enterprises due to increased workload, complex data processing challenges, and integration of HPCs with IoT and big data technologies. It creates several difficulties for the conventional electrical signal transfer to meet the increasing capacity demands of the users since they severely suffer from limited bandwidth and significant power consumption. Thus, to overcome these challenges, the need for efficient, low-latency, and high bandwidth photonic technologies arises. This technology leverages light for computing instead of electricity to carry out high bandwidth communication.

Increased usage of the SiPh technology offers practical solutions to the high volume data transfer challenge. It delivers reliable, cost-effective, and high speed data transfer than the traditional copper-based systems to offer better communication services to users present across the globe. Hence, by leveraging the properties of light and the scalability of silicon technology, silicon photonics offers the promise of faster, more efficient, and lower power data transmission. The integration of SiPh with next-generation high-capacity data communication systems can overcome the limitations of the traditional transceiver technology in high-speed transmission networks. These factors will boost the demand for SiPh to manage high-speed data transfer using various data communication applications during the forecast period.

RESTRAINING FACTORS

Risk of Thermal Effect to Restrict Market Growth

The heat effect challenge is considered as a major drawback in the silicon photonics industry, due to limited conductivity of silicon material. This factor can cause an increase in the temperature, which causes signal attenuation, wavelength drift, and device failure. SiPh is majorly used to carry out seamless data center communication which consumes a lot of power. This factor has boosted the introduction of the thermal effect to the data communication server. However, this has raised sustainability concerns due to the high energy consumption of the silicon photonics industry.

The integration of high power laser sources with silicon chip also generates large amount of heat, which causes an increase in the temperature of the machine. This can reduce the machine’s performance.  Similarly, the integration of CMOS electronics with a SiPh chip can cause thermal expansion effect which can cause a significant change in the performance of photonic and electronic components and threaten their reliability and stability. Thus, the high thermal effect is the main factor which will hinder the silicon photonics market growth during the forecast period.

Silicon Photonics Market Segmentation Analysis

By Component Analysis

Accommodating Multiple Wavelength Channels on Single Chip Using WDM Boosted Market Growth

Based on component, the market is segregated into photodetectors, optical waveguides, Wavelength-Division Multiplexing (WDM) filters, laser, and optical modulators.

The Wavelength-Division Multiplexing (WDM) filters segment held the largest silicon photonics market share in 2023. This segment is dominating the market as energy efficiency plays a vital role in high performance computing environments due to increased integration density to accommodate various wavelength channels on a CMOS chip. The SiPh chips combine silicon and electronic components to integrate WDM filters with other electronic and photonic functions. This factors helps WDM filters play a vital role in the integration of multiple wavelengths on a single CMOS silicon chip.

The optical waveguide segment is expected to record the largest CAGR over the forecast period. The growing need for energy-saving solutions is driving the growth of the optical waveguide segment in market. Growing usage of optical waveguide in high-performance computing environments helps reduce the power consumption and heat dissipation as compared to copper-based interconnects. This factor can help reduce power consumption and build low-latency communications among the users.

By Product Analysis

Streamlining HPCs’ Computing and Installation Operations With Active Optical Cable to Boost Product Demand

On the basis of product, the market is divided into transceivers, active optical cables, optical multiplexers, optical attenuators, and others.

The active optical cables segment held the largest market share in 2023. These cables help transfer high volume of data over a long distance as compared to copper cables. They reduce the integration cost as compared to traditional optical modules. They also aim to deliver streamlined installation operations for HPCs and data centers with additional storage applications.

The optical multiplexer segment is expected to record the fastest CAGR during the forecast period. As optical multiplexers play a key role in WDM systems, they allow different wavelengths to transmit the information over a single optical fiber. The optical multiplexers helps to integrate multiple channel counts and compress the chip designs with low power loss. Thus, the increasing development in multiplexers will enhance the capacity and efficiency of optical communication systems over the forecast period.

By Application Analysis

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Developing High Speed Data Communication Across Data Center & High Performance Computing to Drive Market Growth

By application, the market is divided into data center & high performance computing, consumer electronics, healthcare & life sciences, aerospace, defense & security, automotive, and others.

The data center & high performance computing applications segment is expected to record the maximum CAGR during the forecast period. It is due to the increasing demand for high-speed data transfer and efficient data communication in data centers, telecommunication networks, and cloud computing. The use of SiPh technology in these applications enables the development of compact, high performance, and cost-effective devices, which are in high demand in the rapidly growing data communication market. These factors will positively impact the market growth.

The defense & security segment held the largest market share in 2023. This is due to the increasing need for critical security applications to bring innovations in optical interconnects and optical networking by integrating advanced technologies, such as AI/ML, Internet of Things (IoT), and others for safety purposes.

REGIONAL INSIGHTS

The market is studied across North America, Europe, Asia Pacific, the Middle East & Africa, and South America, and each region is further studied across countries.

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North America is estimated to be a prominent contributor to the market growth and held the maximum market share in 2023. Growing investments by the Canadian government in SiPh chip provider, One Silicon Chip Photonics (OSCP) will contribute to the regional market growth. This is because such investments will bring technological advancements in autonomous vehicles and drones. Similarly, the presence of a large number of silicon photonics technology providers in countries, such as the U.S. and Canada will drive the product demand during the forecast period.

• According to research, in March 2024, the U.S., China, Japan, and Germany accounted for nearly 75% of the global photonics components production. Moreover, increasing research and development activities to enhance the industrial capabilities of SiPh products will drive the growth of the market in North America during the forecast period.

Asia Pacific is estimated to record the highest CAGR during the forecast period. This is due to the increased number of 5G users and rising usage of smartphones and other smart devices in countries, such as China, India, and Japan. The increased network capacity in the region has also created large volumes of data. Thus, to meet the rising need for high-capacity data communication solutions, the demand for SiPh will increase gradually. This factor will boost the growth of the market in Asia Pacific during the forecast period.

Europe is projected to showcase moderate growth during the forecast period. This is due to the rising adoption of automated manufacturing practices and continuous developments in the silicon photonics industry by different key companies to bring in innovation. These factors will boost the growth of the market in the region during the forecast period. Similarly, rising network of data centers to deliver seamless communication services with low – latency among countries, such as the U.K., Germany, Italy, and France will drive the growth of the market.

• According to a researcher’s survey in 2023, there were a total of 6,603 data centers present among the listed 135 countries across the world. Among these, 310 data centers were present in Germany, 204 in France, 345 in the U.K., and 97 in Spain. Hence, by considering these factors, the demand for SiPh in Europe will increase moderately during the forecast period.

The markets in the Middle East & Africa and South America are predicted to experience exponential growth during the forecast period. This is due to the growing presence of SiPh startups in countries, such as Israel, the U.A.E., and Brazil, along with the rising number of telecom and datacom companies in both the regions. These are the key factors which are projected to fuel the growth of the markets during the forecast period.

List of Key Companies in Silicon Photonics Market

Technological Developments by Leading Companies to Aid Market Proliferation

Companies operating in the market mainly include Intel Corporation, Cisco Systems, Inc., Juniper Networks, GlobalFoundries U.S. Inc., Lumentum Operations LLC, and Synopsys, Inc. These firms are focusing on bringing innovation in telecom and datacom applications. To enhance their operations throughout the world, the market players are using various strategic methods, such as partnerships, collaborations, acquisitions, and mergers.

List of Key Companies Profiled:

• Intel Corporation (U.S.)


• Cisco Systems, Inc. (U.S.)


• Juniper Networks (U.S.)


• GlobalFoundries U.S. Inc.  (U.S.)


• Lumentum Operations LLC (U.S.)


• IBM Corporation (U.S.)


• Broadcom, Inc. (U.S.)


• Hamamatsu Photonics K.K. (Japan)


• Synopsys, Inc. (U.S.)


• OSCPS Motion Sensing Inc. (Canada)


• Marvell Technology, Inc. (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• March 2024: Teramount formed a partnership with GlobalFoundries (GF) to resolve the challenges of connecting fibers to the SiPh chip to utilize the high-speed optical connectivity for AI/ML-based applications and data centers. This collaboration aims to address the increasing power challenges and bandwidth demands of telecom and datacom applications.


• October 2023: DustPhotonics launched its first single-chip 800G-DR8 silicon photonics chip to be used across various data center applications to deliver a high-performance computing solution for seamless communication.


• September 2023: Vodafone collaborated with Valencia-based iPronics and U.K.-based Salience Labs to develop new silicon photonic chips as a hardware. This hardware will be used to enhance the capacity of open Radio Access Networks (open RAN) in a Malaga research & developement centre.


• September 2023: Tower Semiconductor formed a partnership with InnoLight Technology to launch multi-generation Tower’s Silicon Photonics processed PH18 platform based on 400G/800G speed optical transceivers. This partnership will help deliver a SiPh platform to bring advancements in various applications including the markets of AI, sensors, automotive LiDAR, and data centers.


• March 2022: GlobalFoundries Inc. collaborated with some key industry players, such as Cisco Systems, Inc., Broadcom, Marvell, and NVIDIA. The company also partnered with various photonic providers, such as Lightmatter, PsiQuantum, Ayar Labs, and Xanadu to fulfill the advanced quantum computing requirements of the market leaders.

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