The artificial intelligence wave that started with ChatGPT has ignited many fields. Among them, a dark horse called "CPO" (co-packaged optics) has emerged in the field of optical communications: At the beginning of 2023, the CPO concept appeared, and by the middle of the year, the stock price rose to five times; half a year after the popularity dropped, as Sora When the market was empty, CPO concept stocks rose again.

Will this technology used in the field of optical communication module packaging lead the optical module market?

01 What is CPO?

CPO is the abbreviation of Co-packaged optics in English, which means co-packaged optics. 

The characteristic of this technology is to integrate silicon optical modules and CMOS chips in the form of advanced packaging (2.5D or 3D packaging) to realize the replacement of optical communication modules. Low power consumption, smaller size and faster transmission rate, mainly used in the data center field.

This technology did not appear in recent years, but as AI puts forward higher requirements for the transmission efficiency of communication infrastructure such as data centers, CPO technology and related businesses that adapt to the increased demand for network connection bandwidth have attracted much attention.

Before the emergence of CPO technology, the traditional technology was to separate the silicon optical module and the CMOS chip into two separate modules and then connect them together on the PCB board. In this technical route, the optical module is installed inside the switch and relies on copper wires to transmit signals. The advantage is that the design is modular, and any problem with the silicon optical module or CMOS chip can be replaced individually.

Currently, the line rate of high-speed systems is gradually increasing, from 50G all the way to 200G. Driven by the demand for AI, the line rate required by data centers is further increased to 400G or even 800G. Under such circumstances, the disadvantages of using copper to transmit signals in traditional technical solutions are gradually emerging - copper I/O is approaching the physical limit and will be difficult to support the increase in the density of data center servers. At the same time, the problems of low integration and high power consumption of this traditional technology have gradually emerged.

Traditional technologies such as copper transmission are "incapable" of AI demand, which has brought market demand for CPO packaging technology. Its main application is the packaging of optical communication modules and optical chips. In optical fiber communications, optical modules are like a type of bridge, used for mutual conversion between electrical signals and optical signals. Electrical-to-optical conversion is achieved at the transmitting end, and optical-to-electrical conversion is implemented at the receiving end. After applying CPO technology, the optical module still plays this role, but due to the reduction of signal conversion by copper wires as an intermediate link, the transmission rate is greatly improved, while the power consumption is lower, the volume is smaller, and the cost of mass production is also reduced. lower.

Currently, the companies deploying CPO technology are mainly upstream communication infrastructure suppliers such as Broadcom and Marvell Technology. Among them, Broadcom announced the mass production of the world's first 51.2Tbps switch chip in March 2023. Most domestic optical module manufacturers are still in the exploratory period of CPO technology, and a few manufacturers are trying to adopt CPO technology in high-speed optical modules.

02 Driven by AI, is there real hot or false?

The reporter checked the revenue of domestic listed companies related to the CPO concept. 

Judging from financial data, AI's current role in driving the revenue of domestic optical module companies is not as obvious as many industry insiders expected. The revenue of some companies will improve in 2023. For example, Suzhou Tianfu Optical Communications Co., Ltd.'s revenue in the first three quarters of 2023 was 287 million, 377 million and 542 million yuan respectively, a year-on-year increase of 1.5%, 27.97% and 73.62% respectively; In the third quarter of 2023, Zhongji InnoLight Co., Ltd. achieved revenue of 3.026 billion yuan, a year-on-year increase of 14.9%, and net profit reached 692 million yuan, a year-on-year increase of 89.45%. There are also some companies whose revenue situation is not ideal.

Regarding the future direction of CPO and high-speed optical modules, market opinions are inconsistent.

Lin Tao, marketing director of the data and access product business department of Guangxun Technology, said in an interview with a reporter from China Electronics News that 800G and 1.6T high-speed optical module products are still a blue ocean market. The requirements for optical modules in data centers and computing centers are mainly higher speed and lower power consumption. "Currently, 1.6T optical modules are scarce, and only leading manufacturers can provide samples, which can effectively increase transmission bandwidth. Judging from past industry development experience, if a product can provide this rate in the entire market, more companies will , such as the current 100G optical module, then this market has become a red ocean market. Therefore, our goal is to launch new products that meet customer needs as quickly as possible and seize the blue ocean market for high-end products."

Many market analysis institutions also gave positive signals:

LightCounting predicts that the global optical module market will maintain growth at a CAGR of 11% in the next five years and will exceed US$20 billion in 2027. The Chinese optical module market is also expected to grow further, and the Chinese optical module market is expected to reach US$3.5 billion in 2028. .

Zheshang Securities predicts that in 2026, HPC and AI clusters will become the largest market segments for CPO optics. CPO shipments are calculated based on 800G and 1.6T ports, which can be combined into 3.2T or 6.4T optical chips. Silicon photonics is used to realize the first step of I/O, which can easily break through the bottleneck of existing bandwidth and is based on decomposed computing and storage. The next-generation architecture increases bandwidth by another 10 times, and has already been applied on a large scale in core switching equipment interfaces.

On the other hand, reporters also heard some unfavorable voices during the interview. An analyst from a well-known domestic securities firm told a reporter from China Electronics News that AI has a limited role in driving communication infrastructure such as optical modules. He believes that the demand for AI-related infrastructure at home and abroad is seriously overestimated. "The stock price may fluctuate, and I personally don't think the performance will improve. AI will not bring a lot of growth to computing infrastructure companies in three to five years." The analyst said.

03 High-speed optical modules are the most promising

Optical modules used in data centers have an iteration cycle of about 3 to 4 years on average. Zhang Jinshuang, business development director of Xinyisheng, said in an interview with a reporter from China Electronics News: "Currently, the optical modules used in foreign cloud computing data centers are in the transition stage from 400G to 800G. The domestic replacement speed is slower, mainly in the Use 400G optical modules of this generation.”

The market demand for optical module transmission rates is related to the bandwidth required by computing power products such as CPU/GPU installed in data centers. "If it is a GPU with high computing performance and relatively large bandwidth requirements, then to cooperate with it, you need to use a higher-speed optical module." Zhang Jinshuang said. It is precisely for this reason that overseas cloud service providers are at the forefront of the current global demand for high-speed optical modules, especially for AI applications, which have begun the deployment of 800G optical modules.

Lin Tao said that in China, the transmission rate of optical modules has been driven by the needs of operators' telecommunications networks for many years. After 2020, it will be driven more by the needs of Internet information providers, especially data centers. "The iteration speed of data center networks is much faster than the previous operator network construction speed. If the existing technology cannot meet the demand, it will drive emerging technologies such as CPO to accelerate the pace of product application."

There are several factors that affect the data transmission rate of optical modules: one is the number of packages of data channels, the other is the single channel rate, and the third is the encoding method.

In addition to the optical module transmission rate, power consumption is another important indicator of concern for cloud data center users, especially AI applications. Reducing power consumption has become an issue that optical module companies need to focus on. “Higher speed and lower power consumption have always been the direction of industry efforts.” Zhang Jinshuang said, “Through the upgrade of internal chip and device processes and increased integration of optical modules, the speed of optical modules continues to increase and the power consumption per unit bit continues to decrease. "

Therefore, whether it is to increase the transmission rate of optical modules or reduce their transmission power consumption, packaging technology upgrades account for a very important part. Under such circumstances, CPO has become the new favorite in the direction of industrial technology.

The reporter learned that Guangxun Technology released CPO ELS self-developed light source module products in March 2023, with the purpose of meeting the higher-speed optical interconnection needs in the future. Many companies also said that they are preparing CPO technology.

Zheshang Securities reported that starting from 1.6T, the traditional pluggable rate upgrade may reach its limit, and subsequent optical interconnection upgrades may turn to CPO solutions. LightCounting believes that the largest application scenario of CPO technology is in the CPU, GPU, or TPU market in the field of HPC and AI clusters. By 2026, HPC and AI clusters are expected to become the largest market for CPO optical devices. CPO shipments are expected to start with 800G and 1.6T ports, which will be commercialized from 2024 to 2025, and will begin to increase in scale from 2026 to 2027, accounting for 30% in 2027.

A new technology that is still in the blue ocean has been associated with the hot topic of AI, thus triggering market attention and rising stock prices of related companies. This is a phenomenon that is in line with economic laws. However, there will be a gap in time and practice between market expectations and actual adoption by customer companies. The next market performance of CPO will depend on the planners and market demand, who can run faster. After all, if the demand comes, the outlet will not wait for anyone.

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