The optical transceiver market is expected to grow from USD 7.0 billion in 2021 to USD 14.3 billion by 2026, at a CAGR of 15.2% during the forecast period. The increase in internet data traffic and rising demand for smartphones and other smart gadgets are driving the growth of cloud-based services, hence increasing opportunities for the optical transceiver market. This is mainly due to the assured reliability cloud computing provides as compared to in-house servers. The advent of cloud computing has generated new business capabilities and opportunities for enterprises. With the help of cloud-based services such as software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS), small enterprises and consumers can subscribe to a range of services by replacing locally housed computing solutions.

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XR optics are a new class of pluggable solutions that enable a single laser to be divided into independently routable data streams using Nyquist subcarriers, resulting in the industry's first point-to-multipoint coherent optical subcarrier aggregation technology optimized for hub-and-spoke traffic patterns. This enables network operators to create more efficient, flexible, and cost-effective transport networks that are optimized for the applications that drive network growth. In February 2020, Infinera (US) and Lumentum (US) announced a collaboration to bring XR optics-based networking solutions to market. XR optics enables significantly more efficient and cost-effective solutions to the transport networking challenges that operators face when delivering new 5G, enhanced broadband, and cloud-based business services.

XR optics, which incorporates the industry's first point-to-multipoint coherent optical aggregation technology, is intended to disrupt optical networking economics by enabling new transport architectures. It is powered by Infinera's low-power DSP technology, which uses routable Nyquist subcarriers to allow a single high-speed transceiver to send and receive independent data streams to and from multiple low-speed transceivers. All optical networks are mostly built on a foundation of bookended point-to-point optical links. Many networks, particularly metro networks, have point-to-multipoint traffic flow, with connectivity between a group of lower-capacity sites and a smaller number of higher-capacity hub sites. XR optics technology is specifically designed to address this asymmetry.


The data center application accounted for the largest share of the market in 2020 and is expected to dominate the market throughout the forecast period. This growth in the market is due to factors such as transition toward cloud storage and increasing technological developments, including machine learning, artificial intelligence, and deep learning, which, in turn, increase the data traffic across networks, which create demand for high data rate transceivers for efficient data communication. The development of hyperscale data centers also drives the demand for high data rate optical transceivers, such as 100G, 200G, 400G, and 800G, for channeling huge packets of information in a shorter span. Moreover, the technological initiatives by big telecommunication giants for the implementation of the 5G networks in APAC regions is further expected to fuel the demand of optical transceivers.

Optical transceivers supporting data rates of 41 Gbps to 100 Gbps are expected to grow at the highest CAGR during the forecast period. The rising demand for higher data transmission drives the growing demand for 100G, 200G, and 400G transceivers. With the advent of advanced technologies such as AI and 5G, there is an increased requirement for higher bandwidth, which is eventually necessary for data center applications.

There has been an increase in internet penetration traffic owing to different factors such as high-bandwidth applications, enhanced data transfer capabilities, fast fixing broadband speeds, growing online video content, mobile internet users, and the proliferation of connected devices. Furthermore, the rising adoption of smart devices and IoT is responsible for the increasing demand for high data rate-enabled optical transceivers along with the shift toward cloud storage. These are some factors leading to the rise in demand for high data rate transceivers for communicating the data efficiently. The higher adoption rate of smartphones, smart devices (such as wearable devices, home assistant, IoT based home security system, and gaming consoles), and laptops & desktops would present several growth opportunities to players catering the optical transceivers operating within data rate of 41 Gbps to 100 Gbps.

The optical transceiver market for multimode fiber (MMF) to be faster-growing segment of optical transceivers during the forecast period owing to benefits such as cost-efficiency, high speed, bandwidth across shorter distances, larger fiber cores, and good alignment tolerances, among others. The market for MMF type optical transceivers is further projected to occupy ~52% of the market shares by 2026. The majority of existing data center backbone cabling is multimode, as until such facilities become a certain size, there is no constraint in terms of the amount of reach needed. Hence, it is expected that MMF type will grow at a faster rate; thus expected to increase the scope for MMF type optical transceiver market for the existing companies and new entrants.

North America is expected to dominate the market by capturing a share of nearly 39% by 2026. The market is driven by developments in optical transceivers by North American companies such as II-VI, Lumentum, Broadcom, Mellanox (now a part of Nvidia (US)), NeoPhotonics, Reflex Photonics (now a part of Smiths Interconnect (UK)), Cisco, and Ciena to list a few. These companies replenish the growing demand for specialized optical transceiver modules, such as coherent pluggable modules, bidirectional (BiDi) modules, QSFP modules with a distance range of more than 2,000 km, and ultra-high-speed 800G optical transceiver modules for telecommunication, data center, and enterprise applications. The presence of five major cloud providers’ R&D headquarters across the US, which are Microsoft, Google, Amazon, Facebook, and Apple, has enhanced the growth of the data center market and, consequently, the optical transceiver market to a substantial extent. Hence, North American region is expected to remain a focal point for research and developments in optical transceiver market and applications.

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