Co-Packaged Optics (CPO) Market 2026–2030

Co-Packaged Optics (CPO) is becoming an important technology direction for high-bandwidth data center networks as AI clusters push switch bandwidth, electrical signaling rates, port density, and power consumption to higher levels. Instead of placing optical transceivers only at the front panel of a switch, CPO moves optical engines much closer to the switch ASIC, shortening the high-speed electrical path between the switching silicon and optical interface. From 2026 to 2030, CPO is expected to develop alongside pluggable optics, LPO, and near-packaged optics rather than immediately replacing them. Market forecasts vary considerably because research firms define the CPO market differently, but the common direction is clear: AI infrastructure is increasing demand for higher-density, lower-power optical interconnect technologies.

1. What Is Co-Packaged Optics?

Co-Packaged Optics, commonly abbreviated as CPO, is an optical interconnect architecture in which optical engines are integrated into the same package or package-level platform as a high-performance electrical ASIC, typically a network switch ASIC.

In a conventional pluggable architecture, the electrical signal travels from the switch ASIC across the PCB, through connectors and the front-panel cage, and into a pluggable optical transceiver. CPO places the optical conversion much closer to the ASIC, significantly shortening the high-speed electrical path.

2. Why Is CPO Important in 2026?

The importance of CPO is closely related to the rapid increase in AI data center bandwidth. Modern AI clusters connect large numbers of GPUs, XPUs, NICs, and switches, creating substantial east-west traffic.

As switch interfaces move toward 800G, 1.6T, and higher aggregate bandwidth, electrical signal loss and power consumption become increasingly difficult to manage using conventional long PCB traces and front-panel pluggable architectures.

CPO addresses part of this problem by bringing optical conversion closer to the switching silicon.

3. CPO Market Outlook 2026–2030

The CPO market is expected to expand substantially through 2030, but published market forecasts should be interpreted carefully because different research organizations use different market definitions.

For example, some forecasts measure only CPO hardware, while others include near-packaged optics, optical engines, silicon photonics, packaging, lasers, or broader AI optical interconnect markets. As a result, reported market sizes can differ by a wide margin.

TrendForce reported in 2026 that the combined CPO and NPO market could exceed US$39 billion by 2030, while other research firms publish narrower CPO-specific forecasts. The difference reflects market scope rather than necessarily a contradiction in the underlying technology trend.

4. CPO Market Growth Drivers

Several factors are driving CPO development between 2026 and 2030:

AI data centers: Large GPU clusters require extremely high network bandwidth.

Higher switch bandwidth: Switch ASIC bandwidth continues to increase rapidly.

Higher electrical lane rates: 112G, 224G, and future higher-speed electrical interfaces increase channel-loss challenges.

Power constraints: Optical connectivity must deliver more bandwidth without a proportional increase in energy consumption.

Port density: High-radix switches require large numbers of high-speed optical connections.

Thermal limitations: Higher module power increases the thermal burden of data center networking equipment.

5. AI Data Centers Are the Main CPO Application

AI training and inference systems are among the strongest drivers of CPO adoption. GPU clusters require high-speed communication between processors, memory systems, NICs, and network switches.

As AI clusters become larger, the network must move increasingly large amounts of data between computing resources. This makes the efficiency of the interconnect increasingly important to overall system performance.

6. CPO and AI Scale-Up Networks

AI scale-up networks connect processors or accelerators with extremely high-bandwidth communication requirements. These connections can place significant pressure on electrical interconnects because the physical distance between the ASIC and optical interface becomes an important factor.

CPO can shorten this electrical path and provide a more direct transition from electrical processing to optical transmission.

7. CPO and AI Scale-Out Networks

Scale-out networks connect servers, GPU systems, and racks through high-speed switching fabrics. Pluggable optics remain highly relevant in this environment because they provide flexibility and serviceability.

However, CPO is increasingly being evaluated for high-port-count switches where optical density and power efficiency become more important.

8. How Does CPO Work?

In a CPO system, the switch ASIC performs electrical switching while nearby optical engines convert electrical signals into optical signals and optical signals back into electrical signals.

A simplified architecture is:

Network Data → Switch ASIC → Short Electrical Path → Optical Engine → Fiber → Optical Network

On the receiving side, the process is reversed. Optical signals are detected and converted into electrical signals before entering the switching silicon.

9. CPO vs Pluggable Optical Transceivers

10. Why Does CPO Reduce Electrical Loss?

High-speed electrical signals experience insertion loss, return loss, crosstalk, and other impairments as they travel through PCB traces, connectors, packages, and cables.

At higher data rates, maintaining adequate signal integrity becomes increasingly difficult. By positioning the optical engine close to the ASIC, CPO reduces the distance that very high-speed electrical signals need to travel before optical conversion.

11. CPO and 224G Electrical Signaling

224G-class electrical interfaces are an important technology step for next-generation networking. As electrical signaling rates increase, PCB material, connector design, package structures, equalization, and signal integrity become increasingly challenging.

CPO provides one architectural approach for reducing the electrical path length and therefore mitigating part of the channel-loss problem.

12. CPO and 800G Networking

800G is an important bandwidth level in current AI and hyperscale data center networking. It can be implemented using different lane architectures and optical technologies.

CPO can support 800G-class switching systems by bringing optical conversion closer to the switch ASIC, particularly where high port density and power efficiency are priorities.

13. CPO and 1.6T Networking

1.6T networking is expected to become increasingly important as AI systems scale. A common architecture uses eight 200G-class lanes to achieve an aggregate 1.6T interface.

At these speeds, electrical channel loss becomes even more difficult to manage, increasing the potential value of optical engines positioned close to the ASIC.

14. CPO and 3.2T Networking

Beyond 1.6T, the industry is already developing architectures targeting 3.2T and higher aggregate bandwidth. These systems will place additional pressure on electrical interconnects.

CPO and other near-ASIC optical architectures may become increasingly relevant as conventional electrical paths become more difficult to scale efficiently.

15. What Is an Optical Engine?

An optical engine is an integrated assembly that performs electrical-to-optical and optical-to-electrical conversion.

Depending on the architecture, an optical engine can contain lasers, modulators, photodetectors, drivers, transimpedance amplifiers, optical coupling structures, and silicon photonics components.

Optical engines are one of the core building blocks of CPO systems.

16. Silicon Photonics in CPO

Silicon photonics is closely associated with CPO because photonic integrated circuits can integrate multiple optical functions into a compact silicon-based platform.

Silicon photonics can support high-density optical channels while providing a pathway toward greater integration between photonic and electronic components.

17. Lasers in CPO Systems

Lasers provide the optical source required for transmission. CPO architectures can use different laser arrangements depending on the optical engine and system design.

Laser placement is an important consideration because thermal conditions, optical coupling, reliability, serviceability, and packaging complexity all affect system architecture.

18. External Laser Sources for CPO

Some CPO architectures can separate the laser source from the optical engine. This approach can provide advantages for thermal management and serviceability because lasers may generate significant heat and can have different lifetime characteristics from other optical components.

External laser architectures are therefore an important area of CPO development.

19. CPO and Optical Packaging

Packaging is one of the most challenging aspects of CPO. The optical engine, switch ASIC, electrical connections, thermal structures, fiber coupling, and mechanical components must operate together within a compact package.

Packaging accuracy and manufacturing yield become particularly important as the number of optical channels increases.

20. CPO Thermal Management

Thermal management is a major factor in CPO design. High-performance switch ASICs can generate substantial heat, while optical components and electrical drivers also contribute to the thermal load.

Because the optical engine is positioned close to the ASIC, thermal design must consider both electrical and optical components simultaneously.

21. CPO and Power Consumption

One of the primary objectives of CPO is to reduce the energy required to move data between the switching silicon and optical interface.

Shorter electrical paths can reduce the need for power-intensive signal conditioning and equalization. At large switch-port counts, even a small reduction in energy per bit can produce significant system-level savings.

22. CPO and Energy per Bit

Energy per bit is becoming an increasingly important metric for AI infrastructure. Higher network bandwidth is useful only when the power required to deliver that bandwidth remains manageable.

CPO is attractive because it targets the electrical interconnect between the ASIC and optical interface, one of the areas where power consumption can become increasingly significant at high signaling rates.

23. CPO and Latency

CPO can reduce the physical electrical path between switching silicon and optical conversion. This can help reduce certain electrical processing and transmission delays.

However, total network latency depends on the complete system, including switching, serialization, optical conversion, protocol processing, and network topology. CPO should therefore not be considered a standalone solution to all latency sources.

24. CPO and Bandwidth Density

Bandwidth density is the amount of network bandwidth available within a defined physical or system footprint.

By integrating optical engines close to the switch ASIC, CPO can support high optical port counts within compact switch architectures and potentially improve the relationship between bandwidth, board area, and power.

25. CPO and Switch ASICs

The switch ASIC is the central electrical processing component in many CPO systems. Its package, SerDes architecture, thermal characteristics, and optical interface requirements directly influence the CPO design.

This close relationship means that CPO development often requires cooperation between ASIC designers, optical component suppliers, packaging companies, and system manufacturers.

26. CPO Supply Chain

The CPO supply chain is broader than the conventional optical transceiver supply chain. It can involve switch ASIC vendors, silicon photonics companies, laser suppliers, optical engine manufacturers, semiconductor foundries, OSAT providers, packaging companies, fiber suppliers, connector manufacturers, and system vendors.

This creates both opportunities and challenges because CPO requires tighter integration across multiple technology domains.

27. CPO Manufacturing Challenges

CPO manufacturing requires precise alignment between optical and electrical components. Optical coupling tolerances, packaging accuracy, thermal expansion, assembly processes, and testing requirements can affect manufacturing yield.

As the number of optical channels increases, maintaining consistent performance across every channel becomes increasingly important.

28. CPO Testing and Validation

CPO systems require testing at multiple levels. Optical performance can include output power, receiver sensitivity, wavelength, extinction ratio, OMA, TDECQ, and BER.

Electrical validation can include insertion loss, return loss, crosstalk, jitter, signal integrity, and high-speed compliance. System-level testing must also evaluate thermal behavior, interoperability, reliability, and long-duration operation.

29. CPO Reliability

Reliability is a critical consideration because the optical engine is closely integrated with the switch ASIC. A failure that would traditionally involve replacing a pluggable transceiver can become more complicated when the optical components are integrated into the switch package.

This difference creates a major design trade-off between integration and serviceability.

30. CPO Serviceability

Pluggable optics can be removed and replaced individually, making field maintenance relatively straightforward. CPO does not provide the same level of modular replacement.

For large data centers, operators therefore need to consider system-level reliability, replacement procedures, spare strategies, and lifecycle management before adopting CPO at scale.

31. CPO vs LPO

32. CPO vs NPO

Near-Packaged Optics, or NPO, places optical components close to the ASIC while retaining more modularity than fully integrated CPO.

NPO is increasingly viewed as a transition architecture because it can shorten electrical paths while maintaining more flexibility for manufacturing, maintenance, and component sourcing.

33. Why NPO May Grow Alongside CPO

The transition to CPO does not necessarily have to happen as a single step. NPO can provide a middle path between conventional pluggable optics and deeply integrated CPO.

This can be attractive for data center operators that want improved electrical efficiency without immediately accepting all the serviceability and manufacturing challenges associated with CPO.

34. CPO Market Segmentation by Data Rate

The CPO market can be divided into different bandwidth classes, including 800G, 1.6T, 3.2T, and higher-speed architectures.

800G is important for early high-speed CPO deployments, while 1.6T and higher-speed solutions are expected to become increasingly important as next-generation AI switch platforms are introduced.

35. CPO Market Segmentation by Component

Major CPO component categories include optical engines, silicon photonic devices, lasers, photodetectors, drivers, electrical ICs, packaging materials, connectors, fiber coupling structures, and thermal components.

The optical engine is particularly important because it brings together many of the functions required for electro-optical conversion.

36. CPO Market Segmentation by Application

Key applications include AI data centers, hyperscale cloud facilities, high-performance computing, enterprise data centers, telecom infrastructure, and other high-bandwidth computing environments.

AI and hyperscale data centers are expected to remain major demand drivers because of their high switch bandwidth and large-scale optical connectivity requirements.

37. CPO Market Segmentation by Region

North America is an important CPO market because of the concentration of hyperscale cloud providers, AI infrastructure investment, advanced semiconductor development, and high-performance data center deployments.

Asia-Pacific is also strategically important because of major data center operators, semiconductor manufacturing capabilities, optical component suppliers, and growing AI infrastructure investment.

Europe remains relevant in telecommunications, research computing, industrial data centers, and advanced photonics development.

38. North American CPO Market

North American demand is strongly connected to hyperscale data centers and AI infrastructure. Large cloud and technology companies are investing in higher-capacity network architectures to support expanding AI workloads.

This creates opportunities for CPO, NPO, LPO, silicon photonics, optical engines, and other advanced interconnect technologies.

39. Asia-Pacific CPO Market

Asia-Pacific has a significant role in the CPO ecosystem because the region contains major semiconductor, optical component, electronics manufacturing, and data center industries.

China, Japan, South Korea, Taiwan, and other regional markets are developing technologies across photonics, packaging, switching, and AI infrastructure.

40. CPO and Hyperscale Data Centers

Hyperscale operators manage very large data center environments where small improvements in power consumption, bandwidth density, and reliability can have significant operational effects.

CPO is therefore particularly attractive where switch bandwidth and port density have reached levels at which conventional front-panel optical architectures become increasingly difficult to scale efficiently.

41. CPO and High-Performance Computing

High-performance computing systems require high-bandwidth, low-latency communication between processors and network resources. CPO can support these environments by bringing optical interfaces closer to high-performance switching and compute silicon.

HPC applications can therefore become another important market for high-density optical interconnect architectures.

42. CPO and AI Infrastructure Investment

Investment in AI infrastructure is increasing demand for GPUs, AI accelerators, high-bandwidth memory, high-capacity switches, optical transceivers, fiber, power systems, and cooling infrastructure.

CPO is part of this broader infrastructure transition rather than an isolated optical technology. Its market development will depend on how quickly AI system architectures move toward higher bandwidth and how effectively the industry solves integration challenges.

43. CPO Market Trend: Higher Optical Integration

One of the clearest trends from 2026 to 2030 is increasing integration between electronic and photonic components.

The industry is moving from separate optical modules toward optical engines, near-packaged optics, co-packaged optics, and potentially more deeply integrated photonic-electronic architectures.

44. CPO Market Trend: 200G per Lane

200G-per-lane signaling is an important step toward 1.6T-class interfaces. Higher lane speeds increase bandwidth density but also increase the difficulty of maintaining electrical signal integrity.

This creates a strong technical rationale for moving optical conversion closer to the ASIC.

45. CPO Market Trend: Silicon Photonics

Silicon photonics is expected to play an increasingly important role in CPO because it allows multiple optical functions to be integrated into photonic integrated circuits.

Higher levels of integration can support compact optical engines suitable for high-density switch packages.

46. CPO Market Trend: External Laser Architecture

External laser architectures are being considered as one way to address thermal and reliability challenges associated with tightly integrated optics.

Separating the laser source from the optical engine can potentially improve thermal management and simplify certain maintenance strategies, although it introduces additional optical coupling and system design requirements.

47. CPO Market Trend: Optical I/O

Optical I/O extends the concept of bringing optical connectivity closer to computing silicon. Instead of treating optics only as a switch interface, optical I/O can become part of the broader architecture connecting processors and accelerators.

This technology could become increasingly relevant as AI systems move toward tightly coupled multi-chip and multi-package architectures.

48. CPO Market Trend: AI Scale-Up

AI scale-up is one of the areas attracting significant attention because accelerator-to-accelerator communication can require extremely high bandwidth and low latency.

As scale-up architectures evolve, optical connectivity may move increasingly close to accelerator and switching silicon.

49. CPO Market Trend: AI Scale-Out

AI scale-out connects large numbers of compute nodes through switching fabrics. CPO can provide a high-density optical interface for switch platforms where the number of optical ports and aggregate bandwidth continue to increase.

50. Key CPO Market Challenges

The main challenges include optical packaging, manufacturing yield, thermal management, laser reliability, fiber coupling, serviceability, testing, supply chain coordination, and interoperability.

Another challenge is that CPO must compete with rapidly improving pluggable optics, LPO, and NPO rather than developing in an environment without alternative technologies.

51. Is CPO Ready to Replace Pluggable Optics?

CPO is unlikely to eliminate pluggable optics across all applications in the near term. Pluggable modules provide major advantages in serviceability, deployment flexibility, multi-vendor sourcing, and incremental upgrades.

CPO is more likely to gain share first in applications where bandwidth density, power efficiency, and electrical channel limitations are more important than field replacement flexibility.

52. CPO Adoption Timeline 2026–2030

53. CPO Market Forecast for 2030

By 2030, CPO is expected to occupy a much larger position in the high-speed optical interconnect ecosystem than it does today. However, the exact market value depends heavily on whether a forecast includes only CPO assemblies or also optical engines, lasers, silicon photonics, packaging, NPO, and related components.

Current industry forecasts consistently point toward strong growth, particularly as AI data centers adopt higher-bandwidth switch platforms and 1.6T-class connectivity.

54. CPO Market vs Pluggable Optical Market

Pluggable optics are expected to remain a major market through 2030. They provide flexibility and support a wide range of transmission distances and network architectures.

CPO is instead positioned as a complementary architecture for applications where the limitations of electrical reach, power consumption, and port density become increasingly difficult to address with conventional pluggable modules.

55. CPO and the Future of Optical Transceivers

CPO does not mean that optical transceivers will disappear. Short- and medium-reach pluggable modules will continue to be important in many data center applications, especially where maintenance and deployment flexibility are priorities.

Instead, the optical industry is moving toward a broader ecosystem in which pluggables, LPO, NPO, CPO, optical engines, and silicon photonics serve different parts of the network.

56. CPO Market Opportunities for Optical Component Suppliers

The expansion of CPO creates opportunities across the optical supply chain, including lasers, photodetectors, silicon photonic PICs, optical coupling components, fiber arrays, optical engines, drivers, packaging materials, thermal components, and testing equipment.

Companies with expertise in high-speed optical components and precision manufacturing can participate in multiple layers of the emerging CPO ecosystem.

57. CPO Market Opportunities for Optical Connectivity Companies

Optical connectivity companies can continue to serve the existing pluggable market while developing capabilities in high-speed optical engines, silicon photonics, fiber assemblies, high-density connectors, and advanced optical interconnect technologies.

The coexistence of different architectures means that the transition to CPO is likely to create a broader optical connectivity market rather than a simple replacement cycle.

58. What Will Determine CPO Adoption?

CPO adoption will depend on several practical factors:

Power efficiency: The reduction in energy per bit must justify the increased integration.

Manufacturing yield: High-volume production requires consistent optical and electrical performance.

Reliability: Integrated optical systems must meet demanding data center operating requirements.

Thermal performance: Optical engines must operate reliably near high-power ASICs.

Serviceability: Operators need practical maintenance and replacement strategies.

Cost: CPO must achieve competitive total system economics.

Standards: Multi-vendor interoperability will be important for large-scale deployment.

59. CPO Market Risks Through 2030

Potential risks include slower-than-expected CPO adoption, continued improvements in pluggable optics, rapid development of LPO and NPO, manufacturing challenges, laser supply constraints, thermal limitations, and difficulties establishing standardized ecosystems.

Technology adoption may therefore vary considerably between scale-up, scale-out, hyperscale, enterprise, and telecom applications.

60. CPO Market Outlook

The 2026–2030 period is likely to be an important development stage for CPO. AI data centers are creating strong demand for higher bandwidth and lower interconnect power, while electrical signaling rates are making conventional PCB-based connections increasingly challenging.

CPO directly addresses the need to shorten electrical paths and increase optical integration. At the same time, LPO, NPO, improved pluggable modules, silicon photonics, and optical engines will continue to develop.

The most likely market structure is therefore not a single technology replacing all others, but a multi-architecture optical ecosystem in which CPO is used where its integration, density, and power advantages provide the greatest system-level value.

61. CPO Market 2026–2030 FAQ

62. Summary

From 2026 to 2030, Co-Packaged Optics is expected to become an increasingly important architecture for AI and high-bandwidth data center interconnects. Its core advantage is moving optical conversion closer to the switch ASIC, reducing high-speed electrical path length and creating opportunities for lower power consumption, higher bandwidth density, and improved scalability. The market will develop alongside pluggable optics, LPO, NPO, silicon photonics, and optical engines. As 800G moves toward 1.6T and higher-speed interfaces, CPO is likely to become increasingly relevant in applications where electrical channel loss, power, and density are major system constraints.