Pluggable Optics for Data Center Market Skyrockets to $12.35 Billion by 2031 Dominated by Tech Giants - Coherent Corp, Nokia Corp and Cisco Systems Inc | The Insight Partners

The global pluggable optics for data center market is set for explosive growth, with projections indicating a surge to $12.35 billion by 2031. This remarkable expansion, driven by expansion of linear pluggable optics and rising need for high-performance computing.

NEW YORK, Nov. 6, 2024 /PRNewswire/ -- According to a new comprehensive report from The Insight Partners, the global Pluggable Optics for Data Center Market is observing significant growth owing to the adoption of linear pluggable optics. As more industrial devices and equipment become connected, there is a growing need for robust networking solutions that can support the ever-increasing number of connected devices, handle the massive amounts of data generated, and ensure secure and reliable communication.

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The report runs an in-depth analysis of market trends, key players, and future opportunities. In general, the pluggable optics for the data centers market comprises a vast array of components that are expected to register strength during the coming years.

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Market Overview and Growth Trajectory:

Pluggable Optics for Data Center Market Growth: According to an exhaustive report by The Insight Partners, the Pluggable Optics for Data Center Market is experiencing significant growth, driven by manufacturers focus on product development and growing number of data centers. The market, valued at $5.23 billion in 2023, is expected to grow at a Compound Annual Growth Rate (CAGR) of 11.3% during 2023–2031.

The global Pluggable Optics for Data Center Market is observing substantial growth and is expected to maintain its upward trajectory in the foreseeable future. This growth can be accredited to numerous factors. Firstly, there is a rising manufacturer focus on product development. Secondly, there is a growing number of data centers across the globe. Thirdly, there is the rising need for high-performance computing.

Manufacturers Focus on Product Development: Pluggable optics enable data center operators to easily upgrade or replace transceivers without having to completely rebuild the cable system. The rising demand for pluggable optics in data centers encourages manufacturers to develop new innovative products that are capable of meeting the dynamic requirements of customers. For instance, in March 2024, Infinera Corporation launched a new line of ICE-D to improve intra-data center connectivity. ICE-D is a new line of high-speed intra-data center optics based on monolithic indium phosphide (InP) and photonic integrated circuit (PIC) technology.

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Growing Number of Data Centers: The rising adoption of the Internet of Things (IoT), the increasing need for storage for massive amounts of data, and growing digitalization are increasing the demand for data centers. It is an excellent data storage solution that provides companies with fast and secure access to vast data. The benefits offered by data centers, such as centralized data management, scalability, and security, encourage businesses to adopt these solutions to achieve a data-driven business landscape. Thus, several companies are investing in the development of data centers in North America. According to Linklaters, North America has maintained its lead in data center transaction values, accounting for an impressive 62% of the global total in 2023 and 69% of investments through April 2024, totaling US$ 15 billion, with the US accounting for the largest share of the total.

Rising Need for High-Performance Computing: High-performance computing (HPC), or supercomputing, is a practice of combining computing power in a way that produces significantly more horsepower than traditional computers and servers. According to IBM, it is more than one million times faster than the fastest commodity desktop, laptop, or server systems. HPC is a method of processing massive amounts of data at extremely high speeds using multiple computers and storage devices. A high volume of calculations in a short amount of time is needed in today's business landscape for faster operations. Many HPC data centers are linked to large private and public companies that require a lot of computing power. The HPC power helps businesses solve problems that would otherwise be impossible to solve using traditional computing systems.

Geographical Insights: In 2023, North America led the market with a substantial revenue share, followed by APAC and Europe. APAC is expected to register the highest CAGR during the forecast period.

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Pluggable Optics for Data Center Market Segmentation, Applications, Geographical Insights:

• Based on component, the market is divided into switches, routers, and servers. The switches segment held the largest share of the Pluggable Optics for Data Center Market in 2023.
• Based on data rate, the market is bifurcated into 100–400 Gb/s, 400–800 Gb/s, and 800 Gb/s and above. The 400–800 Gb/s segment held the largest share of the Pluggable Optics for Data Center Market in 2023.
• The Pluggable Optics for Data Center Market is segmented into five major regions: North America, Europe, APAC, Middle East and Africa, and South and Central America.

Key Players and Competitive Landscape:

The Pluggable Optics for Data Center Market is characterized by the presence of several major players, including:

• Coherent Corp
• Nokia Corp
• Cisco Systems Inc
• Infinera Corp
• Telefonaktiebolaget LM Ericsson
• Ciena Corp
• Intel Corp
• Lumentum Holdings Inc
• Juniper Networks Inc
• Marvell Technology Inc
• Yangtze Optical Fibre
• Cable Joint Stock Ltd
• Broadcom Inc.

These companies are adopting strategies such as new product launches, joint ventures, and geographical expansion to maintain their competitive edge in the market.

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Pluggable Optics for Data Center Market Recent Developments and Innovations:

• "Nokia Corp announced a comprehensive set of new optical transport solutions optimized for metro edge deployments for CSP, webscale, and Enterprise customers. The company's portfolio additions include 100Gb/s, 400Gb/s, and 800Gb/s pluggable coherent modules, a new compact optical transport platform, and new cards optimized for metro edge applications."
• "Infinera announced that Aire Networks, a subsidiary of Grupo Aire, deployed Infinera's software-programmable ICE-X coherent pluggable solution to expand the capacity of its single-fiber network infrastructure across Spain and Portugal. The ability of Infinera's innovative ICE-X solution to provide ultra-high-speed transmissions over a single fiber in a pluggable form factor enables Aire Networks to continue to meet the bandwidth demands of its customers while maintaining its cost-effective single-fiber infrastructure."
• "Infinera and Sumitomo Electric Industries, Ltd. announced the successful completion of the first demonstration delivering high-speed business services over Sumitomo Electric's passive optical network (PON) infrastructure with Infinera's ICE-X intelligent, coherent pluggable optics. The demonstration validated how Sumitomo Electric can leverage next-generation coherent pluggables to provide improvements to network efficiencies and expand capacity while also enabling new high-speed business services and supporting next-generation applications such as 5G and edge computing."

Pluggable Optics for Data Center Market Drivers, Challenges, Future Outlook and Opportunities:

Linear pluggable optics (LPO) are optical transceivers that do not include digital signal processor (DSP) chips. They rely on simpler signal modulation techniques and basic electronic components. This results in lower power consumption and production costs compared to DSP-based solutions. This simplicity also results in lower latency, making LPOs suitable for high-speed environments. LPO modules are increasingly being used in modern data centers, and they are becoming essential components of co-packaged optics (CPO) and near-package optics (NPO) solutions. These applications benefit from direct, short connections between ICs and LPO optical modules, which maximize the efficiency gains provided by LPO technology.

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Lower power consumption, reduced bill of material (BOM) components, and minimal latency features of LPOs are expected to fuel their demand in the coming years. In addition, mega data centers widely adopt LPO, and it works great for latency-sensitive applications in AI and ML and enhances network performance. To cater to this market, the market players are launching solutions, which contribute to the market growth. For example, in March 2023, Eoptolink Technology Inc., Ltd. (SZSE: 300502)—a leading provider of optical transceiver solutions and services—announced the launch of 800G LPO. The product was launched due to the measurable cost savings offered by LPO to the mega data center.

The UK pluggable optics for data center market is growing rapidly with the increasing investment in data centers and the presence of key IT companies, including Google LLC, Microsoft Corp, Oracle Corp, SAP SE, and IBM Corp. These players are making significant investments to develop and advance their data centers. For instance, in January 2024, Google LLC announced an investment of US$ 1 billion in a new UK data center in Waltham Cross, Hertfordshire. This investment will provide critical computing capacity to businesses across the UK, fostering AI innovation and ensuring dependable digital services for Google Cloud customers and users in the UK and worldwide. Increasing focus on data center capacity expansion surges the adoption of pluggable optics for faster data processing and real-time analytics.

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Conclusion:

LPO significantly reduces power consumption for both the module and the system while maintaining a pluggable interface, providing the economics and flexibility customers require for high-volume deployments. Industry leaders are focused on reducing network power consumption for AI and other high-performance applications. For that, they are making some strategic decisions that maximize the adoption of LPO technology. In March 2024, the Linear Pluggable Optics Multi-Source Agreement (LPO MSA) was formed by a group of networking, semiconductor, and optics companies to develop specifications for networking equipment and optical modules that will enable a broad ecosystem of interoperable LPO solutions. Accelink, Arista, AMD, Broadcom, Eoptolink, Hisense, Cisco, Innolight, MACOM, Intel, NVIDIA, and Semtech are the founding members of the LPO MSA. Such consortium to define LPO specifications drives the pluggable optics for the data center market.

With projected growth to $12.35 billion by 2031, the Pluggable Optics for Data Center Market represents a significant opportunity for component providers, system technology integrators, investors, system manufacturers, and industry stakeholders. By staying abreast of market trends, embracing innovation, and focusing on quality and performance, companies can position themselves for success in this dynamic and evolving market landscape.

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