Silicon Photonics and Photonic Integrated Circuits 2026-2036: Technologies, Markets, and Forecasts

Modern AI and high-performance computing workloads require tremendous amounts of information to be transmitted at enormous speeds between chips, servers, and racks. Traditionally this has been done with copper wiring, but the current generation of architectures have been pushing the physical limits of what copper can achieve, and the industry has been facing a so called 'interconnect bottleneck', where raw compute power outpaces interconnect bandwidth, leaving extremely expensive and power hungry accelerator chips sitting idle waiting for data rather than performing useful training or inferencing.

 

The industries solution is to switch to optics, leveraging photons to transmit data in place of electrons in copper. Photons are faster, experience less signal loss, and can facilitate a higher data rate with advanced modulation techniques. Photonic Integrated Circuits (PICs) are optoelectrical systems that allow for processing of electrical and optical signals on a single chip - combining the inherent benefits of photons with the enormous economies of scale of the semiconductor industry. The holy grail is a monolithic silicon chip that generates, processes, modulates, and detects light all on a silicon chip. However, silicon is an indirect bandgap semiconductor, meaning a pure silicon laser is impossible to build. This simple physical constraint has motivated the development of an entire industry of photonics with various material platforms, integration techniques, and designs. This report by IDTechEx seeks to provide clarity and insights into this rapidly evolving industry.

 

Transmitting information throughout a data center is the realm of optics - but within a chip electrons still dominate. Optical transceivers handle the conversion of electric to optic and vice versa, and according to IDTechEx research have emerged as the 'killer application' for PICs, driving the industry into the limelight. Every few years the data rate has doubled, and 2026 has seen the commercialization of 1.6 Terabit per second optical transceivers, enabling the newest generation of accelerator architectures to have high bandwidth low latency chip-to-chip communications. IDTechEx anticipates this doubling of data rate to continue and predicts 3.2T transceivers emerging towards the end of the decade.

 

As data rates climb, eventually even the short copper trace between the optical engine and the ASIC (application specific integrated circuit) begins to limit performance. The key solution if to shift the optics much closer to the ASIC, packaging optical engine on the same substrate. To enable this, the photonics industry has developed a range of silicon photonic modulators and ultra high-powered lasers designed to meet the challenging thermal demands of integrating a laser with a heat-generating ASIC. This report dives into the leading solutions, such as the TSMC COUPE platform and the race to commercialize CPO ready UHP (ultra-high powered) lasers.

 

Unlike conventional logic integrated circuits which are almost entirely built from silicon, PICs have a much greater diversity of material platforms available. Most of the current market uses Silicon and Silica-based PICs for light propagation. However, as an indirect bandgap semiconductor, silicon is not a practical light source or photodetector. Therefore, silicon is usually combined with III-V materials for light sources and photo detection, commonly Indium Phosphide. As the industry evolves, IDTechEx has identified several platforms of interest, including Thin Film Lithium Niobate (TFLN). With its moderate Pockels effect and low material loss, TFLN is emerging as a strong contender for applications that require high-performance modulation such as quantum systems or potentially high-performance transceivers of the future. Monolithic Indium Phosphide (InP) continues to be a major player due to its ability to detect and emit light. Additionally, innovative materials like Barium Titanite (BTO) and rare-earth metals are being explored for their potential in quantum computing and other cutting-edge applications.

 

The photonic revolution in datacom is spurring the development of an entirely new ecosystem. Several steps are similar to the logic semiconductor industry, for example IC design houses, foundries, and OSAT (outsourced assembly and test). PICs and PIC-based transceivers also require a plethora of new components such as lasers, photodiodes and optical fibers. Optical alignment and packaging have also emerged as a critical step, where sub-micron level accuracy is required to minimize signal loss and ensure correct functionality. Indium phosphide (InP), a critical material for InP monolithic transceivers and as the light source in Silicon Photonics is a material with raw Indium production highly concentrated in China as a byproduct of zinc manufacturing. With growing demand, production is ramping up and some companies (such as Coherent) have begun to operationalize 6" InP wafer production.

 

Global manufacturing dynamics are also shifting, with Southeast Asia emerging as a manufacturing hub for Chinese and American transceiver manufacturers alike, while high-end laser components remain the domain of American and Japanese electronics giants. This report seeks to characterize the emerging ecosystem and supply chains of the photonics industry, offering deep insight for users at all stages of the value chain.

 

This report by IDTechEx tracks the emerging and dynamic ecosystem and supply chain for PICs in 2026.

 

Other applications for Silicon Photonics and PICs vary - from high-bandwidth chip-to-chip interconnects to advanced packaging and co-packaged optics (CPO); these technologies are paving the way for next-generation computing. CPO in particular is gaining traction as a future method of enabling greater optical integration for scale-up and scale-out networking.

 

At a much earlier stage of development is the nascent quantum technologies market. Many companies are investing in Trapped Ion and Photon-based Quantum Computing and are looking for PICs for more stable and scalable quantum systems. The challenge lies in achieving precise control of photons necessary for quantum computation. Quantum sensors can also leverage PICs, for example in optical atomic clocks, optically pumped magnetometers (OPM), gravimeters, and quantum gyroscopes. This report focuses on the applications, materials, and challenges for photonic integrated circuits in quantum technology.

 

According to IDTechEx, the photonic integrated circuit and silicon photonics market for optical transceivers in datacom and quantum technologies will reach $50 billion by 2036, with a robust compound annual growth rate (CAGR) of 21.9%. The vast majority of market value will come from PIC-based optical transceivers to meet increasing demands for high-speed data processing and communication in advanced computing applications. PICs for various quantum technologies will emerge later in the forecast period as a small but significant driver of revenue.

 

IDTechEx's latest report, titled "Silicon Photonics and Photonic Integrated Circuits 2026-2036: Technologies, Markets, and Forecasts", offers an in-depth assessment of the latest advancements in PIC technologies. The report comprehensively analyses the key technologies and components including modulators, light sources, waveguides, and material platforms for photonics, as well as assessing the supply chain, market dynamics, and end-use applications. It also assesses the emerging "wide-and-slow" architecture offered by MicroLED interconnect technologies. It offers comprehensive and detailed market forecasts and analyst insight, offering IDTechEx's view of how the photonics market is set to evolve over the coming decade.

This report provides a comprehensive analysis of the market for Silicon Photonics and Photonic Integrated Circuits (PICs). The report covers the following topics:

The report is based on extensive research and interviews with industry experts and provides valuable insights for anyone interested in the future of photonic integrated circuits.

 

Market Forecasts:

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