If you trace the technological evolution of the optical transceiver industry over the past decade, you will see a clear trajectory: from 10G to 40G, from 100G to 400G, each doubling of speed has been accompanied by incremental innovations in optical materials and packaging processes. But 2026 is different. This year, the optical module industry is experiencing more than just a speed upgrade — it is undergoing a deep transformation involving the fundamental material system, the manufacturing paradigm, and the supply chain structure. The core engine driving this transformation is silicon photonics technology.
Why silicon photonics? This question deserves serious exploration. On the traditional EML path, core optical components such as lasers and modulators are fabricated based on the indium phosphide material system, offering the advantage of mature, reliable technology. However, the EML path also faces a structural dilemma: it depends on a small number of qualified InP laser suppliers, and the pace of capacity expansion struggles to match the explosive growth in AI computing demand. In 2026, the global effective capacity of 200G EMLs is widely considered insufficient to support market demand, with a notable shortfall. When the supply of a core industry material is constrained in the hands of a few suppliers, uncertainty in pricing, lead times, and capacity ripples through every link of the industry chain.
The technical logic of silicon photonics provides a fundamental solution. It integrates optical modulation functions onto a silicon wafer, utilizing mature CMOS semiconductor manufacturing processes to achieve high-volume production. This means the manufacturing foundation shifts from a "small but specialized" compound semiconductor capacity pool to a "large and broad" silicon-based foundry capacity. This is not just a cost reduction; it is a qualitative leap in manufacturing flexibility. Zhongji Innolight's internally developed silicon photonics chips are reported to have achieved a yield rate of 95%, with costs reduced by 30% compared to conventional solutions. These numbers demonstrate that silicon photonics is far more than a technical concept — it has already demonstrated overwhelming competitiveness in both cost and manufacturability.
Of course, the silicon photonics approach is not without its own challenges. It migrates the supply chain bottleneck from EML chip capacity to the availability of CW lasers, silicon photonic foundry yields, and high-precision optical coupling and packaging. To use a vivid analogy, silicon photonics does not eliminate the bottleneck; it relocates it from a narrow tunnel to a larger plaza. The nature of the problem has changed, but the industry chain must still collaboratively address new constraints. Nevertheless, seen from the broader trend of industry evolution, silicon photonics is expected to capture a market share of approximately 60% or even higher in the 1.6T era.
HaloWill's positioning in the silicon photonics space began with forward-looking market assessments several years ago. We believe that silicon photonics represents not only a product upgrade path for a single generation, but an entirely new supply chain mindset — using the scaling logic of the semiconductor industry to redefine how optical modules are manufactured. Currently, HaloWill's 1.6T silicon photonics modules have entered the customer sampling and testing phase. They employ an internally developed silicon photonics engine combined with highly reliable external CW laser sources, delivering outstanding performance in power consumption, cost, and signal integrity. In the 800G space, HaloWill has also introduced silicon photonics versions of its module products, providing a differentiated choice for customers who prioritize long-term cost and supply stability.
Broadening our perspective beyond silicon photonics, we can see that the technology landscape of data center optical interconnects is being reorganized in an even more expansive way. Two directions in particular warrant the attention of North American buyers.
The first is co-packaged optics technology. The core idea of CPO is to co-integrate the optical engine with the switch silicon at the packaging level, fundamentally shortening the distance that electrical signals must travel on the PCB, thereby achieving significant power savings at higher bandwidths. TSMC has introduced a CPO solution based on micro-ring optical modulators, achieving efficient conversion between optical and electrical signals on a 3nm process node, with power consumption reduced by approximately 40% compared to traditional approaches. HiSilicon and Feikong Technology have also jointly launched the first 2.5D-packaged CPO production line. That said, large-scale commercialization of CPO is still expected to take some time, and the industry generally believes that significant deployments may not be seen until 2027 or later. For current procurement planning, CPO is better viewed as a technology reserve to watch rather than an immediate purchasing target.
The second is optical circuit switching architecture. Google adopted a 3D Torus network topology with the Apollo OCS all-optical switching network in its next-generation Ironwood TPU cluster. This architectural innovation redefines the role of the optical module from a mere "connector" to a core enabler of the network architecture. Under the OCS architecture, an all-optical switch consumes only about 100 watts, achieving a roughly 95% reduction in power consumption compared to a traditional switch consuming around 3,000 watts. More importantly, this architecture makes network bandwidth upgrades much simpler — moving from 800G to 1.6T requires only replacing the optical modules, without the need to rebuild the entire system. This means that when planning network architecture, North American data center operators should place greater strategic value on optical modules, viewing them as critical assets capable of protecting long-term infrastructure investments.
In the face of the intertwined evolution of these technology trends, HaloWill has always held to one core philosophy: technological advancement must be predicated on delivery certainty. Our R&D pipeline tracks multiple technology routes, including silicon photonics, LPO, and CPO, not only to maintain technological acuity but, more importantly, to ensure that when our customers face technology transitions, they can consistently count on HaloWill for reliable supply support and pragmatic engineering guidance.
2026 is indeed a watershed year. In this year, the competitive factors in the optical module industry are shifting from "who can achieve the highest speed" to "who can achieve high speed with lower cost, more stable supply, and better power efficiency." The winner of this race will not be the most technologically aggressive player, but the one that best melds technology with supply chain integration. HaloWill is steadily advancing in this direction, and we look forward to witnessing and participating in this industry transformation together with our North American buyer and distributor partners.
