Photonic Integrated Circuit Market

Market Overview

The global photonic integrated circuit market size was valued at USD 10,314.05 million in 2022. It is projected to reach USD 63,603.49 million by 2031, growing at a CAGR of 22.4% during the forecast period (2023-2031). 

The ICs use photons for carrying data, unlike electronic ICs that utilize electrons for data transfer. Optical rays are preferable to electrical semiconductor approaches because they transport more data and enable faster data transmission rates than copper-based communications. The system is discrete since optical equipment is used. Additionally, these chips can be combined with fundamental electronic circuits, expanding their range of uses. One of the main factors propelling the market for photonic integrated circuits is the high-speed data transmission made possible by these circuits, making them appropriate for various applications across the aerospace, industrial, communications, utilities, and energy sectors.

Market Dynamics

Global Photonic Integrated Circuit Market Drivers

Investments and Research to Miniaturize the PICs

There is a significant need for compact, reasonably priced, and dependable Photonics integrated Circuits, according to automotive, aerospace, and telecom businesses working together to produce spectrometers for the LiDAR industry. Therefore, there is a strong commercial demand for miniaturization. The allied device was made of a silicon dioxide layer and a thin lithium niobate (LN) coating, creating a modulator that could operate at high-speed while being compact and energy-efficient. The modulator's electro-optical modal volume was 0.58 m3, featuring a 17.5 GHz modulation bandwidth and a 1.98 GHz/V tuning efficiency. A significant improvement in processing bandwidth, latency, and power efficiency is desired as integrated optical signal processors, in tandem with traditional electrical signal processors, paving the way for advanced signal processing hardware platforms.

Similarly, according to Mitsubishi Electric Research Laboratories, the silicon photonics platform has been looking at new building blocks to expand processor capabilities and provide valuable features in keeping with the growing miniaturization of devices. Additionally, it is desired to enable the ultra-dense integration of complicated circuits into processor chips.

Global Photonic Integrated Circuit Market Restraint

Continued Demand for Traditional ICS

Even though hybrid photonic integrated circuits are incredibly efficient and offer several advantages over their forerunners/traditional ICs, they have a relatively limited level of market penetration. Many foundries create significant quantities of hybrid photonic integrated circuits in the current market environment. Research is still being conducted on the materials needed to produce hybrid PICs in large quantities at low cost. The penetration of conventional ICs into volume-driven applications is facilitating ongoing growth in the absence of IoT hardware, thanks to improvements in that area. Another factor impeding the use of PICs in volume-based applications is the growing need for general ICs for smart or intelligent systems.

Global Photonic Integrated Circuit Market Opportunities

Growing Applications in Telecommunications and Data Centers

Data centers and the telecommunications industry benefit significantly from using hybrid PICs. The main reason for the rising deployment of hybrid PIC in the telecom and data center markets is the high data transfer rate requirement, which conventional ICs cannot support. The advancement of 5G and high-speed networks has been blamed for further acceleration. The creation and widespread use of transceivers and passive components have made PICs a well-known technology in the telecom industry. The advent of 5G has made wireless and radio technology more prominent. However, photonics and fiber optics have played a crucial role in signal transmission to and from the new base station generation. High levels of innovation are also assisting other manufacturers in creating low-cost hybrid PIC hardware to fulfill their needs. Additionally, the volume of traffic that data centers must manage is fast expanding due to the rise in cloud applications (DC).

Regional Analysis

The global photonic integrated circuit market is bifurcated into four regions: North America, Europe, Asia-Pacific, and LAMEA. 

Asia-Pacific Dominates the Global Market

Asia-Pacific is the most significant revenue contributor and is expected to grow at a CAGR of 25.2% during the forecast period. The growing electronics and telecom sectors and the swift relocation of many semiconductor production bases to Southeast Asian nations have made Asia-Pacific, including China, a significant market. China's PICs technologies have advanced quickly over the last ten years. In the country, more than nine important PIC projects have been released. Various material technologies and platforms have been created for numerous applications focusing on broadband communication, including optical and wireless networks, optical interconnects, and coherent optical communication.

Europe is expected to grow at a CAGR of 22.6% during the forecast period. Over several years, the European Commission, the EU's executive body, has invested in photonic integrated circuit (IC) technology. This involves cutting-edge investments in fundamental research, developing proof-of-concept devices and software, and, more recently, pilot line manufacturing. As a result, there is currently a thriving PIC ecosystem in the regions, which has the potential to unleash the power of PIC technologies and benefit its residents on a wide range of economic and social fronts.

Additionally, several other initiatives have been started to advance PIC development in Europe. For instance, InPulse is a pilot initiative that would give companies with great ideas but no PIC manufacturing facilities access to the most recent production technology for PICs based on indium phosphide. A high-level strategic roadmap of fundamental technologies for future connectivity systems and components, aimed at the next generation of telecommunications networks and services, is being developed by industrial and R&D enterprises from Europe's telecommunications and microelectronics sectors.

In North America, data centers and vast area network (WAN) applications of fiber optic communication are driving the market for photonic integrated circuits (PIC) based devices. The rapid adoption of IoT and the increasing demand for high-speed data transmission have increased data traffic in cloud computing. The region now has a potentially burgeoning photonic integrated circuit industry. By the end of 2021, North America is anticipated to produce the highest cloud market adoption. The U.S. military aims to build photonic integrated circuits for the high-performance position, navigation, and timing (PNT) devices. This could replace the GPS in situations with no GPS signals, which is advantageous. The U.S. military aims to build photonic integrated circuits for the high-performance position, navigation, and timing (PNT) devices. This could replace the GPS in situations with no GPS signals, which is advantageous.

In the Middle East, electronics and photonics technologies have become more prevalent in recent years due to the increased emphasis on building the technological foundation. For instance, the National Science Technology and Innovation Plan have recognized innovations in Saudi Arabia. King Abdulaziz City for Science and Technology (KACST) is a private, non-profit, independent national research and development agency that supports Saudi Arabia's knowledge-based society and economy. To take advantage of the rising demand for services from businesses in the area, IBM announced the opening of two data centers in the United Arab Emirates. This is the company's first venture into the Middle East and Africa cloud storage sector.

Segmental Analysis

The global photonic integrated circuit market is segmented by type of component, type of raw material, integration process, and application.

Based on the type of component, the global market is bifurcated into laser (optical laser), modulators, detectors, transceivers, multiplexer/demultiplexers, and optical amplifiers. 

The laser (optical laser) segment is the highest contributor to the market and is estimated to grow at a CAGR of 22.3% during the forecast period. A laser serves as a source and is crucial to the effective operation of photonic integrated circuits. Lasers can be built into photonic integrated circuits (ICs) or used externally. The most popular semiconductor for hybrid photonic integrated circuits is distributed feedback lasers (DFB). DFB semiconductor lasers can be made using an integrated grating structure that resembles a corrugated waveguide. DFB is a fiber or semiconductor laser with a single resonator mode (single frequency operation). In the fiber laser method, the dispersed reflection happens in a fiber Bragg grating, typically with a length of a few centimeters or millimeters, in a fiber Bragg grating. In addition to a wide range of novel applications such as fiber sensing, 3D sensing, gas sensing, and disease diagnosis such as respiratory and vascular monitoring, a DFB is primarily utilized as the optical signal for high-capacity long-distance optical communication.

A semiconductor device called an electro-absorption modulator is used to alter the intensity of a laser beam using an electric voltage (optical modulator). It functions by altering the absorption spectrum brought on by an applied electric field, which modifies the band gap energy but largely excludes the excitation of carriers. Compared to electro-optic modulators, EAMs can operate at substantially greater speeds and lower voltages. Since these devices can achieve modulation bandwidths of tens of GHz, they are useful for hybrid photonic ICs. EAMs are used in external modulation links in telecommunications and internal linkages on integrated photonic and electrical device circuits. EAMs can operate at ten times lower voltages, produce ten times less heat, and enable faster signal transmission than current modulation methods.

Based on the type of raw material, the global market is bifurcated into III-V material, lithium niobate, silica-on-silicon, and other raw materials. 

The III-V material segment owns the highest market and is estimated to grow at a CAGR of 21.8% during the forecast period. Materials like GaAs, InP, GaN, InAs, and InSb are the most common III-V materials. Indium-phosphide and gallium-arsenide are two examples of III-V semiconductors used as light sources. These materials are often implemented as discrete packaged components. These external light sources typically experience more significant coupling loss, a big physical form factor, and expensive packaging costs. The III-V semiconductor compound material gallium arsenide (GaAs) is utilized in several integrated circuits and field-effect transistors (FETs) (ICs). GaAs-based optoelectronics components are helpful for fast electronic switching applications working at frequencies greater than 200GHz due to their high electron mobility.

One of the essential elements for upcoming all-optical communication networks is silica-on-silicon (SoS). The monolithic integration of passive dielectric components with semiconductor active electronic circuits and photonic devices is challenging trends toward planar lightwave circuits (PLCs) based on silicon platforms. Due to its benefits, such as low weight and limited locations, connection applications are the most advantageous for SOS performance. However, the characteristics of the layers that make up the structure of SoS planar waveguide devices significantly impact their performance. In WDM (wavelength-division multiplexed) optical communication systems, as wavelength-selective devices, and in optical sensing, including biosensors and bioanalytical micro-techniques, devices based on SoS waveguide technology with imprinted Bragg gratings find increasing applications.

Based on the integration process, the global market is bifurcated into hybrid and monolithic. 

The monolithic segment is the highest contributor to the market and is estimated to grow at a CAGR of 21.8% during the forecast period. Different materials are manufactured on the same wafer substrate in monolithic integration. Compared to hybrid systems, monolithic integration has some drawbacks in terms of performance. Monolithic integration does not allow for individual optimization and testing of all components before assembly. Hence hybrid integration can provide superior performance and design freedom. A monolithic integration photonic integrated circuit has been used in various active and passive optical devices with a single material to avoid problems with multiple material adoptions. These single-chip photonic integrated circuits have several advantages over hybrid photonic integrated circuits regarding energy efficiency and dependability.

A photonic integrated circuit is built using two or more materials utilizing the hybrid integration technique. This hybrid technology has the main benefit of allowing the optimum materials to be chosen for each specific optical function. However, blending several materials is necessary because each has a unique design. Recent chip-based photonic quantum circuit technology advances have dramatically impacted quantum information processing. It has proven difficult for monolithic photonic platforms to satisfy the demanding requirements of most quantum applications. These constraints of monolithic photonic circuits may be solved by hybrid platforms, which combine several photonic technologies into a single functional unit. Due to their high efficiency and lower manufacturing costs, hybrid photonic integrated circuits have many uses, including wireless communication, high-end computing, servers, data centers, medical devices, and military and aerospace products.

Based on application, the global market is bifurcated into telecommunications, biomedical, data centers, and other applications. 

The data centers segment owns the highest market and is estimated to grow at a CAGR of 21.9% during the forecast period. The server racks are connected by optical links in the data centers via an intricate web of fiber optic cables. Currently, 4x25 Gb/s single channel or lane 100 Gb/s optical lines support data traffic inside the data center. Single-mode fiber is the preferred optical technology for crossing long distances in these networks, which transfer data over fiber lengths ranging from a few meters to 2 kilometers. To fulfill the growing demand for data, it is more likely that data center operators will upgrade their networks to 400 Gb/s optical links during the next few years (by aggregating 4x100 Gb/s lanes per link). The demand for inexpensive, power-efficient optical communications will increase exponentially within data centers, driving the market for photonic integrated circuits (ICs).

Emerging services like ultra-bandwidth video services, data center cloud interconnection services, and 5G mobile network services are encouraging the development of optical transport network technology. These services will drive future optical communications industry development and architecture transformation. Mobile access, which comes with video clients on all smartphones and tablets and makes it easier to watch videos over network connections, further accelerates the expansion. As copper cabling reaches its limits in data transmission capacity, network carriers increasingly turn to laser light sources rather than electrical conductors to convey data. To satisfy the demands of data-hungry consumers, it is thus enabling transceivers that enable improved data transport and communication.

Recent Developments

• February 2022- POET Technologies Inc., the designer and developer of the POET Optical Interposer™ and Photonic Integrated Circuits (PICs) for the data center and telecommunication markets, announced a collaboration with Liobate Technologies to incorporate advanced Thin-Film Lithium Niobate (“TFLN”) modulators onto POET’s Optical Engines supporting power-efficient ultra-high-bandwidth electro-optic conversion for data center and telecom applications.
• November 2022- II-VI Incorporated made 11 acquisitions and one investment. The company spent over USD 3.66B on the acquisitions. II-VI Incorporated invested in multiple sectors such as Telecom Infrastructure Tech, Analog and Mixed Signal ICs, Photonics, and more.