| | | The Total Addressable Market for 800G Optical Interconnects: Market Size, Value Distribution, and Implications for POET Technologies | by The Optical Edge | Jan, 2026 | Medium
The Total Addressable Market for 800G Optical Interconnects: Market Size, Value Distribution, and Implications for POET Technologies
The Optical Edge
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23 hours ago
Introduction
The rapid expansion of artificial intelligence (AI) workloads has fundamentally altered the structure of data centre networking and, in turn, the economics of optical interconnects. Whereas traditional enterprise and cloud applications were dominated by north – south traffic patterns, AI training and inference workloads generate sustained east – west traffic between accelerators, memory, and storage nodes. This shift has increased the importance of bandwidth density, power efficiency, and latency within data centre networks.
In response, 800 gigabit per second (800G) optical interconnects have emerged not as an incremental upgrade, but as a necessary architectural response to changing workload characteristics. This paper examines the total addressable market (TAM) for 800G optical interconnects, quantifies its scale in monetary terms, and analyses how value is distributed within an 800G optical module. Particular attention is given to the positioning of POET Technologies within the optical interconnect value chain and the portion of market value that is realistically addressable by its Optical Interposer architecture.
Market Drivers and the Necessity of 800G
AI workloads scale by increasing the number of interconnected accelerators. As cluster sizes grow into the tens or hundreds of thousands of GPUs, network bandwidth becomes a critical determinant of overall system efficiency. Industry studies indicate that insufficient interconnect bandwidth can result in meaningful reductions in effective GPU utilisation, undermining the economic return on high-cost accelerator infrastructure (Cisco, 2023; NVIDIA, 2024).
At 400G, data centre operators are already encountering constraints related to port density, power consumption, and cabling complexity. The move to 800G enables operators to double bandwidth per port, reducing the number of required optical modules, switch ports, and fibre connections for a given level of throughput. Consequently, adoption of 800G is increasingly driven by total cost of ownership considerations rather than peak performance metrics alone.
Quantifying the 800G Total Addressable Market
Optical interconnects typically represent approximately 30 – 40% of total data centre networking capital expenditure. Annual global spending on data centre optical interconnects reached approximately $10 – 15 billion in the early 2020s and is expected to expand materially as AI-related infrastructure investment accelerates (Dell’Oro Group, 2024). As hyperscale operators continue to build AI-centric data centres, total optical interconnect spending is forecast to exceed $20 – 25 billion per year by the latter half of the decade.
Within this expanding market, 800G optical modules are expected to account for a growing proportion of high-performance ports. Conservative scenarios suggest that 800G optics could represent 25 – 30% of total optical interconnect revenue at maturity, implying an annual TAM of approximately $5 – 7 billion. More aggressive scenarios place 800G penetration at 40 – 60% of high-end ports, yielding an annual TAM of $10 – 15 billion (LightCounting, 2024).
Average Selling Prices and Module Economics
Early-generation 800G optical modules have reportedly sold at average selling prices in the range of $1,500 – 3,000 per unit. This price reflects low initial volumes, technical complexity, and yield challenges. Importantly, this ASP represents the fully assembled optical module, incorporating lasers, modulators, photonic integrated circuits, digital signal processors, packaging, housing, and testing.
Distribution of Value Within an 800G Optical Module
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At advanced speeds such as 800G, packaging, assembly, and integration-related activities account for a growing share of total module cost. Industry analyses estimate that 30 – 50% of the total cost of an 800G module may be attributable to packaging, alignment, assembly, and integration processes (Yole Group, 2023). This shift elevates the importance of manufacturability, yield, and thermal management as sources of economic value.
POET Technologies’ Addressable Share of the 800G ASP
POET Technologies does not seek to capture the full $1,500 – 3,000 module ASP. Its Optical Interposer architecture addresses the optical engine and integration layer of the value chain. Under conservative assumptions, POET’s addressable revenue may represent approximately 10 – 20% of module ASP, equivalent to roughly $150 – 600 per 800G module. Under more optimistic assumptions, which one would assume given the advancements in their technology, this share could approach 20 – 30%, or approximately $300 – 900 per module.
Implications for POET’s Serviceable Addressable Market
Applying these assumptions to a total 800G module TAM of $5 – 15 billion annually implies a POET serviceable addressable market in the range of approximately $1.5 – 4.5 billion per year. This reflects POET’s exposure to the integration layer rather than the full module market.
Conclusion
The transition to 800G optical interconnects reflects a structural change in data centre networking driven by AI workloads. While the total 800G optical module market is estimated at $5 – 15 billion annually, POET Technologies’ realistic opportunity lies in the integration and packaging layer of this market. Based on estimated value capture of 10 – 30% per module, POET’s serviceable addressable market can be reasonably framed at approximately $1.5 – 4.5 billion annually. As data rates progress toward 1.6T and beyond, the economic importance of scalable integration architectures is likely to increase further, reinforcing the long-term relevance of POET’s positioning.
References
Cisco Systems (2023). Global Cloud Index and Data Center Networking Trends.
Dell’Oro Group (2024). Data Center Switch and Optical Components Forecast.
LightCounting (2024). High-Speed Ethernet Optics Market Report.
NVIDIA (2024). Scaling AI Infrastructure: Networking Considerations.
Yole Group (2023). Photonic Integration and Advanced Packaging Economics. |
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