Summary

• The optical supply chain bottleneck into 2026 is EML capacity, with 200G EMLs (needed for 1.6T) far tighter than 100G and keeping pricing and allocations elevated.
• Silicon photonics is the short-term “release valve” for EML shortages by shifting more functionality onto PICs and using CW light sources, but it remains a partial substitute for the harshest 800G/1.6T AI link requirements.
• 800G demand remains robust (~40m units in 2026) but is increasingly viewed as transitional as hyperscalers push to migrate to 1.6T wherever supply and infrastructure allow.
• The 1.6T ramp is gated not just by optics supply (200G lasers/DSPs) but also by the availability and qualification of 1.6T-capable switch platforms (Tomahawk6-class), which can cap deployable port count.
• CPO has long-term promise but stays in validation through 2026 due to reliability, serviceability, and supply-chain concentration, making it an incremental complement by 2028 rather than a near-term replacement for pluggables.

Optical Communication Lasers: Current Status, Capacity, and Future Outlook

Current Laser Capacity Status

The typical optical transceiver spreads data across 8 optical channels, each requiring an EML (Electro-absorption Modulated Laser) laser. Current 800G transceivers utilize 8 x 100G speed channels, while 1.6T transceivers employ 8 x 200G speed channels, with mass production of the latter primarily achieved by Lumentum (LITE) in 2025. The primary bottleneck in the optical supply chain remains the shortage of EML lasers, which has driven up prices and spurred interest in alternatives like silicon photonics (produced by Tower Semiconductor; ticker TSEM), which is gaining favor.

Leading vendors' capacities vary significantly. LITE's 2025 EML chip plan is about 60 million units, with nearly all being 100G products (supporting 800G modules) and 200G products (for 1.6T modules) accounting for only about 2 million units, ramping up in the second half. Mitsubishi's current capacity is around 40 million units, expanding to about 50 million next year. Sumitomo's overall capacity is about 80 million units, with EMLs comprising 20%-30% and the remainder being CW (Continuous Wave) products. Broadcom's capacity has grown to 20-30 million units this year, expected to increase to around 30 million next year.