Recently, Co-Packaged Optics (CPO) has attracted significant market attention.
As a new type of optoelectronic integration technology, CPO shortens the electrical interconnection length between optical signal input and computing units by closely interconnecting the optical engine with the switching chip. Its advantages include: high bandwidth density, low power consumption, high integration, low latency, small size, and the ability to achieve large-scale production through semiconductor manufacturing technology. Many analysts believe that this technology is key to solving high-speed data transmission in the AI era.
Recently, Morgan Stanley also released an in-depth report analyzing the CPO industry chain, stating in the report:
<blockquote>
Although CPO (Co-Packaged Optics) technology is still in the early stages of market recognition... investors generally agree that this is the future development direction of network technology.
</blockquote>
The report predicts that as NVIDIA's Rubin server rack system begins mass production in 2026, the CPO market size will expand at a compound annual growth rate (CAGR) of 172% between 2023 and 2030, expected to reach USD 9.3 billion by 2030; in an optimistic scenario, the CAGR could reach 210%, with the market size exceeding USD 23 billion.
In terms of industry chain layout, FOCI has secured the position of the only FAU supplier in the first phase, AllRing is expected to supply key optical coupling equipment in 2026, and ASE has received a visit from NVIDIA's CEO at its factory in Taichung, Taiwan, likely becoming a core partner for Rubin CPO system-level packaging.
As for the next catalyst in the CPO supply chain, Morgan Stanley mentioned in the research report that NVIDIA is expected to showcase some CPO prototype solutions at this year's GTC conference, but it is more likely to be the Quantum CPO switch, which is set for mass production in the second half of 2025, rather than products related to Rubin.
It is worth mentioning that regarding when CPO will be realized, NVIDIA CEO Jensen Huang, in a recent media interview discussing the progress of the silicon photonics technology jointly developed by NVIDIA and TSMC, stated:
<blockquote>
Silicon photonics may still need a few more years; we will continue to use copper technology for now.
</blockquote>
<h2>1. Analysis of Core Enterprises in the Industry Chain</h2>
In the CPO industry chain, Morgan Stanley focuses on core enterprises such as FOCI, AllRing, TSMC, and ASE.
First, FOCI has a unique advantage in the FAU (Fiber Array Unit) field. Morgan Stanley believes that as the only FAU supplier in the first phase, FOCI occupies a key position in the industry chain due to its close cooperation with TSMC and excellent product quality.
In the equipment supply segment, AllRing will provide optical coupling equipment for FAU customers. It is expected that starting in the first half of 2026, this business will bring significant revenue contributions to AllRing, with its average selling price (ASP) and gross margin expected to be significantly higher than the existing CoWoS product line.
In the packaging field, Morgan Stanley mentioned that ASE has recently made important progress. The CEO of NVIDIA recently visited ASE's factory in Taichung, Taiwan, and Morgan Stanley speculates that this indicates ASE is likely to become a key partner in the production of NVIDIA's Rubin CPO SiP (System In Package)
The new factory is expected to become the main production base for CPO SiP by 2026.
In addition, Morgan Stanley also supported its judgment with the views from TSMC's latest conference call. As a key manufacturing partner in the supply chain, TSMC stated in its latest earnings call that it expects CPO to start ramping up in 1 to 1.5 years.
<h2>2. Market Size and Development Expectations</h2>
Morgan Stanley proposed three expected scenarios for the CPO market:
1. Base Case Scenario
<ul>
<li>A compound annual growth rate of 172% from 2023 to 2030, with a market size of USD 9.3 billion by 2030</li>
<li>Rubin GPU shipment forecast: 200,000 units in 2026, 700,000 units in 2027</li>
<li>NVIDIA will be the first to introduce CPO architecture in the Rubin GPU rack system in 2026</li>
<li>Vendors such as Broadcom, Cisco, and Marvell will begin to gradually ship in 2027</li>
<li>Note: CPO solutions are primarily targeted at Rubin server rack systems, and traditional HGX systems will not adopt this solution</li>
</ul>
2. Optimistic Scenario
<ul>
<li>A compound annual growth rate of 210% from 2023 to 2030, with a market size of USD 23 billion by 2030</li>
<li>Rubin GPU shipment forecast: 500,000 units in 2026, 1.75 million units in 2027</li>
<li>Significant improvement in CPO yield rates</li>
<li>More chip manufacturers actively adopting CPO solutions</li>
</ul>
3. Conservative Scenario
<ul>
<li>A compound annual growth rate of 107% from 2023 to 2030</li>
<li>Yield issues leading to shipment delays</li>
<li>Reduced willingness of customers to adopt</li>
</ul>
Additionally, considering the complexity of CPO technology, the institution does not rule out the risk of product delays. Furthermore, cloud service providers may also delay the adoption of CPO due to cost and yield considerations, which could lead to stagnation in CPO adoption rates

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Morgan Stanley predicts that as NVIDIA's Rubin server rack system begins mass production in 2026, the CPO market size will expand at a compound annual growth rate of 172% between 2023 and 2030, expected to reach USD 9.3 billion by 2030. FOCI has secured the sole FAU supplier position in the first phase, and AllRing is expected to supply key optical coupling devices in 2026. ASE has received a visit from NVIDIA's CEO at its Taichung factory and is likely to become a core partner for the Rubin CPO system-level packaging

- The CPO (Co-Packaged Optics) technology is gaining attention for its potential to enhance data transmission in the AI era, offering benefits like high bandwidth density and low power consumption.  
- Morgan Stanley predicts a compound annual growth rate of 172% for the CPO market from 2023 to 2030, potentially reaching $9.3 billion by 2030, with optimistic scenarios suggesting a growth rate of 210%.  
- Key players in the CPO supply chain include FOCI, AllRing, and TSMC, with significant developments expected in the coming years, although risks of delays and adoption challenges remain.

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Morgan Stanley in-depth analysis: 172% annual compound growth rate, who can seize the CPO opportunity?