As China's Deep Seek has brought low-cost AI models to the forefront of global attention, the widespread cost reductions in AI models could ultimately lead to increased global data center deployments and a boost in demand for optical communications.

According to a report by market research firm TrendForce on the 5th, Deep Seek's low-cost AI model is expected to increase optical transceiver shipments by 56.5% in 2025 due to the promotion of demand for optical communications.

As the demand for high-speed data transmission increases due to the increase in AI servers, the need for optical transceivers, a key component of data center interconnection, is increasing.

According to TrendForce, global shipments of 400G and above optical transceivers are reported to be 6.4 million units in 2023, and are expected to grow approximately threefold to 20.4 million units in 2024, and exceed 31.9 million units in 2025, recording an annual growth rate of 56.5%.

In particular, he points out that as massive amounts of data generation move to the edge, AI adoption by deep seekers, CSPs, and AI SW companies will be further accelerated. He explained that this transition will require an increase in the construction of micro data centers in industrial sites such as factories and wireless base stations.

Accordingly, optical transceivers can be deployed at a higher density, and the number of optical communication nodes per factory can be increased by three to five times compared to existing architectures. Fiber optic communications can meet AI server requirements with high bandwidth, low latency, and low signal attenuation.

The optical transceiver market is a growing market as demand for bandwidth-intensive applications such as cloud-based services and generative AI-based services such as VR, AR, and large-scale language models increases. The recent deep seek craze is driving the expansion of optical transceivers as AI agents and ChatGPT commercialization and efficiency become visible.

Optical transceivers consist of laser diodes, modulators, and photodetectors, and EML (Electro-absorption Modulated Laser) diodes are preferred for high-speed applications. Major EML laser suppliers include Broadcom, Coherent, and Lumentum, which manufacture and supply their own products. Photodetectors dominate the market, along with the three companies mentioned above, and Hamamatsu Photonics of Japan.