Co-packaged optics represent the future key to breaking electrical data transfer limitations and cutting energy consumption by up to half in artificial intelligence chips.
Article index:
- Announcement of the new Taiwanese industrial alliance
- Addressing data bottlenecks and reducing energy consumption
- Co-packaged optics technology and production schedules
- Taiwanese ecosystem investment and the president’s development initiative
- A new generation of packaging via rectangular panels
- Samsung’s platform and the global optical interconnects race
- Frequently asked questions
Announcement of the new Taiwanese industrial alliance
Taiwan’s Ministry of Economic Affairs announced on September 6 the formation of the “Silicon Photonics Industry Alliance” in a major strategic move led by Taiwan Semiconductor Manufacturing Company (TSMC) with the participation of more than 30 prominent Taiwanese companies and institutions. The alliance aims to solidify the island’s dominance over the next generation of data transfer and advanced computing processing technologies dedicated to artificial intelligence.
The industrial consortium includes an elite group of Taiwanese technology giants, including assembly and packaging firm ASE, chip designer MediaTek, and manufacturing giant Foxconn. The alliance is directly focusing its efforts on the co-development of “co-packaged optics” technology, which integrates optical communication components alongside artificial intelligence chips on the same substrate to transmit digital signals via light instead of traditional electrical pulses. This announcement comes just a few days after the conclusion of “Semicon Taiwan 2026,” held in Taipei, where silicon photonics was the most prominent focus.
Addressing data bottlenecks and reducing energy consumption
With the tremendous and rapid evolution in artificial intelligence chip performance and the expansion of deep learning networks, the volume and speed of data flowing between different chips and memory arrays have turned into a critical technical bottleneck limiting data center efficiency. The Ministry of Economic Affairs explained that applying silicon photonics technologies allows for cutting the massive heat generated by data transfer, alongside reducing electrical energy consumption by 30 to 50 percent.
Co-packaged optics technology achieves this breakthrough by converting electrical signals into ultra-fast laser optical signals in close proximity to the processor core, which raises data transfer speeds to unprecedented levels and minimizes energy loss to the lowest possible levels.
Co-packaged optics technology and production schedules
TSMC is preparing to begin commercial mass production of co-packaged optics products before the end of the current year, while major global companies such as Nvidia and Broadcom have begun launching products compatible with these optical standards in the markets. During Semicon Taiwan, TSMC’s vice president emphasized that silicon photonics will play a “dominant” and decisive role next year in enabling chip-level optical packaging.
This shift opens the door to unprecedented leaps in training large language models that require ultra-fast bandwidth packages that traditional copper wires cannot match.
Taiwanese ecosystem investment and the president’s development initiative
This government strategy builds on leveraging the solid strength of Taiwan’s chip manufacturing ecosystem and expanding its leadership in advanced manufacturing and packaging into the photonics sector. Taiwan currently holds more than 90 percent of the global market share in manufacturing advanced chips at 7-nanometer and below, and about 50 percent of the semiconductor packaging and testing market.
This close alliance aligns with the “Ten Major New AI Constructions” initiative launched by Taiwanese President Lai Ching-te, which includes the silicon photonics sector and aims to achieve production revenues of up to 15 trillion New Taiwan Dollars and generate 500,000 AI-related jobs by 2040.
A new generation of packaging via rectangular panels
Along similar lines, TSMC is developing another advanced technology known as “chip-on-wafer-on-substrate,” which replaces traditional circular silicon wafers with rectangular panels measuring 310 by 310 millimeters. This innovation aims to raise the raw material utilization rate from less than 70 percent to over 90 percent.
A pilot production line for this technology began operations in June 2026 at Vens Era’s facility in Longtan, with the goal of transitioning to expanded commercial production in the second half of 2028 or by 2029.
Samsung’s platform and the global optical interconnects race
In contrast, South Korea’s Samsung Electronics unveiled its own 300-millimeter silicon photonics platform built on mature CMOS technology, which it showcased for the first time at the Optical Fiber Communication Conference 2026.
These simultaneous moves highlight the intensification of the global technological race among semiconductor giants to integrate optical communication technologies into the main production lines of AI processors to overcome the physical limits of traditional silicon.
Frequently asked questions
Question: What is the Taiwan Silicon Photonics Alliance and what are its goals?
Answer: It is an industrial coalition comprising TSMC and 30 companies to develop light-based data transfer technologies for artificial intelligence chips.
Question: How does co-packaged optics technology contribute to improving processor efficiency?
Answer: It reduces electrical energy consumption by up to 50 percent, reduces thermal emissions, and increases data transfer speeds.
Question: When does TSMC plan to start commercial production of optical packaging technology?
Answer: The company is preparing to begin commercial production of co-packaged optics technology before the end of the current year 2026.
