Silicon photonic switches enter mass production! ITRI estimates Taiwan will become the core base of global CPO

2025/06/20

TechNews Technology News
June 16, 2025
Author Yao Huiru

The Industrial Technology Research Institute recently held the "2025 Global Technology Industry Competition Trends and Challenges Series Seminar", focusing on the three major themes of semiconductor strategic positioning, electronic components business opportunities and quantum technology supply chain layout. Among them, with the introduction of silicon photonic switches into mass production, the CPO market size will grow more than 4 times by 2029 compared to 2024, reaching 47.5 million US dollars.

The Industrial Technology Research Institute said that as AI artificial intelligence technology is being fully integrated into life applications, generative AI technology has lowered the threshold of computing power, and open source and lightweight models have enabled smartphones, PCs and other devices to be equipped with AI, driving up demand for Taiwan's IC design industry. The Industrial Technology Research Institute estimates that the output value of Taiwan's IC design industry will grow by 13.9% in 2025 compared to the previous year.

ITRI pointed out that the popularity of edge AI will not only consolidate the existing advantages of Taiwan's chip industry, but will also give rise to more innovative applications and services, allowing opportunities for chips and hardware to flourish. CPO and advanced packaging will help the high-speed computing market heat up. In response to the rapid expansion of AI model scale and the demand for high-speed computing in data centers, co-packaged optics (CPO) technology has become the focus of the industry.

ITRI explained that with the introduction of mass production of silicon photonic switches, the CPO market size will grow more than 4 times by 2029 compared to 2024, reaching US$47.5 million. In response to heterogeneous integration needs, advanced packaging technologies such as 2.5D/3D packaging and TSV will be accelerated. The global advanced packaging market will also grow steadily at an average annual rate of 10.8%. It is estimated that the global advanced packaging market will reach US$67.19 billion in 2029.

ITRI believes that Taiwan has advantages in wafer process, packaging and silicon photonics integration, and has the opportunity to become the core base for CPO global technology landing in the future. The semiconductor industry is growing strongly, and policy changes have become a challenge. AI applications have boosted terminal upgrades and computing needs, driving semiconductor technology and markets to new heights. It is estimated that the global semiconductor market will reach US$700.9 billion in 2025, an annual growth of 11.2%.

In Taiwan, AI-related applications will boost IC manufacturing and packaging and testing capacity utilization, and the annual output value is estimated to reach 6.3313 trillion yuan, an annual growth of 19.1%, showing strong momentum. However, in the face of geopolitical escalation and global supply chain restructuring pressure, policy risks cannot be ignored. ITRI recommends that Taiwan's semiconductor industry must pay close attention to the impact of policy changes and adjust response strategies in a timely manner.

Innovation in display and sensing technology drives new application scenarios. With AI empowerment, the smart glasses market has great potential. LEDoS (LED on Silicon), which has high brightness and miniaturization advantages, best meets the display needs of smart glasses. ITRI estimates that the market penetration rate will reach 57.4% in 2029. If it is able to replace mobile phones in the future, the market size is expected to reach more than US$40 billion, comparable to the current mobile phone panels.

ITRI suggests that Taiwan should make good use of Micro LED and semiconductor process advantages, deploy LEDoS technology in advance, and strive for opportunities for smart display upgrades. MEMS sensors have a steady growth momentum due to the diversification of application scenarios. High value-added applications such as automotive electronics, AI Sensing, and smart medical care have boosted market demand. It is estimated that Taiwan's annual sensor output value will reach 223.2 billion yuan in 2025, an annual increase of 2.5%.

ITRI analyzed that MEMS sensors have become key components, especially in high value-added fields such as automotive electronics, smart healthcare, and AI sensing, due to their small size, low power consumption, and high sensitivity. In the future, with the trend of integration and modular design, new niches will be created for Taiwan's sensor industry. The demand for components will increase steadily, and it is necessary to respond prudently to policy interference.

In terms of passive components, ITRI pointed out that in the short term, in response to uncertainty, the industry has stocked up in advance, and AI server shipments are booming, driving Taiwan's passive component output value to 127.6 billion yuan in the first half of 2025, a year-on-year increase of 9.6%, and the annual output value is expected to reach 250.7 billion yuan, a year-on-year increase of 4.2%. However, it is necessary to carefully observe whether the stocking effect will cause a decline in demand in the second half of the year, and respond to market fluctuations caused by external political and economic changes.

The PCB industry is driven by AI servers and satellite communications, and will continue to be the main driver of Taiwan's PCB industry growth in 2025. ITRI estimates that the scale of Taiwan's PCB industry will reach NT$866.1 billion in 2025, a growth of 6.0%. With the impact of tariff policies, companies may ship in advance, which may compress subsequent market demand, and should be cautious in responding to changes in rhythm.

Overall, the electronic components industry in 2025 is at a critical moment where emerging demands and global turmoil intersect. Applications such as AI, electric vehicles, and the Internet of Things are expanding rapidly, driving huge demand for high-performance and high-reliability components, but the uncertainty of the international political and economic environment also tests the industry's ability to respond.

ITRI estimates that global quantum technology will create $850 billion in economic value in 2040, and the amount of new venture investment in 2024 has reached $8.5 billion, showing its market growth potential. Among them, quantum hardware technologies such as ion traps have shown practical potential in finance, new materials and other fields, and quantum control circuit technology will also become the key to industrialization.

ITRI calls on Taiwan to combine the advantages of semiconductors and ICT to develop niche applications such as hybrid quantum computing, cryogenic control components and encrypted communications, and actively promote international cooperation and talent cultivation to accelerate the construction of a local quantum technology innovation ecosystem and seize a key position in future global technology competition.

Related link: https://technews.tw/2025/06/16/cpo-core-base/
Image source: ITRI

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