Taiwan Semiconductor Manufacturing Co. is pushing its co-packaged optics (CPO) platform, known internally as COUPE, toward higher-volume production as AI data center operators run into a hard limit on how much data copper wiring and pluggable optical modules can move between chips. In effect, the approach fuses optical engines directly onto the same package as switch and accelerator silicon, positioning it as the semiconductor industry's answer to power and bandwidth ceilings that conventional interconnects can no longer clear at AI cluster scale.
CPO replaces the pluggable transceivers that sit at the edge of a server rack with photonic engines soldered next to the switch die itself, cutting the electrical distance a signal has to travel before it turns into light. According to TSMC, COUPE supports bandwidth in the multiple-terabit-per-second range per package, a jump that matters most for the 800G and 1.6T switch generations now entering AI network designs.
Broadcom Brings CPO to Production Switches
Broadcom has been the most public backer of the approach on the systems side, shipping its Tomahawk 5-class CPO switch, codenamed Bailly, to hyperscale customers building out AI training clusters. According to Broadcom, CPO cuts per-bit power consumption in switch-to-optics links by roughly 30 percent compared with pluggable modules — a figure that matters directly to data center operators facing power ceilings on new AI campuses rather than compute ceilings.
Nvidia and other switch and accelerator vendors have signaled similar interest, and TSMC's foundry customers building custom AI accelerators are increasingly asking for COUPE-compatible packaging options alongside standard CoWoS advanced packaging.
Japan's Fiber and Component Makers Scale Up
Much of the remaining supply chain sits in Japan, where Sumitomo Electric, Furukawa Electric and Fujikura — the three companies that dominate global optical fiber and connector manufacturing — have each added data center-specific capacity this year, separate from their traditional telecom fiber business. Sumitomo Electric has expanded output of its indium phosphide laser components, a key input for the light sources CPO engines depend on, while Furukawa Electric has focused on the fiber array units that connect photonic packages to the wider optical network inside a data hall.
Demand tied to CPO is still a small fraction of these companies' overall optical component revenue, but it is also the fastest-growing line item, arriving as legacy telecom fiber demand has flattened across most developed markets.
Packaging and Reliability Remain Open Questions
CPO is not without tradeoffs. Because the optical engine is soldered permanently next to the switch silicon, a single failed laser can force replacement of the entire package rather than a simple transceiver swap, a serviceability problem data center operators are still working through with their suppliers. Laser reliability at the temperatures found inside densely packed AI racks remains one of the technology's harder engineering problems, which is why several hyperscalers are running CPO in limited production pods before committing to full-fleet rollouts.
TSMC has previously indicated COUPE-based products would reach broader customer availability on a multi-year timeline stretching past 2026, with early deployments concentrated among the largest AI infrastructure operators before the technology reaches mainstream enterprise switch products.