Demand for vertical-cavity surface-emitting lasers (VCSELs) used in near-packaged optics (NPO) is expected to rise as AI data centers require higher-bandwidth, lower-power interconnects, according to TrendForce. In its 2027 Infrared Sensing and Optical Communication Market Trend report, the market research firm projects VCSEL sales will reach 650 million units by 2031, representing a compound annual growth rate (CAGR) of 38% from 2025 to 2031. Several VCSEL NPO solutions are expected to launch in 2027 and 2028. Lumentum, Furukawa Electric, Coherent, Broadcom, ams OSRAM and HiSilicon are developing VCSEL NPO technologies for scale-up networks connecting processors and other components within AI data centers. As transmission rates approach 1.6 Tbps, signal attenuation in copper cables becomes more pronounced. Active electrical cables (AECs) use retimers to compensate for signal degradation, but higher data rates are expected to increase interest in optical interconnects for short-reach links. Supplier strategies differ by VCSEL wavelength. Coherent, Broadcom, ams OSRAM and HiSilicon are developing solutions based on established 850nm VCSELs paired with photodiodes, targeting aggregate bandwidths of up to 3.2 Tbps. However, chromatic dispersion could limit further increases in bandwidth and transmission distance. Lumentum and Furukawa Electric are pursuing higher-cost 1,060nm VCSELs, while Coherent is also planning to adopt the wavelength. TrendForce identifies high fiber-coupling efficiency, low dispersion, low relative intensity noise and performance at elevated temperatures as potential advantages of these devices. VCSEL NPO is also competing with Micro LED co-packaged optics (CPO), which integrates arrays of optical emitters and receivers with application-specific integrated circuits (ASICs) or GPUs to increase transmission density and reduce power consumption. Micro LED CPO could eventually approach theoretical limits for energy consumption per bit, but mass transfer, optical fiber compatibility and coupling efficiency remain challenges. Its supply chain is also less mature. By comparison, VCSEL NPO benefits from a more established supply chain, lower power requirements and greater maintenance flexibility, according to TrendForce. Both 850nm and 1,060nm implementations could support high-density links in AI data centers. Further development will focus on improving optical performance and increasing individual VCSEL data rates from 100G to 200G. Suppliers are also developing smaller Micro VCSEL devices measuring 100–200µm, which could enable denser multi-channel arrays and higher aggregate bandwidth. The post TrendForce Forecasts VCSEL Demand to Reach 650 Million Units by 2031 appeared first on EE Times Asia .