Huawei, Alibaba, and Tencent Accelerate NPO Commercialization, Opening an Industrialization Window for Domestic Optical Interconnects
Claire Weston
Huawei, Alibaba, and Tencent are simultaneously pushing near-package optics (NPO) toward commercial deployment, with trial rollouts set for 2026 — opening a critical industrialization window for China's domestic optical interconnect supply chain.
What is NPO, and why is it surfacing now?
NPO — near-package optics — places the optical engine as close to the switch chip as possible, but keeps it in a separate package. This means → each component is independently manufactured, tested, and replaceable.
In plain terms = pluggable modules sit on the front panel far from the chip; CPO welds the optics and chip into one package; NPO moves the optics right next to the chip without welding them together — balancing performance and serviceability.
SemiAnalysis noted on August 10 that CPO is not yet fully mature. NPO offers a deployable middle path, and its transition window will likely push back CPO's mass-commercialization timeline further.
What three advantages does NPO hold over CPO?
Field-replaceable: NPO modules attach to the board via sockets and can be swapped on-site; most CPO designs do not allow independent replacement of the optical engine. This means → a single module failure does not force an entire board offline.
Fault isolation: failure impact stays at the individual NPO module level and does not cascade across the system.
Simpler manufacturing: optical-engine and chip packaging run on independent lines, lowering yield-management and supply-chain coordination complexity. Put simply = two production lines run separately — a problem on one does not stall the other.
Which technology paths do optical engines follow?
Two main paths are evolving in parallel: silicon photonics and VCSEL. Silicon photonics — transmitting signals with light on a chip — uses on-chip external modulation plus wavelength-division multiplexing (WDM) to expand single-fiber capacity, suiting higher bandwidth density and longer reach.
VCSEL — vertical-cavity surface-emitting laser, a tiny laser that can be switched on and off at high speed — uses direct modulation with parallel arrays, better suited to ultra-short-distance, high-parallelism interconnects.
This reflects a complementary rather than competitive relationship: each path fits a different distance and parallelism profile — Huawei and Tencent are pursuing both.
How far along are Huawei, Alibaba, and Tencent?
Huawei's Hi-ONE silicon-photonics version delivers 7.2 Tbps unidirectional bandwidth (36×200G). Compared with equivalent pluggable modules, it cuts laser count by roughly 88%, footprint by about 90%, and power consumption by around 65%. The next phase targets 400G/lane for 14.4 Tbps.
Alibaba completed its first functional 3.2T OIF NPO by late 2025 and plans Q3 2026 pilot deployment; a 6.4T product has entered Alpha sampling. Targets: optical-interconnect cost down over 30%, system reliability up roughly 3×.
Tencent is validating both silicon-photonics and VCSEL 3.2T designs. It plans to prioritize silicon-photonics NPO trial deployment in Q4 2026, with a next-generation roadmap pointing to a 448G electrical interface.
Where are the opportunities for China's domestic supply chain?
Northeast Securities notes that NPO preserves discrete supply-chain segments: optical engines, photonic integrated circuits (PICs), electronic integrated circuits (EICs), lasers, fiber-array units (FAUs), and high-density connectors. This means → Chinese firms' existing capabilities in pluggable-module design, silicon-photonics, precision coupling, passive components, and volume manufacturing transfer directly.
The firm highlights six segments: optical engines, high-density optical connectors, FAU and semiconductor optics, light sources and upstream materials, advanced packaging, and domestic compute and switch chips.
Connector density is climbing fast: SENKO's 16-fiber SN-MT connector offers roughly 2.7× the panel density of MPO-16. External laser sources (ELS) keep junction temperature at 50–55 °C, far below the 80–100 °C environment next to the chip.
What are the risks?
Northeast Securities flags four categories: AI-compute capex falling short of expectations, NPO product validation and scale-deployment timeline delays, slower-than-expected domestic compute and supernode buildout, and intensifying competition squeezing prices and gross margins.
In plain terms = NPO has clear technical merit, but whether it can be mass-produced on schedule — and whether customers will commit at scale — remains uncertain.
Whether the 2026 trial-deployment milestone is met on time will be the critical window for validating NPO's market opportunity.
Content is for reference only, not financial advice.