Recently, the market research institution LightCounting for the optical communication industry released a report on the Chinese optical module market and related suppliers.

Counting said that focusing on North American cloud customers is crucial to the success of Xueteng Technology. Amazon, Google and Meta have invested billions of dollars in optical modules, demand from these customers accelerated between 2023 and 2025.

Demand from Chinese cloud service providers for optical components had been rapidly escalating between 2017 and 2020, but stalled by the end of 2020 and only started recovering in 2024. The speed and scale of China’s market shift has always been impressive, in the second half of 2024, as the government clarified its encouragement for investments in the AI field, spending by Chinese cloud service providers quickly rebounded. The success DeepSeek at the start of 2025 further propelled momentum for related projects.

The chart below shows LightCounting’s estimates for Ethernet optical module andPO/NPO spending by the top five cloud service providers in the US and China. According to the latest forecast, the gap between the US and China is quickly narrowing: 7x in 2022, down to 4x in 2024-2025, and expected to narrow further to 2.x by 2031. There’s a significant difference in Compound Annual Growth Rate (CAGR) in the period 2025-203: 18% for the US market, and a whopping 29% for the Chinese market.

However, due to the US export control on NVIDIA GPUs, the purchase amount of Ethernet optical modules by Chinese cloud service providers in 2025 was lower than expected. These restrictions were lifted in early 2026, so LightCounting predicts a strong growth in 2026. Currently, all Chinese cloud service providers have planned large-scale deployment of 800G optical modules and will introduce 1.6T/3.2T products from 2027 to 2029. CPO and NPO technologies will be important components of the 1.6T and 3.2T deployment solutions. For clarity, the relevant data of NPO has been included in the CPO forecast.

In contrast, the top five US cloud service providers, in addition to internal data center interconnections, also plan to deploy DWDM optical modules on a large scale from 2026 to 2031 for data center interconnections (DCI) and new cross-domain Scale-across networks. Currently, Chinese regulations do not allow cloud service providers to build their own metropolitan or long-distance optical networks, so cooperating with Chinese telecom operators is the only way for them to obtain DCI connections. LightCounting believes that this policy may change in the future.