Ayar to scale co-packaged optics with TSMC and AIchip

09 Sep 2025

Partnership 'unlocks' high-bandwidth, low-latency connectivity for extended memory and computing resources.

Ayar's optical chiplet

Ayar Labs, the San Jose, California, company specializing in co-packaged optics (CPO) enabling faster and more energy-efficient chip interconnects, is now working to scale up the technology with the Taiwanese ASIC packaging company AIchip.

A new strategic partnership between the two firms also involves the chipmaking foundry giant TSMC, with the aim of meeting rapidly escalating demands from data center hyperscalers to fulfil the enormous computational requirements of AI.

“This new partnership brings together Ayar Labs’ industry-leading CPO technology, Alchip’s advanced packaging expertise, and TSMC’s advanced packaging and process technologies to build a robust ecosystem to accelerate the production and adoption of optical engines,” announced Ayar in a joint release.

The approach will feature TSMC’s “COUPE” (Compact Universal Photonic Engine) process, which stacks 220 million transistors on top of 1000 photonic integrated circuits (PICs).

Power efficiency
Combined with silicon photonics, CPO is seen by its proponents as a major upgrade on traditional copper-based interconnects that can no longer keep pace with AI computational workloads.

The new partnership aims to overcome legacy performance bottlenecks to enable multi-rack scale-up system architectures by implementing Ayar Labs’ optical interfaces in Alchip’s high-performance ASICs.

“This unlocks high-bandwidth, low-latency connectivity for extended memory and computing resources across larger systems and data centers, dramatically improving interactivity while reducing power consumption,” claim the two firms, with Ayar’s CEO Mark Wade adding:

“Ayar Labs’ co-packaged optics technology unlocks the next era of AI infrastructure by removing the limitations of copper interconnects.

“By combining our optical I/O innovation with Alchip’s deep expertise in advanced packaging, we’re building an ecosystem to accelerate the transition to power-efficient, high-performance AI systems.”/p>

Big hitters
Founded in 2003 and headquartered in Taipei, AIchip is a significant player in the local semiconductor ecosystem, with annual sales of more than NTD$50 billion (US$1.65 billion) in 2024.

Its CEO Johnny Shen said: “We’re working with Ayar Labs to bring leading-edge optical I/O technology to demanding high-performance next-gen designs, helping hyperscalers achieve new levels of data throughput and energy efficiency.

“Current and future AI workloads require innovative and often collaborative advanced packaging design expertise and production-ready solutions. Alchip has proven to the market that it has the entire skill set to serve [top-tier] hyperscale customers.”

News of the deal comes a few months after Ayar increased its equity funding thus far to $370 million, with support from the likes of Nvidia, AMD, and Intel. Early backers also included defense contractor Lockheed Martin and GlobalFoundries, with the latter currently establishing a major silicon photonics facility in upstate New York.

And in March this year Nvidia announced details of how it is adopting silicon photonics and CPO technology to deliver massive scaling in AI architecture while reducing power consumption.