Data Centers Are Making a Big Shift: From Copper to Optical Interconnects with Micro LED Technology

The data center industry is at an inflection point.

A wave of Chinese tech companies just announced they’re deploying Micro LED optical interconnects to replace traditional copper cables in AI data centers.

And the market noticed immediately.

On March 5th, seven of the top ten gainers on China’s A-share market belonged to the optoelectronic segment—all riding the hype of a research report titled “Micro LED CPO Opens a New Era for Data Center Interconnection.”

Here’s what’s happening, why it matters, and which companies are leading the charge.

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The Market Just Went Ballistic on Micro LED Stocks

• Eight companies reached the 20% daily price limit.
• Seven of the top ten market gainers were optoelectronic firms.
• Driven by research on “Micro LED CPO New Era”.
• Xinyichang surged over 15%; Leyard and Unilumin jumped over 12%.

The enthusiasm was real and immediate.

Eight companies hit the 20% daily price limit (the Chinese market’s equivalent of a circuit breaker for stocks moving too fast):

• Huacan Optoelectronics (Hua Can Guang Dian 华灿光电) (300323.SZ)
• IVO (Long Teng Guang Dian 龙腾光电) (688055.SH)
• Changer (Ju Can Guang Dian 聚灿光电) (300708.SZ)
• TG-Group (Tong Guang Xian Lan 通光线缆) (300265.SZ)
• Jufei Optoelectronics (Ju Fei Guang Dian 聚飞光电) (300303.SZ)
• Leyard (Li Man Guang Dian 雷曼光电) (300162.SZ)
• Absen (Ai Bi Sen 艾比森) (300389.SZ)
• Lianjian Optoelectronics (Lian Jian Guang Dian 联建光电) (300269.SZ)

Several others surged hard, too.

Xinyichang (Xin Yi Chang 新益昌) (688383.SH) rose over 15%.

Leyard (Li Ya De 利亚德) (300296.SZ) and Unilumin (Zhou Ming Ke Ji 洲明科技) (300232.SZ) both jumped more than 12%.

MTC (Zhao Chi Gu Fen 兆驰股份) (002429.SZ) hit the 10% daily limit.

This wasn’t a fluke. This was a coordinated signal that the market thinks something big is coming.

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Why AI Data Centers Need Better Connectivity (And Copper Just Isn’t Cutting It)

Let’s step back and understand what’s actually driving this.

Generative AI exploded. Training and running large language models requires massive amounts of data center infrastructure.

That infrastructure needs to move data between servers fast—really fast.

Traditionally, companies used copper cables (Tong 铜) for short-distance transmission inside data center racks (the metal structures that house stacked servers).

Problem: copper cables suck at this job.

The Copper Cable Problem

Here’s what’s broken about copper:

• Limited transmission density (you can only fit so much data through a copper cable)
• Poor energy efficiency (they consume a ton of power relative to the data they move)
• Heat generation (copper cables get hot, which creates cooling challenges)

According to a survey by TrendForce (Ji Bang Zi Xun 集邦咨询), the continuous increase in data center demand means copper solutions are hitting a wall.

Something better needs to replace them.

Why Micro LED CPO Is the Answer

Enter Micro LED CPO (Co-Packaged Optics).

Instead of moving data through copper wires, this technology uses light to transmit data through optical fibers.

The difference in efficiency is staggering.

Micro LED CPO solutions can reduce overall energy consumption to just 5% of copper cable solutions.

That’s a 95% reduction in power consumption.

For data centers running hundreds of thousands of servers 24/7, that’s not just better—it’s transformational for operating costs and environmental impact.

A representative from Leyard (Li Ya De 利亚德) told reporters that “Micro LED CPO is a key technical route for short-distance optical interconnects in AI data centers.”

The industry is calling this shift the “optical-in, copper-out” transition.

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Here’s the Timeline: When Will This Actually Happen?

Market enthusiasm is one thing. Reality is another.

We need to know: is this vaporware or is this actually coming?

According to Xie Zongchun (Xie Zong Chun 谢宗錞), an analyst at TrendForce, most companies are still in early stages.

Here’s where the industry stands:

• Most companies: Still in early design and development phases
• Leading players: Entering reliability testing and sampling phases
• Next 2-3 years: If progress stays on track, small-scale implementation in intra-rack optical communication (Tong Xin 通信) applications could happen

So we’re not talking about tomorrow. But we’re also not talking about pure speculation.

We’re in the “serious R&D to early commercialization” phase.

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Which Companies Are Actually Shipping Product?

This is where things get interesting.

Most companies are still in testing mode, but some are further along than others.

Huacan Optoelectronics: Already Delivering Samples

Huacan Optoelectronics (Hua Can Guang Dian 华灿光电), a subsidiary of display giant BOE (Jing Dong Fang A 京东方A) (000725.SZ), is one of the leaders.

They’ve already delivered the first batch of samples for their Micro LED optical interconnect business to customers.

Currently, they’re optimizing products in coordination with clients, and the partnership is moving smoothly.

They’re not sitting on prototypes. They’re actively iterating with real customers.

That’s a massive signal of progress.

Strategic Partnerships Being Formed

In January of this year, Huacan Optoelectronics signed a strategic agreement with display chip manufacturer NewVision (Xin Xiang Wei 新相微) (688593.SZ).

The goal: combine forces on Micro LED-based optical interconnect technology.

The partnership strategy is smart: “chip manufacturing + driver design.”

By combining expertise, they’re tackling R&D and production of optical modules designed for high bandwidth and high reliability in intelligent computing centers.

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Other Players Are Moving Too (But With Varying Levels of Progress)

Huacan isn’t alone. Here’s where other major companies stand:

Leyard: Technical Reserves, No Commercial Product Yet

Leyard (Li Ya De 利亚德) hasn’t launched a commercial product yet.

But they’ve got serious technical depth, including:

• Substrate-less Micro LED technology (a manufacturing advantage)
• LiFi capabilities (light-based wireless communication)

They’re positioning themselves for when the market is ready.

MTC: Full Vertical Integration Play

MTC (Zhao Chi Gu Fen 兆驰股份) stated in November 2025 that they’ve systematically built out Micro LED optical interconnect technology.

Their strategy is vertical integration: “Optical Chip – Optical Component – Optical Module.”

By controlling multiple layers of the value chain, they’re hedging against bottlenecks.

San’an and Chanchao: Entering the Optical Chip Space

San’an Optoelectronics (San An Guang Dian 三安光电) and Chanchao Optoelectronics (Qian Zhao Guang Dian 乾照光电) (300102.SZ) have also reportedly entered the Micro LED optical chip field.

The competition is heating up.

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Wait—Some Companies Just Admitted They Aren’t Actually In This Market

Here’s where the story gets messy.

Not every company that surged on March 5th is actually shipping Micro LED optical interconnects.

Jufei Optoelectronics (Ju Fei Guang Dian 聚飞光电) issued a statement clarifying their position.

They produce Micro LEDs. Their products are used for terminal displays.

But they have not yet been applied to the CPO field or generated revenue from it.

In other words: they’re riding the hype without the substance.

This is important context. Stock rallies don’t always mean product readiness.

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The Technical Hurdles Nobody’s Talking About

The narrative around Micro LED CPO sounds promising. But there are serious engineering challenges that could slow adoption.

Micro LED for Optical Communication Is Different From Display Micro LED

Here’s the kicker: Micro LEDs for optical communication aren’t the same as Micro LEDs for displays.

Display Micro LEDs are optimized for brightness and color.

Communications Micro LEDs need:

• CMOS backplanes (Hu Bu Shi Jin Shu Yang Hua Wu Ban Dao 互补式金属氧化物半导体) integrated into the chip
• Modified epitaxial structures to properly couple with fiber optics
• Precision alignment to minimize light loss

This requires different design and engineering approaches.

Good news: the “mass transfer” technologies from the display industry can be repurposed for miniaturizing optical receivers.

So the innovation isn’t starting from zero—but it’s not a simple copy-paste either.

Analyst Warning: Real Bottlenecks Remain

Xie Zongchun cautioned that several technical bottlenecks remain unsolved:

• Yield and reliability of light-emitting components (Yuan Jian 元件): Can you manufacture these at scale without defects?
• Wavelength matching: Matching light wavelengths with fiber optics to reduce signal loss is harder than it sounds
• Precision coupling: The high precision required to couple multiple fibers with Micro LED arrays is a manufacturing challenge

These aren’t theoretical problems. These are real engineering constraints that will determine which companies succeed and which ones fail.

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What This Means for Investors and the Industry

The shift from copper to optical interconnects in data centers is real.

The technology is promising and energy efficiency gains are massive.

But this isn’t a “buy now, get rich quick” situation.

Here’s what we actually know:

• Some companies (Huacan, primarily) are already shipping samples and iterating with customers
• Small-scale implementation could happen within 2-3 years if everything stays on track
• Not every company riding this rally actually has a product in the market
• Real technical challenges remain that will determine winners and losers
• The market is pricing in a lot of optimism—some of which may not pan out

This is an emerging technology with massive long-term potential. But the timeline matters, and not all companies in this space are equal.

For founders and investors tracking AI infrastructure, this is definitely one to watch—but with appropriate skepticism about which players actually have executable roadmaps.

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References

• Data Centers: ‘Optical-In, Copper-Out’? Multiple Listed Companies Deploy Micro LED Optical Interconnects – Cailian Press
• Analysis of Micro LED CPO Technology Trends – TrendForce
• Strategic Cooperation and R&D Progress – Huacan Optoelectronics