Recently, TSMC, the world's leading semiconductor manufacturer, announced a collaboration with the US startup Avicena. The two companies will jointly produce optical interconnect products based on Micro LED, aiming to replace traditional electrical connections with advanced optical communication technology and provide a low-cost, high-efficiency data transmission solution for the growing high communication demands of graphics processing units (GPUs).
This move has attracted significant attention in the industry. In addition to marking TSMC's entry into the Micro LED field, it could also serve as a strong endorsement of the application prospects of Micro LED in the emerging field of optical communication. It is also expected to encourage a wider range of industry chain participants to increase their investment in related technology research and development and commercialization, thereby accelerating the maturity of the entire ecosystem.
A deeper look reveals two key signals from TSMC's bet on Micro LED: First, it reflects the growing trend of Micro LED technology moving beyond traditional display applications and extending towards non-display applications such as optical communication. Second, it demonstrates the ambition of Taiwanese manufacturers to leverage their strengths and avoid weaknesses in the current competitive landscape, pursuing differentiated competition and achieving "leapfrog development."
Micro LED: Extending from display to non-display applications
Micro LED technology, with its superior characteristics such as high brightness, high contrast, low power consumption, and long lifespan, is highly anticipated in the display field. Over the years, with the active promotion of manufacturers and continuous technological innovation, Micro LED has gradually opened the door to the large-scale display market and is beginning to show greater potential in small and medium-sized fields such as automotive displays, wearable devices, and smartwatches. However, the application scenarios of Micro LED are actually far more extensive than this; it also has great potential in non-display fields such as optical communication, biomedicine, and industry, and has already gained widespread attention from the capital market and cross-industry manufacturers.
1. The Micro LED Optical Interconnect Technology Ecosystem is Taking Shape <br /> According to the "AI Server Report," demand for AI servers will continue to grow in 2025, with a high average selling price (ASP), potentially pushing the market value to nearly $298 billion. Meanwhile, as telecom operators and major CSPs continue to build data centers, Data Center Interconnect (DCI) technology is receiving increasing attention, with its market value projected to exceed $40 billion in 2025, representing a 14.3% annual increase.
The two sets of data clearly demonstrate that the rapid development of AI has placed unprecedented demands on computing power and data transmission capabilities. However, the overall performance of systems such as large GPU clusters is increasingly constrained by data communication speed and energy efficiency. The scale and complexity of AI models continue to grow, requiring the rapid movement and processing of massive amounts of data among numerous processing units (GPUs, TPUs, etc.). Traditional copper-based electrical interconnects face physical limitations in terms of bandwidth density, long-distance signal integrity, and power consumption, making it difficult to meet the stringent transmission rate requirements of AI accelerators. While fiber optic technology performs excellently in long-distance communication, there remains a technological gap in ultra-short-distance, high-density, low-power optical links within servers, between chips in packages, or between racks.
Micro LEDs, with their small size, potentially high modulation rates, and excellent integration with silicon-based CMOS processes, can be fabricated into high-density arrays for parallel optical communication, thus providing bandwidth density and potential energy efficiency advantages far exceeding those of copper wires for such short-distance applications. In other words, Micro LED optical interconnect technology offers a new path to overcome the bottlenecks of traditional electrical interconnects, and is expected to support the construction of more powerful and efficient AI hardware architectures that are difficult to achieve with current interconnect technologies.
Avicena, TSMC's partner in this collaboration, is dedicated to developing LightBundle™, an ultra-low-energy optical link technology. This highly parallel optical interconnect technology, based on GaN-based Micro LEDs, can be integrated onto various high-performance CMOS integrated circuits. Compared to traditional copper link technologies, LightBundle™ offers advantages such as low power consumption, low latency, wide coverage, and high bandwidth density. It is suitable for interconnects between high-performance computing systems (HPC), artificial intelligence (AI)/machine learning (ML), and discrete memory chips, as well as next-generation link applications in sensors, 5G wireless, and aerospace.
In 2022 and 2025, Avicena completed funding rounds of $25 million and $65 million respectively, with investors including Samsung, Micron, and SK Hynix. This demonstrates the recognition of Avicena's technological strength and the promising future of Micro LED optical interconnect technology by the capital market and industry giants. Another Micro LED optical interconnect technology developer, Hyperlume, also completed a $12.5 million seed round earlier this year, with investors including Intel Capital, further confirming the investment enthusiasm in this niche market.
In terms of industry collaboration, Avicena has already partnered with LumiLeds and ams OSRAM to increase the production volume of Micro LED arrays and promote the mass production of optical interconnect Micro LED technology. In this collaboration with TSMC, TSMC will be responsible for manufacturing the silicon photodetector array in the LightBundle™ system. It is expected that TSMC will leverage its mature CMOS process combined with Chiplet packaging technology to help Avicena expand production and accelerate product deployment.
These developments indicate that a specialized ecosystem surrounding Micro LED optical interconnect technology is gradually taking shape. Startups like Avicena and Hyperlume are playing a pioneering role in technological innovation and proof-of-concept; strategic investments from industry giants such as Samsung and Intel reflect market recognition and expectations for this technology; collaborations with established light source manufacturers like LumiLeds and ams OSRAM provide crucial technical support for the large-scale production and quality assurance of Micro LEDs; and the involvement of large wafer foundries like TSMC injects core manufacturing capabilities into the efficient and low-cost mass production of the product. In the future, with the collaborative efforts of innovators, investors, manufacturers, and foundries, the ecosystem of Micro LED optical interconnect technology is expected to mature rapidly.
2. LED Industry Chain Companies Actively Deploying Optical Communication Technology <br /> Faced with the application potential of Micro LED technology in non-display fields, companies in the LED industry chain are also beginning to focus on emerging markets such as optical communication. For example, Fucai Investment Holdings has clearly stated that it will comprehensively deploy the three major light source technologies required for artificial intelligence (AI) optical communication, including Micro LED, vertical-cavity surface-emitting laser (VCSEL), and indium phosphide (InP). Fucai is optimistic about the potential of Micro LED in short-distance optical transmission applications within 10 meters, and its Micro LED-related products have been jointly developed with customers and have entered the sampling stage.
Besides Fucai, other LED manufacturers such as Sanan Optoelectronics, MTC, and Ganzhao Optoelectronics are also actively deploying in the optical chip field, which may help promote the development of Micro LED technology in the field of optical communication in the future.
The above two aspects reflect, from different dimensions, that Micro LED is accelerating its expansion from display applications to non-display applications, and that related industries are showing high growth potential and are expected to initially achieve scale.
The latest report, "2025 Micro LED Display and Non-Display Application Market Analysis," also shows that the advantages of Micro LED in non-display applications stem partly from the material properties of inorganic light sources (InGaN and AlGaInP systems) and partly from the miniaturization benefits. The advantages of LED material properties include high energy density, high photoelectric conversion efficiency, and high reliability; the miniaturization benefits include cost control, array area management capabilities, and, when applied to end-user devices, the ability to miniaturize and deform the entire system.
In non-display applications, the miniaturization and arraying of Micro LEDs for information transmission, surface excitation, absorption, curing, and dissociation can create new possibilities for applications such as medicine, sensing, and optical communication. Currently, the industry is dedicated to exploring the potential of Micro LEDs in non-display applications to accelerate the overall commercialization of Micro LEDs.
Taiwanese manufacturers: Leveraging Micro LED to "leapfrog" competitors
In the emerging wave of Micro LED technology, Taiwanese manufacturers have entered the market quickly and aggressively, planning to leverage their first-mover advantage and technological accumulation in this field to achieve a "leapfrog development" in the existing display technology landscape.
According to industry rumors, this is not TSMC's first foray into the Micro LED field. Prior to this, there were already reports that TSMC would collaborate with Apple to develop AR devices, and Apple's future AR glasses are expected to use Micro LED. If this is true, TSMC's move reflects its recognition of the future prospects of Micro LED in display and optical communication applications.
In the display industry chain, Taiwanese panel giants AU Optronics and Innolux have chosen to focus on the research and industrialization of Micro LED, with relatively limited investment in the OLED field, and even absent from the large-size OLED track. This strategic choice stands in stark contrast to the active expansion of South Korean and Chinese manufacturers in the OLED field.
Among LED manufacturers, Fuchsun has been deeply involved in the Micro LED field and has achieved a number of technological breakthroughs. The company expects Micro LED to contribute to its revenue growth in 2025. Pure Micro LED company Neptunus Technology has also increased its investment in Micro LED R&D and industrialization, and has set a goal to advance Micro LED technology to the mass production stage this year.
Taiwanese manufacturers' strategic choices can be seen, to some extent, as a concentrated manifestation of their ambition to "leapfrog" the competition. However, this is not simply about avoiding competition in the OLED market, but rather a proactive strategic adjustment based on a deep understanding of their own strengths and industry development trends. The underlying logic transcends the purely market context, reflecting a more profound consideration:
The current landscape of the OLED market: In the field of OLED technology, major South Korean manufacturers such as Samsung Display and LG Display have established a significant leading position in technology, patents, and production capacity due to their first-mover advantage. Mainland Chinese panel manufacturers, supported by favorable government policies, are also rapidly expanding their OLED production capacity, leading to increasingly fierce market competition and greater pressure on product prices. According to the "AMOLED Market and Technology Trends Report," OLED has achieved an overwhelming 61% penetration rate in the mobile phone market by 2025, and its penetration rates in the two major IT product categories, monitors and notebooks, are also steadily growing from 1.7% and 4.3% respectively. Against this backdrop, Taiwanese manufacturers, as latecomers to the OLED field, face significant challenges in catching up and pressure to achieve profitability.
Taiwan's industrial advantages: Taiwan has strong capabilities in the global semiconductor manufacturing field (TSMC is a typical example), and has accumulated rich experience and technological foundation in precision engineering, automation equipment, and the existing LCD panel industry (such as AU Optronics and Innolux).
Technical characteristics of Micro LED: The mass transfer, bonding, and inspection processes of Micro LED chips share more commonalities with semiconductor manufacturing processes (such as pick-and-place, photolithography, and inspection), rather than the evaporation deposition process of traditional OLEDs or the potting process of LCD panels. This allows Taiwanese manufacturers to better leverage their existing advantages in the semiconductor and precision manufacturing fields.
Based on various factors, it can be inferred that Taiwanese manufacturers hope to leverage the synergy between the display and semiconductor industries in the next generation of display technology, where technical standards and market structures are not yet fully established, to gain the initiative, build high competitive barriers through differentiated competition, and reshape their position and influence in the global display and even technology industry landscape.
Conclusion
Micro LED technology is continuously evolving along the lines of display applications and is also rapidly expanding into non-display applications, with a clear dual-track path. Currently, cost optimization and performance improvement of Micro LED in traditional display fields are still ongoing, while breakthroughs in non-display fields such as optical communication have opened up entirely new growth opportunities.
The collaboration between TSMC and Avicena on Micro LED optical interconnect technology is a landmark event in this technological evolution trend. This move not only highlights the enormous potential of Micro LED beyond visual displays, but also reflects the strategic recognition of the technology's prospects by semiconductor industry leaders, indicating the key role that Micro LED may play in future data-intensive applications.
Currently, Micro LED technology still faces challenges such as high costs and complex manufacturing processes. Relying solely on a single application may make it difficult to achieve sufficient market scale to amortize costs in the short term. However, due to specific performance requirements, non-display applications such as optical interconnects or specific biosensors may have a higher tolerance for initial higher costs. Achievements in these niche non-display markets may bring early revenue and mass production experience, and could also, through technological advancements in chip efficiency and miniaturization, support the development of display applications. Therefore, by diversifying applications and simultaneously focusing on both display and non-display markets, the overall market penetration and cost optimization of Micro LED technology are expected to accelerate, creating a virtuous cycle.
