Inside IQE and Tower's Optical Tech Behind AI Connectivity

AI may be fuelling a race for more powerful processors, but the networks connecting those systems are equally important.

For telco operators, the challenge mirrors what hyperscale cloud providers face inside large AI environments.

As AI clusters grow, the volume of traffic moving between servers, switches and storage platforms increases, placing greater pressure on network infrastructure.

Optical networking is attracting growing attention as one way to relieve that pressure.

By using light to transmit data, optical technologies can support higher bandwidth while helping to manage latency and energy consumption.

Against that backdrop, semiconductor materials specialist IQE and foundry provider Tower Semiconductor have signed a multi-year agreement focused on optical connectivity solutions for AI infrastructure.

At the heart of the partnership is indium phosphide (InP) technologies, which are used in optical communications applications and are deployed to support the connectivity demands created by AI.

Optical connectivity for growing AI traffic

Under the agreement, IQE will supply InP epiwafers to Tower for use across several silicon photonics platforms.

The collaboration is aimed at supporting optical technologies designed for demanding AI environments, where large volumes of data need to move quickly and efficiently across network infrastructure.

The companies say the work covers production technologies capable of supporting 200Gb/s per lane pluggable transceivers.

This agreement also includes development work on future 400Gb/s per lane modulators, components that encode information onto optical signals.

Beyond transceivers and modulators, the partnership extends to optical circuit switch applications.

As AI deployments expand, networking infrastructure is becoming a critical constraint. The optical components that carry data between systems are attracting investment across the communications and semiconductor ecosystem as operators seek ways to scale capacity without creating bottlenecks.

Strengthening silicon photonics capabilities

The agreement also strengthens IQE’s position in the market for AI and cloud infrastructure, where demand for advanced optical technologies continues to grow.

Jutta Meier, CEO of IQE, says: “I am pleased to move forward together with Tower, already the leader in silicon photonics.

“This agreement reinforces IQE’s position within Tier 1 global hyperscale cloud and AI infrastructure markets.

“With decades of InP epitaxy expertise and established high-volume manufacturing capability, IQE is primed to support next-generation optical connectivity applications as they scale from innovation to commercial deployment.”

Supporting future network scale

Tower believes incorporating InP-based components into its silicon photonics platforms will help deliver the performance levels needed for future AI connectivity.

Dr. Marco Racanelli, President of Tower Semiconductor, says: “We are pleased to partner with IQE as a key supplier for our next-generation photonic technologies that add InP high-performance components to our high-volume, mature, silicon photonics platform.

“The combination will enable products that can deliver both the performance and high volumes required to scale future AI infrastructure capacity.”

Alongside the supply agreement, IQE and Tower have also resolved an intellectual property dispute.

Under a separate arrangement, Tower will provide IQE with a worldwide royalty-free licence covering porous silicon patents that were the subject of litigation between the two companies.

The settlement removes a potential barrier as both businesses focus on optical connectivity opportunities linked to AI infrastructure.

As network traffic continues to grow across cloud, AI and communications environments, the ability to deliver scalable optical connectivity remains a key area of development for both the semiconductor and telco sectors.