Coherent and the Optical Foundation for the AI Era

Copper wiring inside a data center rack is now the only physical connection Coherent's photonics haven't replaced.

Patrick Moorhead talks with Jim Anderson, CEO of Coherent, for the Six Five Summit's AI Infrastructure Spotlight series, on what's changed inside the company over his first two years leading it.

Anderson frames the shift to optical connectivity as a physics constraint: as data rates climb over any given distance, electrical copper connections eventually hit a limit only light can cross.

Telecom networks converted to optical decades ago, then data center connections between racks followed. The remaining holdout is the scale-up domain inside the rack itself, which Anderson expects to begin converting to optical as well.

He traces Coherent's differentiation to two things working together: the company holds the full breadth of photonics technology needed for transceivers, co-packaged optics, and near-package optics, and it manufactures nearly everything it sells at scale, having shipped billions of lasers to customers including data center operators.

Key Insights:

🔹 As data rates rise, copper can carry less data over distance. Anderson says that physical limit—not vendor preference—is driving optical connectivity deeper into the data center.

🔹 In-rack scale-up networking remains copper’s last major stronghold, but Anderson expects it to shift toward optics as AI clusters grow larger and more densely connected.

🔹 Coherent’s advantage combines a broad photonics portfolio. From transceivers to near-package and co-packaged optics, with the manufacturing scale required for high-volume deployment.

🔹 Coherent’s new Sherman, Texas facility is the world’s most advanced six-inch Indium Phosphide production site. NVIDIA CEO Jensen Huang attended the groundbreaking, reflecting the facility’s role in supplying lasers for NVIDIA’s co-packaged optics program.

🔹 Coherent is doubling its Indium Phosphide capacity this year and again next year. They plan on quadrupling output within 24 months to address what Anderson describes as an industry-wide materials bottleneck.

Anderson's own framing for the company: founded as a manufacturer more than 50 years ago, headquartered in Pennsylvania, now running over 50 manufacturing sites and more than 50,000 employees worldwide, with over 20 sites inside the U.S.

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Jim Anderson:
Data center customers are adopting new technologies at the fastest rate we've ever seen, certainly in my career. And so we're now bringing technologies, new products to market at a much faster rate.

Patrick Moorhead:

 Hey, everybody. Welcome to Six Five Summit 2026. The theme is AI Unleashed. Boy, have we come a long way in the last four years from AI doing essentially trip preparation and recipes to complete end-to-end agentic workflows and pretty much everything in between. My name is Patrick Moorhead, and in this session, we're going to talk about how AI continues to reshape the technology landscape, driving new demands on infrastructure. The amazing part about it is up until maybe a couple of years ago, I mean, the world is still fascinated with compute, don't get me wrong, but there's as much attention on things like silicon photonics, optical transceivers, and I can't imagine a better person to break all of this down who's been in this knee deep for two years, Jim Anderson, welcome back to the show. Welcome back to the Summit. I believe this is your third, maybe your fourth appearance.

Jim Anderson: 

Yeah, it's great to be back. Always happy to be back here at the Summit. And we are definitely knee deep in photonics, that's for sure. I think we're more than just knee deep.

Patrick Moorhead: No, it is amazing. I mean, you know, Jim, when you told me a couple of years ago that you were joining Coherent, I'll admit, I had to look up the company. and see what they did. And I was wondering, my gosh, Jim, what are you doing? Because you left a very famous compute company and a very famous FPGA company that you added a ton of growth and profitability to, but I trust in Jim and it seems like it's paying off for you.

Jim Anderson: 

Well, you know, Pat, you and I have actually known each other for a very long time, I think. And I think you probably know that actually, I started my career in data centers. I actually started as a microprocessor architect. This is many, many moons ago, started as microprocessor architect doing data center service. So I've always been around the data center. And, you know, before I joined Coherent, you know, when I was doing my own diligence on the company, What I loved about the company was how well positioned it was with respect to photonics. And having been around the data center for a long time, I could see that photonics was becoming so much more important to the data center. But what coherent is, is you can really think of coherent as a photonics company. And as you know, a photon is the basic particle of light. And so almost everything that we do is about generating a photon, amplifying, modulating, directing a photon or detecting it on the other end. And so our two big markets are data center and communications, which is about 80% of our revenue. and industrial applications, which is about 20% in that biggest market of ours, data center and communications, basically what we're doing is we're using light or photons to transmit data in the data center. And there's just, there's no more power efficient, higher bandwidth, faster way to communicate data than to use light. And that's kind of, that's what all that's coherent in a nutshell.

Patrick Moorhead: 

That's right. And whether it's inside the rack, between racks, between data centers, it all needs accelerated. And even though copper has a long life, copper is kind of like spinning hard drives, right? Just when you think it's gone, kind of a new technology will come in, but pretty much everybody If they can use photonics, they will make that happen. I think the only question is inside of the rack, but I've seen designs where we are very much going to see that beyond what's out there today with a switch.

Jim Anderson: 

Well, yeah, and to your point, look, physics is on our side, right? And it's pretty tough to fight physics, right? There's other things you can fight, but physics is difficult. And what physics says is, hey, if you take any length of distance, And as you increase the data rate, as you increase the speed that you're trying to transmit that data, if you're trying to do it over electrical, eventually electrical copper lines just run out of gas and physics forces you to use a faster form of transmission, which is light, right? And so that's the fastest, highest bandwidth form of data transmission. And that's why, you know, over time we've seen transmission using optical, using light, becoming a bigger and bigger part of the network, right? First time we built telecom networks way back when they were first built with electrical connections. Now they're all photonic optical connections. When we first built data centers, they were all electrical connections between the racks. Now they're all optical. And now, as you said, the last part, the only part of the network that is still using copper is within the scale up part of the network. But over the coming years, we'll now start to convert those electrical connections to optical as well. And that'll continue to expand the TAM of the industry for optics, but definitely for coherence. So that's why we're so excited about kind of where we're at and in this kind of transformation of the AI data center architecture to more and more deeper use of objects.

Patrick Moorhead: 

So Jim, you've made a lot of moves in the last two years when you walked in the door. Coherent was doing a lot of different things. Most of them really well. Some of them not as good as I think you would have wanted them. But also, in life, it comes down to priorities. And where are you going to double down on investments? Can you talk a little bit about how the shift kind of influenced your priorities sitting in the big seat?

Jim Anderson: 

Yeah, for sure. You know, I would think I would say our prioritize our priorities if you had to sum it up in just a couple words is we're going faster, we're growing very very quickly. We'll soon, versus when I started with the company, we will soon have doubled the company organically, right? And I think that's pretty good over a two-year period. But we're at an inflection in our growth rate where our growth is now accelerating given the tremendous demand that we see from our data center customers and the more capacity that we're bringing online. And so we're at this inflection point. My message to the leadership team, in fact, we had a meeting just a couple of months ago, where the last slide in my summary was, like, if you can't remember anything else, I had two words, go faster, right? We've got to go much faster. When I joined the company, this is over a couple of years ago, you know, what I loved about the company is we're incredibly innovative, right? We're an incredibly innovative photonics company. But when you look at where the market is headed, the growth that's ahead of us, the technology transitions that are accelerating, where we're adopting new technology faster and faster, we needed to move much faster as a company. And so I think we've really sped up the growth and the progress that the company's made over the past couple of years. And I see that only accelerating from here. And I think it was really You know, just a few different things that we really focused on. Number one is what you already mentioned, which is, hey, let's make sure we're concentrating our efforts. Let's focus all our efforts on the areas of greatest growth and greatest benefit for our customers. So there was a focusing effort, which had some portfolio adjustments we had to make. But the second was speeding up our product cycles, right? The data center customers are adopting new technologies at the fastest rate we've ever seen, certainly in my career. And so we've we're now bringing technologies, new products to market at a much faster rate. But the third thing, which is really important because of the demand is growing so fast is manufacturing capacity. We manufacture almost everything we sell to our customers. And so expanding our manufacturing capacity has been a key part of that as well. So I think those are probably the three key things. that we've been working on to grow faster the last couple of years, but grow even faster as we move forward.

Patrick Moorhead: 

Yeah, Jim. One of the hallmarks that I'm always looking for in a Jim Anderson led company is product acceleration. And regardless of what company that I've seen you lead, that was part of it. And that's hard to do for a lot of reasons. Culture is one. Hey, we did it this way for years and it's good. So hats off to you for doing that. I think we've already talked about as clusters become larger and larger, more bandwidth intensive, optical is in the same conversation as compute. And I would say, and I'm not, maybe I just hang out with the wrong people, but it's as big a conversation, quite frankly, because to scale these million node networks, you have to fundamentally think about, The models are bigger, so you need a planar memory service. It's just larger. And you can't fit it into a single rack. You can't fit it into a single fleet. You can't fit it into the same data center. And then as we get to inference, it becomes even more of a challenge. I'm curious now. So I guess we've established the category, Jim. Now what I want to know is how are you different, right? I see you get put up there with your competitors. The good news is there's not a whole lot of competitors who can do this well, but what separates you and Coherent to hit this challenge?

Jim Anderson: 

Yeah, I think it's really two things. And by the way, before I talk about how we're different, I just want to echo what you just said is, look, as we're, as we're ramping the compute capacity at this incredible rate, the processors themselves are becoming incredibly powerful. We're deploying workloads that are spanning tens of thousands, maybe millions of processors over time. The network that communicates between all the processors has to grow at a faster rate, right? And the only way to achieve those bandwidth data rates that you need to achieve to feed all those processors is by optical connections. And so that's why so much we're seeing as we move forward, so much more of the network will become optical. So to the point where we believe all connections within the data center will be optical over time.

Patrick Moorhead: Well, in fact, can't we make the argument too, a lot of people say training is the most rigorous, but latency inference is more latency aware and therefore needs quicker connections between notes.

Jim Anderson: 

Yeah. And the fastest connection you're going to get is a connection that's running at the speed of light, right? Which is a photonic connection. Yeah, I think for all those reasons, we're going to just see a greater and greater use of photonics and optics in data center architecture. And that's why to kind of your original point, that's why it's becoming so much more important to the fundamental definition and innovation around data center And then, so what are we or how are we different? I think it really comes down to two things. And this is kind of what I found out as I dug into the company before I joined. Number one is the technology portfolio that we have, but number two is the manufacturing capability. And those aren't two separate things, those are interrelated things. So on the first one, in the technology portfolio, If you look at all the photonics technology that you need to not just build a transceiver, but to do co-packaged optics, near package optics, any form of integrated optics, any form of pluggable transceivers, et cetera, the full suite of optical technology that you need, really the only company that has that full suite of optical related technologies is Coherent. There's no other company out there that's got the breadth and depth of the technology suite. And that's really important because as we're partnered very deeply with our big data center customers on innovating on future architectures, having that full toolbox of, hey, here's all the different tools we can bring to bear on your architectural innovation that you want to drive, that becomes really important. But the number two is you can't just bring the technology, you have to be able to manufacture it. And so we can manufacture those technologies and we can do it at scale. We've shipped billions of lasers for all sorts of applications, including data center. And so being able to not just design that technology, but to be able to manufacture that at scale is key for the customers. And so I think that's really the difference that you see versus really any other competitor out there is the breadth and then of technology and the depth of the manufacturing capability.

Patrick Moorhead: 

Yes, so Jim, there's a lot of questions that I get either from investors or customers talking about, you know, we want to balance supply chain. To your manufacturing point, can you dig into that a little bit? You know, the U.S. government has weighed in with a big I'm out of interest around these. It looks like a different month, right, is the industry du jour. And oh, by the way, congratulations. You are very much a hot topic as this video is coming out here.

Jim Anderson:

Look, I think manufacturing and manufacturing strategy is incredible. It's always been incredibly important to us. I mean, we were we were founded as a company over 50 years ago as a manufacturing company, right? Founded in Pennsylvania. That's still our headquarters today. We still do manufacturing in Pennsylvania. We're growing our manufacturing in Pennsylvania. Right. So we we are a manufacturing company at our heart. And so manufacturing is critical to us, but I think it's becoming even more important to our customers. And, you know, making sure that that manufacturing and that supply chain is resilient is critical to our customers as well. And there's a couple of different ways that you can look at resiliency. One is geographic diversity, making sure there's, you know, a diversity of where you're making things. But also number two is vertical integration, right? A lot of the products that we bring to market, we make all the critical components that are underneath that we make ourselves. In a lot of cases, we grow the material that goes into those components. And so, you know, we have over 50 manufacturing sites worldwide. So we're a global manufacturer. We have over 50,000 employees. Most of those employees are in manufacturing, but we're really proud also of our U.S. manufacturing footprint. We have over 20 manufacturing sites in the U.S. We were founded as a U.S. manufacturer. We're across so many different states. And a great example of this is we just had, I think it was last month, a groundbreaking at our Texas, our Sherman, Texas facility. And this facility is the world's most advanced production facility for Indian phosphide technology, six inch Indian phosphide. We're leading the world in the production of six inch Indian phosphide. And NVIDIA, Jensen Wong was there and NVIDIA was there to help us do the groundbreaking. They're a key customer for us. What we're doing there is a bunch of different products, but we're also going to be manufacturing our laser that goes into co-packaged optics that supports our NVIDIA partnerships. That's why NVIDIA was there. We got a grant from the CHIPS Act, et cetera. So we're really proud. That's just one example of where we're investing in U.S. manufacturing. There's other examples as well. But yeah, I think manufacturing strategy is key. We're certainly investing heavily in our capacity. Just take that Indian phosphide as an example. Indian phosphide is kind of a constraint across the industry right now. We're doubling our Indian phosphide output capacity this year, and we're going to double it again by the end of next year. That's a quadrupling of output capacity over a 24 month period, right? So we're certainly investing heavily in our US manufacturing and manufacturing capacity overall.

Patrick Moorhead: 

Yeah, Jim, I'm really glad you pointed out a couple of things here. It's funny, Indium Phosphate, I look, it seems to be the big discussion, like on, you know, hey, what's the next thing that could keep us from building out the entire AI infrastructure? And it's like something like this. And, you know, a lot of people take manufacturing for granted, they shouldn't. But this is a great proof point on the ability to not only balance out the supply chain for your customers on multiple continents, but also to go in the entire value chain of this. It's not like you just show up with one piece of the puzzle and I think you all did a good job on the whole CPO versus LPO, and where is coherent play? And it's like everywhere. LPO, CPO, pick your poison, coherent operates there. I got entertained watching that debate.

Jim Anderson: 

Yeah, I mean, actually, all those different LPO, CPO, NPO, transceiver, pluggable transceivers, at the end of the day, all those, those are just different form factors. Those are just different connection points, right? And regardless of the form factor, or where the optical connection, where it connects relative to the piece of silicon, whether it's out on the faceplate, or whether it goes all the way up to the piece of silicon in the case of CPO, or NPO in between, the fundamental optical technology underneath that's required to make that happen is in a lot of cases completely similar, right? And so what we're doing is we're, you know, we're leveraging, you know, decades of experience that we built up for pluggable transceivers and decades of manufacturing capacity and expertise. And that's now being leveraged for integrated optics, whether it's NPO or CPO, etc. At the end of the day, we're a photonics company, so it doesn't matter to us what form factor the customer wants to use. We'll help them use whatever form factor and we'll deliver the photonic optical content to make that happen.

Patrick Moorhead: Yeah, I appreciate you adding that, Jim. Gosh, it's been a great conversation and hopefully you and the company feel the weight of the world on your back to build out AI. It's a good place to be in, but it's a lot of responsibility, but it also has to be a little bit fun as well.

Jim Anderson: 

Oh, it's absolutely fun, right? We got a, we got a great team at Coherent. I love this team, incredibly innovative team and teams running very fast, expanding capacity at a rapid rate and doing that all for the customers that we love. So yeah, we're excited about the future. So thanks. Thanks for the time, Pat.

Patrick Moorhead: 

Yeah, appreciate joining us for this Infrastructure Summit. And to our viewers, don't forget to subscribe, follow us on the socials and check out all of our 6.5 Summit content, all of our networking content out there. And also you can check out my website, moreinsightstrategy.com for all the times we've talked about Coherent and their technologies. Take care.

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