NTT, Japan's telecommunications giant, is facing challenges to its next-generation communication strategy known as the "IOWN" (Innovative Optical and Wireless Network). This strategy aims to enhance data transmission speeds and reduce power consumption by utilizing light instead of electrical signals. However, the rise of artificial intelligence (AI) data centers has prompted major U.S. semiconductor companies like Nvidia and Broadcom to take the lead in developing related technologies, undermining NTT's goal of establishing international standards.
The Nikkei reported on June 17 that NTT's IOWN strategy is at a turning point. NTT introduced the IOWN concept in 2019, envisioning a system that connects data centers with long-distance communication and facilitates short-distance data transfer between semiconductors within servers using light, thereby achieving high-capacity, low-latency, and low-power communication.
At the core of this strategy is photonic integration technology, which allows for data movement using light instead of electrical wiring while traditional electronic circuits handle computation and control. This approach aims to transmit vast amounts of data between AI semiconductors and servers, reducing power consumption and heat generation. NTT's subsidiary, NTT Innovative Devices, is developing photonic integration components for servers.
The growing interest in photonic integration is driven by the expansion of generative AI. In AI data centers, semiconductors like graphics processing units (GPUs) exchange massive amounts of data, leading to a surge in power consumption and heat generation, which traditional electrical wiring struggles to manage. Consequently, photonic technology is emerging as a key next-generation technology for AI infrastructure.
Masahito Domizawa, CTO of NTT Innovative Devices, stated in an interview with the Nikkei that "the direction is not wrong" regarding their research into optical technology. As the AI data center market expands, opportunities are opening up for NTT to sell its photonic integration components to data centers. NTT announced in 2025 that it would partner with Broadcom to adopt its components and aims to achieve sales in the photonic integration sector worth hundreds of billions of yen by the 2030s.
However, Broadcom is not merely a partner for NTT; it has begun to outpace NTT in the development of photonic integration technology. After announcing its entry into the photonic integration product market in 2021, Broadcom has already entered mass production for major U.S. tech clients. While collaborating with NTT, Broadcom has also established itself as a key player in the U.S.-led standardization efforts that exclude NTT.
Nvidia, leveraging its substantial earnings from AI semiconductors, is also securing its supply chain for optical components. According to the Nikkei, Nvidia has invested approximately 1 trillion yen in U.S. optical component companies such as Coherent and Lumentum Holdings since March. The company is rapidly expanding its influence over internal communication technologies in data centers.
The competition for standards is increasingly dominated by U.S. firms. In 2020, NTT established the IOWN Global Forum with Intel and Sony Group, engaging in standard discussions with over 170 companies and organizations. However, in March, six major U.S. tech companies announced the formation of a separate group to create standards for photonic integration, which includes Broadcom and Nvidia, as well as customer companies like OpenAI and Microsoft. NTT's name was notably absent from this group.
In the AI infrastructure market, a small number of big tech and semiconductor companies effectively set the standards. The choice of technology and components is determined by the system designs of these companies. Even if NTT possesses the technology, it risks losing its leadership in standards if it cannot enter the actual supply chain. Although Nvidia and Broadcom participate in the IOWN Global Forum, a U.S. corporate source told the Nikkei that "collaboration is broadly done for information gathering" and that there is no need to be bound by NTT's framework.
NTT acknowledges its limitations. Domizawa stated regarding consultations on photonic integration that "at this point, it is difficult to say that the IOWN Global Forum is yielding tangible results." While NTT has been ahead in research and development, it is lagging in the development of components and devices that actually go into AI data center servers, with U.S. semiconductor companies leading the way, according to the Nikkei.
In search of a breakthrough, NTT is working to establish new alliances. This month, it plans to create a $500 million fund with prominent venture investors in Silicon Valley to invest in promising startups and expand the photonic integration ecosystem. NTT is also collaborating with South Korea's SK Group and Taiwan's Chunghwa Telecom to build an economic zone in the photonic integration sector.
Simultaneously, NTT is exploring collaborations with competing U.S. semiconductor companies. Domizawa remarked, "It is difficult to realize photonic integration with just one company," adding that "sometimes we may shake hands with one hand while striking with the other." Akira Shimada, president of NTT, also mentioned that discussions with Nvidia are ongoing, indicating potential opportunities for collaboration.
Seven years after introducing the IOWN concept, NTT finds itself at a crossroads. It must decide whether to lead the standards for next-generation AI infrastructure using light-based communication technology or remain a supplier of components and technology to U.S. big tech and semiconductor firms. The speed at which NTT can connect its research achievements to actual business and supply chains will likely determine its future standing.
* This article has been translated by AI.
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