Japan's telecommunications giant NTT is facing a critical juncture with its next-generation communication strategy, known as the 'IOWN' (Innovative Optical and Wireless Network). This initiative aims to enhance data transmission speeds and reduce power consumption by utilizing light instead of electrical signals. However, the emergence of power challenges in artificial intelligence (AI) data centers has prompted major U.S. semiconductor companies like Nvidia and Broadcom to take the lead in developing related technologies, jeopardizing NTT's strategy to establish international standards.
According to the Nihon Keizai Shimbun, NTT's IOWN strategy is at a turning point. The company first proposed the IOWN concept in 2019, envisioning a system that connects data centers over long distances and facilitates short-range communication between semiconductors within servers using light, thereby achieving high-capacity, low-latency, and low-power communication.
At the core of this initiative is 'photonic integration' technology. This technology allows for computation and control to be handled by traditional electronic circuits while using light for data transmission instead of electrical wiring. In simpler terms, it aims to transmit vast amounts of data between AI semiconductors and servers using light, thereby reducing power consumption and heat generation. NTT's subsidiary, NTT Innovative Devices, is developing photonic integration components for use within servers.
The growing interest in photonic integration is largely driven by the expansion of generative AI. In data centers used for AI training and inference, semiconductors such as graphics processing units (GPUs) exchange massive amounts of data. This process has led to a significant increase in power consumption and heat generation, highlighting the limitations of traditional electrical wiring. Consequently, photonic technology has emerged as a key next-generation technology for AI infrastructure.
Masahito Domizawa, CTO of NTT Innovative Devices, stated in an interview with Nikkei that the direction of their research into optical technology is correct. As the AI data center market grows, 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, aiming for sales in the photonic integration sector to reach 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 market in 2021, Broadcom has already entered mass production for major U.S. tech clients. While collaborating with NTT, it has also positioned itself as a key player in the U.S.-led standardization efforts from which NTT is absent.
Nvidia is also leveraging its substantial profits from AI semiconductors to secure a supply chain for optical components. According to Nikkei, Nvidia has invested a total of 1 trillion yen in U.S. optical component companies such as Coherent and Lumentum Holdings since March. The company, which dominates the AI semiconductor market, is rapidly expanding its influence over internal communication technologies in data centers.
The competition for standards is also shifting toward U.S. leadership. In 2020, NTT established the IOWN Global Forum with Intel and Sony Group, engaging in standard discussions with over 170 companies and organizations. However, six major U.S. tech companies announced in March that they would form a separate organization to create standards for photonic integration. This group includes not only Broadcom and Nvidia but also customers like OpenAI and Microsoft that purchase semiconductors and components. NTT's name was notably absent from this initiative.
In the AI infrastructure market, a handful 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 control over standards if it cannot integrate into the actual supply chain. Although Nvidia and Broadcom participate in the IOWN Global Forum, a U.S. corporate representative told Nikkei that "collaboration is broadly done for information gathering" and that there is no need to be bound by NTT's leadership framework.
NTT acknowledges its limitations. Domizawa stated regarding consultations on photonic integration that "it is difficult to say that the IOWN Global Forum has led to tangible results at this point." While NTT has been ahead in research and development, it is lagging in the actual development of components and devices for AI data center servers, with U.S. semiconductor companies taking the lead, according to Nikkei.
In search of a breakthrough, NTT is working to establish new alliances. This month, it plans to create a $500 million fund in collaboration with prominent venture investors in Silicon Valley to invest in promising startups and expand the photonic integration ecosystem. NTT is also pursuing the establishment of an economic zone in the photonic integration sector in partnership with South Korea's SK Group and Taiwan's Chunghwa Telecom.
At the same time, NTT is exploring collaborations with competing U.S. semiconductor companies. Domizawa remarked that "it is difficult for a single company to realize photonic integration" and noted 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 collaboration opportunities.
Seven years after proposing 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 technologies to U.S. big tech and semiconductor companies. 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.
Copyright ⓒ Aju Press All rights reserved.