- Nokia is boosting optical production capacity at its Pennsylvania plant by 10x as it waits for a second plant in California to come online
- The expansion comes as AI buildouts and telecom demand strain optical supply chains industrywide
- Nokia isn’t alone: competitors like Ciena are also scrambling to add capacity amid soaring backlogs
Nokia is pouring $30 million into the expansion of a U.S. manufacturing facility responsible for producing optical networking technology, aiming to keep up with growing demand driven by AI and telecom operators.
The company said the move will allow its Pennsylvania plant to deliver 10x its current production capacity, with new capacity coming online as soon as Q3 2026. It added that the plant is one of a handful that makes photonic chips for optical modules domestically.
The expansion is part of its previously announced plan to invest $500 million in manufacturing across facilities in Pennsylvania, New Jersey and Texas. Nokia isn’t footing the bill for this particular project alone, though. Its $30 million investment includes a $4 million assistance grant from the state of Pennsylvania, as well as a $10 million tax credit under the CHIPS Act.
The move comes as demand for optical products continues to rise, driven not just by telecom network expansions but also AI buildouts.
Dell’Oro Group recently raised its growth forecast for the optical transport equipment market from an original 10% to 16% for 2026 based on rising demand. At the time, Dell’Oro VP Jimmy Yu noted supply was proving to be a gating factor for faster growth.
“We estimate that the Optical Transport market grew 20 percent year-over-year in the first quarter of this year, driven by demand for data center interconnect. However, many key optical suppliers are noting a growing backlog of orders as lead times continue to stretch out,” Yu said. “We think supply may be the biggest factor keeping the Optical Transport market’s growth rate from being even higher this year due to all the AI data center buildouts.”
Nokia competes with Ciena, Huawei and ZTE in the market, with those four companies holding over 80% market share, according to Dell’Oro Group.
Indeed, Nokia noted in its calendar Q1 2026 earnings report that Optical Networks revenue grew 20%. It expects growth to hold strong throughout the year, forecasting 18-20% combined growth for its Optical Networks and IP Networks divisions.
At the time, CEO Justin Hotard said Nokia also expects its second U.S. optical manufacturing facility, located in San Jose, California, to begin ramping production later this year.
The Finnish giant isn’t the only one feeling the heat. Ciena previously admitted it was fighting to keep up with demand. And in Ciena’s fiscal Q2 2026, its order backlog climbed to $7.7 billion. Ciena CFO Marc Graff said during its earnings call it is working to secure both more supply and manufacturing capacity to serve customers.