The players of the InP value chain are not driven by optoelectronic applications due to the high performance needed in this field and the small volume corresponding to the application in layer one core machines. This does not mean that this solution cannot be deployed; it simply means that we can- not expect a fast diffusion and price decrease that characterized microelectronics. A similar conclusion can be obtained by a simple cost model of this kind of inte- grated circuits. We do not want to correctly model the industrial cost, but only bring into evidence a few factor that heavily influences the industrial costs scaling with vol- umes. For this reason, beyond a simplification of the cost terms, we will neglect the fact that by increasing the volume, the yield generally increases due to a stabilization of the process. This is an effect that exists both for InP optoelectronics integrated circuits and for CMOS circuits. Let us assume that our integrated optoelectronic circuit is a PIC. Next Generation Networking: Enabling Technologies, Architectures, and Performances This is a DWDM circuit, which is to be stabilized in current by at least placing a heater inside the package. Moreover, the package has to have specific heat conduction charac- teristics and must accommodate high-speed transmission lines to deliver ten signals at 10 Gbit/s to the internal components. The industrial cost of a component exiting from the line of preliminary production can be divided in three main terms that scale quite differently increasing volumes. 1. Chip Industrial Cost. It depends on the particular product under consideration; we assume that it is around 40% the industrial cost of the PIC. In order to justify this rough assumption, let us remember that in a standard DFB laser, the industrial value of the active chip is smaller than 10% of the cost of the whole devices. If large volumes of PICs are absorbed by the market, the industrial cost decreases abruptly, almost linear with the volume. This is due to the fact that the greater