http://www.photonics.com/Article.aspx?AID=49950

Some quotes from the article :

“In optical systems, the laser itself cannot be shrunk; its size is dictated by physics,” said Martin Zirngibl, head of Physical Technologies Research at Bell Labs in Murray Hill, N.J.

“However, you can more tightly integrate everything that is needed to operate the laser.”

“You have to send light from one component to another; these interconnections take up a lot of real estate,”

“so one very important technology for shrinking optical components is integration of multiple functionalities onto a single chip. This eliminates the interconnections. The components still have the same size, but they are put very closely to each other.”

Of course, some believe that the Holy Grail lies in the realization of silicon photonics – a pursuit that Intel is furiously working on. Silicon photonics would allow unprecedented integration and would reduce cost, Kapon commented.

But Bell Labs’ Zirngibl points out one major deficiency: You cannot make a laser out of silicon.

“One advantage silicon photonics has is that there is a huge embedded manufacturing base. So scaling any solution to large-volume production is pretty easy. The dream would be to run photonic devices just like you do CMOS today, but we are still far away from that,” he said.

“One other advantage could be that you could easily integrate a lot of electronics around your optical devices. In current transmitters and receivers, this is not really necessary, but it could open up new applications.”