In his lab in Sunnyvale, CA, ­David Welch, cofounder of telecom startup Infinera, holds up a rigid two-­centimeter-wide strip featuring four patterned, gold-colored rectangles. It's made of indium phosphide, a semiconductor prized for its optical properties. The chip's simple appearance belies its complex engineering and gives little hint that it could be the key to cheaply supplying the bandwidth demanded by a YouTube-addicted world.

The gadget is called a photonic integrated circuit, and it represents an important practical advance in optical data transmission. Since the early 1990s, such transmission has increasingly relied on a technique called wavelength division multiplexing (WDM). With WDM, data is encoded on as many as 80 laser beams, each having a different wavelength. Those beams are then combined for a trip down an optical fiber thinner than a human hair. At a node on the other end of the fiber, the beams are split into their constituent wavelengths, and the information is turned into the electrical signals that reach our computers.