Future communication networks require the entire communication system to be all-optical to overcome the bandwidth constraints of electronics. All-optical devices play a vital role in supporting future networks, which demand a high speed of up to Tbps. An all-optical gray code converter operation was demonstrated numerically using a photonic crystal semiconductor optical amplifier (PhC-SOA) in a Mach–Zehnder interferometric (MZI) configuration at 1 Tbps for M-ary differential phase shift keying modulated binary and BCD inputs. The design achieved a very high extinction ratio of about 123.8 dB with a good quality factor value of about 45. The results show that PhC-SOA-based XOR and OR gates in the gray code converter design exhibits improved modulation features compared with traditional SOAs in our previous works.