China Galaxy Securities: Structural Evolution Continues to Promote the Gradual Upward Development of the Optical Communications Industry Chain
The Zhitong Finance App learned that China Galaxy Securities released a research report saying that the 27th Optical Expo will be held in Shenzhen from September 9 to September 11. The technological evolution of the optical communication industry has entered a deep water zone, and the value focus of the industrial chain is accelerating the spread from traditional optical module packaging to lower-level core devices such as light sources, silicon optical chips, precision coupling, and high-density connections. The balance between supply and demand is tight, and the integration of speed and optoelectronics evolves at an accelerated pace, and the industry is showing a tight balance trend where the supply of high-end products is in short supply. The bank believes that the current focus of the industrial side is the quadruple resonance of high demand, limited supply, technology delivery, and domestic substitution.
The main views of China Galaxy Securities are as follows:
The core highlights of this year's Optical Expo: Architectural evolution continues to advance, and value spreads to upstream core devices
In a context where the digital communication market has replaced traditional telecom infrastructure as the core driving force of the industry, the marginal change in this exhibition is that the expansion of the scale of computing power clusters is forcing optical connectivity to leap from single-point link upgrades to system-level optical network collaboration. Compared to previous sessions that simply focused on linear iteration of optical module port rates, this year's exhibition focused deeply on the reconstruction of the underlying interconnect architecture. As 10,000 car-level AI clusters place strict requirements on cross-cabinet traffic scheduling, extremely low latency, and network energy efficiency, NPO (Near Package Optics) accelerates the push of the optical engine closer to the switching chip side to shorten the high-speed electrical connection distance, and the progress of engineering verification and customer introduction of disruptive architectures such as CPO (co-packaged optics) and OCS (all-optical switches) became the focus of the audience. This transformation indicates that the technological evolution of the optical communication industry has entered a deep water zone. The value focus of the industrial chain is accelerating the spread of traditional optical module packaging to lower-level core devices such as light sources, silicon optical chips, precision coupling, and high-density connections.
The balance between supply and demand is tight, and the fusion of speed and optoelectronics accelerates evolution
Currently, the optical communications industry is showing a tight balance where the supply of high-end products is in short supply. Currently, there have been three significant changes on the industrial side: first, the evolution of the rate has exceeded expectations. The 1.6T optical module has entered the first year of commercialization and large-scale shipments. Forward-looking solutions such as single-wave 400G and 3.2T/6.4T have been intensively unveiled, and the combined market size of 800G and 1.6T is expected to account for an important proportion of the overall market; second, the interconnection architecture is accelerating its evolution towards “optoelectronic fusion”. In order to solve the bottlenecks of power consumption and signal integrity at high speeds, NPO solutions are accelerating the optical engine closer to the switching chip side, and CPO technology is also gradually moving from laboratory verification to small-batch delivery; Underlying core The value of devices is prominent. With the advancement of 3.2T and NPO/CPO, the importance of upstream links such as active chips and precision coupling components such as DFB and EML is simultaneously increasing, and the self-sufficiency rate of domestic optical chips is breaking through at an accelerated pace.
The bank believes that the current focus of the industrial side is the quadruple resonance of high demand, limited supply, technology delivery, and domestic substitution
The 2026 capital expenditure guidelines of the four major North American cloud vendors continued to be upgraded to over US$740 billion, and the cloud business revenue and backlog all exceeded expectations. The closed loop of AI investment returns provides strong medium- to long-term demand certainty for the optical communication sector; on the supply side, the current industrial chain is facing serious structural shortages, and upstream core materials face a large supply and demand gap and production expansion cycle; on the product form side, as Nvidia and other giants announce that CPO has entered the mass production and delivery stage, optical communication architectures are accelerating the evolution of the industrial chain to NPO/CPO and other optoelectronic value co-packaging patterns. Focus on assembly from traditional modules Move to upstream links such as high-barrier light engines, silicon optical chips, and precision coupling devices. In terms of domestic substitution, domestic optical chip companies are entering a critical inflection point from verification to full release. Leading companies have already made batch shipments in EML chips, high-power laser chips, etc., and the domestic substitution process is expected to be further accelerated.
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Risk warning: the risk of artificial intelligence development falling short of expectations, the risk of application implementation falling short of expectations, etc., the risk of geopolitics affecting the industry, etc.