Soochow Securities released a research report stating that Lumentum (LITE.US) recently disclosed that, driven by accelerated deployment of 800G/1.6T solutions and CPO architectures by North American CSPs, its order visibility now extends to 2028. This reflects downstream customers' strong demand for securing core underlying light source supplies. The optical chip industry faces extremely high process barriers and lengthy, capital-intensive capacity expansion cycles, leading to top manufacturers' production ramp-up lagging behind the pace of demand growth. The supply tightness is unlikely to ease in the short term. There is currently a mismatch in the pace of industry capacity release, providing a critical time window for domestic manufacturers with supply flexibility to enter the global leading supply chain. The main points from Soochow Securities are as follows:
Global demand for optical chips is robust, with high supply chain optimism. The non-linear growth of global AI computing infrastructure is driving the optical chip industry chain into a long-term upward cycle, with the sector exhibiting strong beta characteristics. LITE recently disclosed that its order visibility extends to 2028, reflecting downstream customers' urgent need to secure core light source supplies. Previously, Lumentum projected that the compound annual growth rate for its Ultra-High Power (UHP) laser shipments would exceed 200% between 2025 and 2030 to meet market demand. Coherent (COHR.US) also plans to continue capacity expansion through 2026-2027, aiming to double its year-end capacity for two consecutive years. Nvidia has secured capacity from LITE and COHR through a $2 billion investment and billions in purchase commitments, further solidifying the strategic importance of optical chips in the AI computing chain.
A mismatch in capacity release rates creates an entry opportunity for domestic manufacturers. The optical chip industry's high process barriers and capital-intensive expansion cycles cause leading manufacturers' production ramp-up to lag behind demand growth, making short-term supply tightness difficult to alleviate. For example, while LITE has initiated expansion plans targeting an annualized capacity of $5 billion, substantial volume increases will only materialize by 2028, creating near-term delivery bottlenecks. This mismatch between quasi-linear capacity growth and exponential demand爆发 provides not only enhanced pricing power for existing capacity but also a crucial window for flexible domestic suppliers to integrate into the global top-tier supply chain.
Domestic laser companies are making continuous breakthroughs with promising prospects. Domestic manufacturers are accelerating technological positioning and overcoming bottlenecks in high-end optical chips. Some core products have reached sufficient maturity and are entering a phase of simultaneous commercial adoption by domestic and international customers. Companies to watch include Yongding Shares (600105.SH), among others. Source Photonics: Its 100G PAM4 EML chips have completed customer validation and are in the early stages of volume market expansion. CW 70mW lasers for 400G/800G silicon photonics solutions are being delivered in volume to multiple customers, with steady progress in yield improvement and capacity expansion for silicon photonics light source chips, supported by strong order backlogs. Other domestic players are also advancing their respective high-speed EML chips and high-power laser products, progressing through validation and initial delivery stages with various partners.
Risk factors include slower-than-expected AI infrastructure build-out, significant changes in optical interconnect technology, and systemic risks.
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