According to a research report, silicon photonics solutions offer significant advantages and are becoming the mainstream choice for high-speed optical modules. The production of optical chips encompasses four major stages: substrate manufacturing, epitaxy, wafer fabrication, and testing/packaging. Currently, optical chips are in a state of short supply. Based on a comprehensive analysis of supply and demand dynamics, the global imbalance between supply and demand for high-speed optical chips is expected to persist until 2027.
Domestic optical chip manufacturers have achieved comprehensive breakthroughs in core areas such as high-speed EML and high-power CW light sources. Customer validation and batch deliveries are accelerating simultaneously, indicating that import substitution has entered a phase of large-scale implementation. The main viewpoints of the analysis are as follows:
The core function of an optical module is to perform photoelectric conversion. The efficient operation of an optical module relies on the synergistic cooperation of optical chips and electrical chips, with optical chips undertaking the core task of conversion. Laser chips are the core components of optical modules, accounting for a significant portion of costs. Their selection and modulation method directly determine the application scenario of the optical module. The market currently features three mainstream technological paths: 1) VCSEL lasers are suited for short-distance transmission; 2) EML is designed for medium-to-long-range high-speed transmission; 3) Silicon photonics solutions utilize CW light sources and are compatible with CPO technology. Leveraging advantages in low cost and low power consumption, silicon photonics is predicted to achieve a penetration rate exceeding 50% by 2026, establishing itself as the mainstream choice for high-speed optical modules.
The manufacturing process for optical chips is complex, and the industry barriers are high. From a technical perspective, epitaxy and grating processes require nanometer-level precision in equipment and parameter control, with a narrow process window, making it difficult to improve chip yields. On the capacity side, the delivery and commissioning cycles for core equipment like MOCVD and EBL can extend to one year. High-end InP substrates are monopolized by overseas manufacturers, and their expansion cycles are long. Constraints from both equipment and materials make significant industry-wide capacity expansion extremely challenging. From an industry chain standpoint, the customer validation process for optical chips is stringent and lengthy, taking approximately two years from internal testing to module manufacturer validation, end-customer certification, and finally mass production. This results in strong customer loyalty, making it very difficult for new entrants to penetrate the supply chain.
The current undersupply of optical chips presents a strategic window of opportunity for domestic manufacturers. On the demand side, driven by the explosion in AI inference needs, the expansion of data center networking scale, and cloud providers developing their own ASICs, the optical module market is forecast to reach $23.8 billion by 2025. Furthermore, ongoing advancements in NPO/CPO/OIO technologies continue to open new growth avenues. It is projected that the global laser market size could exceed $10 billion by 2030. On the supply side, high-end production capacity is dominated by overseas giants, and the supply-demand gap for InP optical chips continues to widen. CW light sources, benefiting from relatively lower technical barriers and shorter expansion cycles, have become a pioneering direction for domestic manufacturers to rapidly enter the mainstream downstream supply chain. Based on the overall supply-demand assessment, the global imbalance for high-speed optical chips is expected to last until 2027.
Overseas leaders are accelerating capacity expansion and advancing emerging technologies like CPO. Domestically, the commercialization of high-speed optical chips by Chinese companies is progressing smoothly. Overseas, major players are pushing forward with expansion plans and implementing technologies like 400G EML and CPO, achieving small-volume shipments. Domestically, Yuanjie Semiconductor Technology Co.,Ltd. has its 70mW/100mW CW light sources being applied in volume within silicon photonics modules. Suzhou Everbright Photonics Co.,Ltd. is scheduled for mass production of its 100G EML in the second quarter of 2025. Henan Shijia Photons Technology Co.,Ltd. has built a product matrix for 75-1000mW CW light sources. Other domestic suppliers have also achieved volume production and shipment of key components. Domestic optical chip manufacturers have made comprehensive breakthroughs in core areas like high-speed EML and high-power CW light sources. The simultaneous acceleration of customer validation and batch deliveries signifies that import substitution is now entering a phase of large-scale, practical implementation.
The report highlights risks including potential shortfalls in technology R&D and yield improvement, challenges related to supply chain and capacity release, fluctuations in downstream demand, and intensifying market competition.
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