China Galaxy Securities has released a research report indicating that the domestic market for optical communication testing instruments is rapidly expanding. Currently, relatively few domestic manufacturers have the ability to industrialize these products. In recent years, local electronic testing instrument companies have aggressively pushed forward with proprietary product development, achieving continuous breakthroughs in their high-end strategic layouts. Leveraging technical expertise accumulated from real-time oscilloscope series, they are expected to successively launch core optical module testing instruments such as sampling oscilloscopes, bit error rate testers, and clock recovery units. This suggests a potential acceleration in the import substitution process for domestic testing instrument manufacturers, who stand to benefit significantly from the incremental market space created by the volume ramp-up of high-speed optical modules.
The core view of China Galaxy Securities is as follows: Testing instruments are a critical and necessary safeguard for optical module production lines. Optical modules, which are key components for converting between optical and electrical signals, are essential for connecting data center infrastructure with communication networks. They account for more than 50% of the cost in optical communication system equipment. As the key components for optical interconnection, the performance of optical modules directly determines the efficiency and stability of communication transmission. They must undergo rigorous testing during both research and production manufacturing processes. Typical optical module tests include transmitter end/TOSA (Transmitter Optical Subassembly), receiver end/ROSA (Receiver Optical Subassembly), and electrical performance tests. These require various electronic measurement instruments like sampling oscilloscopes, clock recovery units, bit error rate analyzers, wavelength meters, and source meters.
Testing instruments exhibit a clear inflation characteristic, and the market is rapidly expanding. The volume ramp-up of high-speed optical modules drives a simultaneous increase in both the quantity demanded and unit price of testing instruments, making them the most definitive link for inflation in optical module production testing. 1) Volume: The exponential growth of AI computing power demand is pushing the industry to build AI clusters through super-node networking to fill the gap. This increases the requirements for low latency, high bandwidth, and low loss in interconnect technology, with optical interconnection becoming the core foundation for scaling AI computing power. The global optical interconnection market was valued at $24.8 billion in 2025 and is forecast to grow to $111 billion by 2030, a compound annual growth rate of 31.6%. The increasing penetration of optical interconnection drives demand for optical modules, and major optical module manufacturers are accelerating capacity expansion, which in turn boosts procurement demand for testing instruments. 2) Price: As data center scale and computing power interconnection demands rise, optical interconnection technology is evolving towards lower power consumption, higher efficiency, higher density, and easier integration. Optical modules are accelerating their evolution towards higher speeds and integration. 800G/1.6T high-speed optical modules are entering volume production and shipment, while 3.2T product R&D is advancing. Concurrently, NPO/CPO technologies are becoming core solutions for the next generation of ultra-large-scale data center interconnection. Technological iteration in optical modules is driving rapid parameter upgrades for testing instruments, leading to a multiple-fold increase in their value. The firm estimates that the new market space for sampling oscilloscopes could total over 22 billion yuan from 2026 to 2028.
Overseas leaders have long monopolized the market, but optical communication testing presents new opportunities for localization. Europe and the Americas have a head start in the general-purpose electronic measurement instrument field and have long held a dominant position in the global market. In 2025, the top ten global electronic measurement instrument manufacturers held a combined 78.5% market share, with Chinese manufacturers accounting for only 3%. Looking at the optical communication testing instrument sub-market, in 2024, foreign brands like Keysight Technologies and Anritsu held 84% of China's optical communication testing instrument market, while domestic brands accounted for only 16%. Lianxun Instrument is the only domestic brand among the top five. Benefiting from the development of the optical communication industry, the optical module testing instrument market is rapidly expanding, with a clear supply-demand gap. Currently, domestic instrument manufacturers are intensifying their layout in core instruments like sampling oscilloscopes and are expected to fully capitalize on the new opportunities for localization.
Risk warnings include risks of macroeconomic performance falling short of expectations, slower-than-expected development of the optical communication industry, slower-than-expected technical R&D progress, slower-than-expected AI capital expenditure, slower-than-expected instrument R&D progress, and risks related to tariffs and export trade disputes.
Comments