China Securities: High-Speed Optical Module Demand Continues to Soar, Scale-up Poised to Unlock New Market Potential

Stock News12-23 07:42

China Securities Co., Ltd. released a research report stating that with the rapid iteration of GPUs and ASICs, computing performance continues to improve, driving substantial growth in data transmission demand. In AI data centers, more clients are opting for higher-bandwidth network hardware, as larger bandwidth reduces per-bit transmission costs, power consumption, and physical size. The rapid adoption of 800G optical modules reflects AI's urgent bandwidth needs. By 2026, demand for 800G modules is expected to maintain high growth, while 1.6T shipments will surge, and R&D for 3.2T modules has begun.

The report highlights strong performance in the optical module/component/chip sector, recommending: 1. Leading optical module manufacturers; 2. Companies poised for market and client breakthroughs; 3. Upstream optical chip/laser and component suppliers; 4. Firms entering the field via acquisitions.

**Sector Performance (2025 Q1–Q3):** - **Revenue Growth Leaders:** Optical modules/components (¥66.2B, +65% YoY), connectors (¥10B, +19% YoY), and ICT equipment (¥231.3B, +15% YoY), all buoyed by AI demand. - **Laggards:** Industrial internet (¥7.8B, -26% YoY), smart cards (¥3.1B, -21% YoY), and smart gateways (¥8.3B, -12% YoY). - **Net Profit Leaders:** Optical modules/components (¥16.94B, +123% YoY), connectors (¥820M, +62% YoY), and IDC (¥6.5B, +52% YoY, partly due to Runze Technology’s投资收益). - **Net Profit Decliners:** Military通信 (-¥160M, -194% YoY), smart cards (-¥2M, -102% YoY), and smart gateways (¥40M, -86% YoY).

**Q3 2025 Highlights:** - Optical modules/components revenue surged 62% YoY to ¥25.5B, while IDC net profit skyrocketed 231% YoY (boosted by Runze’s non-recurring gains). - Weakness persisted in industrial internet (-22% YoY) and military通信 (-80% YoY).

**Market Outlook:** The shift toward **Scale-up architectures** (vertical scaling via GPU/XPU density per node) is expected to drive optical module demand, as Scale-up bandwidth (averaging 10Tbps) vastly exceeds Scale-out (800Gbps). Broadcom’s CEO estimates the Scale-up hardware market could be 5–10x larger than Scale-out, encompassing switches, modules, copper cables, and PCBs.

With rising domain sizes and bandwidth, electrical signaling faces distance and thermal limitations, making **optical interconnects** the preferred solution. Giants like Google, Meta, and Huawei already deploy optical modules for Scale-up networks. For instance, NVIDIA’s Blackwell platform demands 7.2Tbps bandwidth (9x Scale-out), potentially requiring 36x 800G modules per GPU in fat-tree designs.

China Securities reiterates its bullish stance on optical modules/components/chips, citing untapped potential in Scale-up adoption and innovation.

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