According to the latest forecast from LightCounting in March, the global optical transceiver market is projected to maintain a 60% growth rate in 2026, with the total market size expected to reach nearly $60 billion by 2031. Automated equipment is essential for mass production of optical modules. With the introduction of new technologies like 3.2T, CPO, and silicon photonics, simultaneous increases in both volume and price are anticipated. A Huatai Securities research report states that AI development is driving accelerated iteration of optical transceivers. Currently, 1.6T optical modules are in the stage of commercial scaling, while next-generation products like 3.2T are in the early technical preparation phase, with verification expected to commence between 2027 and 2028. CITIC Securities points out that AI computing clusters are shifting from a focus on "pure computing power accumulation" to "competition in network efficiency," which will impose more comprehensive and stringent requirements on AI interconnect solutions. XPO, a new generation pluggable optical module solution jointly launched by Arista and over 60 partners, successfully breaks the physical limits of traditional OSFP with 8x the bandwidth, 4x the front panel density, native liquid cooling, and full hot-swap capabilities. It balances the performance advantages of CPO/NPO with the operational convenience of pluggability, providing a more practical upgrade path for AI clusters scaling up, out, and across tens of thousands of cards. CITIC Securities believes XPO will significantly expand the application scenarios for pluggable optical modules, enabling domestic optical module manufacturers to achieve smooth technological evolution and upgrades towards next-generation optical interconnects, initiating a new cycle of performance and valuation growth. Related XPO industry chain stocks listed in Hong Kong include: CIG (06166): The company has a comprehensive portfolio of optical transceiver products, including models such as Retimed 1.6T 2×DR4/DR8, 1.6T 2×FR4, OSFP DR8, and Gearbox 800G DR4, while also covering LPO/LRO related models, primarily based on silicon photonics technology. North America is one of its key markets. Through a JDM model, the company has deep integration with core customers and is advancing product validation with several new clients. Current demand for 800G and 1.6T optical modules is strong. The company is continuously expanding production, with capacity gradually increasing at its Jiashan and Malaysian plants, and is also promoting capacity construction at its Mexican production base. By 2026, 800G modules are expected to remain the primary shipment driver, while 1.6T modules are projected to see significant shipments starting in the first quarter, showing an upward trend. With subsequent technological iterations, capacity releases, and customer expansion, the company's performance is expected to improve continuously. FIT HON TENG (06088): AI is driving explosive growth, becoming the primary growth driver. In 2026, revenue from cloud network infrastructure reached $813 million, a year-on-year increase of 37.6%, mainly due to AI server upgrades driving a surge in shipments of copper-based components and new cable connectors. Concurrently, the company is expanding from data solutions to power solutions, with demand for general server connectivity products also rising. Notably, the company launched a 1.6T high-speed solution and a new 448G architecture at DesignCon 2026, receiving positive feedback from core customers. It is also set to demonstrate a 102.4T CPO (Co-Packaged Optics) external laser pluggable platform, validated by NTT, at OFC 2026. Its technology strategy closely follows the industry's shift towards 448Gbps/1.6T, building strong momentum for future growth. Wai Chi Technology (01729): The company's core customer base is tied to leading overseas cloud providers. Its optical interconnect products, particularly high-density fiber solutions like MPO, are currently a major revenue source, having stably entered the supply chain of a major North American customer. The company will continue to strengthen its supply chain advantages. In the specialized copper connection cable segment, it closely follows the overall solution advancements of its controlling shareholder, Luxshare Precision, participating in the introduction of new-generation interconnect solutions like CPC (Co-Packaged Copper) into scale-out architectures. It is well-positioned to benefit from the ongoing evolution of high-speed copper connections to higher generations.
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