CITIC SECURITIES has released a research report stating that demand for optical communication is experiencing non-linear growth, leading to an explosion in the market space for optical module equipment. Within the optical module manufacturing process, the die-bonding stage now requires higher precision, thereby increasing the value of the associated equipment. The barriers to entry for coupling equipment are high, and the importance of passive coupling is further increasing. In the testing phase, there is an urgent need for domestic alternatives to optical sampling oscilloscopes, while AOI inspection equipment demands high levels of customization. The report is optimistic about companies with significant exposure to the optical module equipment sector, those actively pursuing mergers and acquisitions to address weaknesses, and those with solid core businesses. It recommends the leading industrial X-ray inspection equipment manufacturer, which plans to acquire Philentec to enter the optical communication reliability testing segment. It also recommends a top domestic manufacturer of industrial cameras, a core upstream component for optical module equipment. Furthermore, it suggests monitoring companies involved in optical module die-bonding and AOI inspection businesses, and which have acquired Zhongnan Hongsi to strengthen their coupling capabilities. The main viewpoints from CITIC SECURITIES are as follows: Optical communication demand is growing non-linearly, driving an expansion in the optical module equipment market. In terms of volume usage, the shift from Scale-out to Scale-up architectures is causing non-linear growth in optical module consumption. Regarding packaging, the rapid iteration from PCB-level to substrate-level packaging is upgrading optical module structures. The firm believes that driven by multiple factors including capacity expansion, technological iteration, and increased automation, capital expenditure from leading manufacturers will surge in 2026 and 2027. Their estimates project the optical module equipment market space to reach RMB 34.53 billion in 2026E and RMB 36.34 billion in 2027E. Optical module manufacturing is primarily divided into four stages: die-bonding, coupling, assembly, and testing. From a value perspective, according to Frost & Sullivan (cited from Lieqi Intelligent's prospectus), the value share of die-bonding/coupling/burn-in testing/other (assembly, bonding) equipment is 18.9%/23.3%/31.4%/26.4% respectively. Among these, coupling and testing equipment hold higher value. Key trends to watch are efficiency improvements and the push for domestic production in the die-bonding, coupling, and testing segments. Die-Bonding: As optical module bandwidth upgrades from 800G to 1.6T and 3.2T, placement precision requirements increase concurrently, leading to higher value for die-bonding equipment. Coupling: The coupling stage has high barriers, as coupling accuracy directly impacts optical module performance. The importance of passive coupling is rising, further enhancing work efficiency in multi-channel coupling. Testing: There is a pressing need for domestic solutions for optical sampling oscilloscopes. AOI inspection complexity is increasing, leading to a fragmented market landscape with high customization demands. Risk factors include: Slowdown in downstream capital expenditure: If the growth rate of AI computing power demand falls short of expectations, leading cloud providers to reduce capital spending, the optical module market space could contract, significantly weakening the sector's growth potential. Changes in technology roadmap: The pace of technological iteration for optical modules is rapid. As modules advance to NPO and CPO architectures, packaging structures will shift from PCB-level to substrate-level, causing a substantial decline in the value of certain manufacturing segments. Overcapacity and intensified competition: If equipment becomes more homogeneous after optical module designs stabilize, and manufacturers aggressively expand capacity, it could lead to oversupply, price wars, and reduced industry profitability. Slower-than-expected progress in domestic production: Domestic capability remains low in some segments. If domestic manufacturers fail to achieve technological breakthroughs due to issues with talent, R&D investment, or supply of key components, it could slow down the overall industry progress.
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