2022-09-18 17:19 See you on Tuesday Follow and post

01 Optical Communication and Its Upstream Industry

Optical communication, as the name suggests, is a communication method that uses light waves as information carriers. Compared to traditional electrical signal transmission, optical communication has a larger transmission bandwidth and capacity, lower transmission loss, stronger resistance to electromagnetic interference, and higher transmission quality. It has become one of the mainstream communication methods and is widely used in fields such as data centers, telecommunications networks, fiber optic broadband, automotive electronics, and industrial manufacturing.

The upstream of optical communication includes components such as optical/electrical chips, optical devices, optical modules, and fiber optic cables. The midstream mainly consists of equipment integration brands such as switches and routers. The downstream includes users such as data centers and telecommunications networks.

Among them, in terms of optical/electrical chips, China has achieved domestic substitution in the low-speed (2.5G/10G) field, while the high-speed (25G and above) field is still dominated by overseas.

Optical devices are responsible for the generation, modulation, detection, reception, connection, conduction, transmission, wavelength division multiplexing and demultiplexing, optical path conversion, signal amplification, optoelectronic conversion, and other functions of optical signals. They are the core components of optical communication. Due to the transmission rate of optical signals in optical fibers approaching the speed of light, reaching 2.0 × 108m/s, there are bottlenecks in the processing and transmission rates of optical devices and equipment. Therefore, optical devices and equipment largely determine the information transmission speed, quality, performance level, and reliability of optical communication networks. According to whether energy drive is required, optical devices are divided into active and passive types. Active optical devices require energy drive, such as lasers, optical transceivers, optical detectors, optical amplifiers, optical modulators, etc; On the contrary, it refers to passive optical components such as fiber optic connectors, optical isolators, optical attenuators, etc.

The product formed by encapsulating optical devices with optical and electrical chips with different functions is called an optical module, which is used to achieve the mutual conversion between optical signals and electrical signals. At the transmitting end, the driving chip processes the raw electrical signal and then emits the optical signal through a semiconductor laser or light-emitting diode. At the receiving end, when the optical signal enters, it is converted into an electrical signal by a photodetector diode, and then output as an electrical signal through a preamplifier.

800G and 1.6T optical modules will become the mainstream products in data centers. The application of AI has spurred the demand for higher transmission rates and larger bandwidth in networks. According to Light Counting, in the second quarter of 2025, global sales of optical modules will increase by 10% month on month, mainly due to the contribution of 800G optical modules. As cloud computing giants such as Amazon and Meta transition to higher speed optical modules, sales of 400G optical modules will gradually decline.

02 Strong market demand

With the rapid development of new generation information technologies such as cloud computing, big data, and artificial intelligence, global data traffic is experiencing explosive growth, and data center construction has become the trend. According to Guosen Securities, global data center capital expenditures have reached 260 billion US dollars in 2023. Optical communication is an important infrastructure for data centers, and its market demand will also increase accordingly. On the other hand, with the upgrading and iteration of technologies such as silicon photonics, CPO, LPO, etc., high bandwidth density and low-power transmission methods have become possible, giving rise to the need for downstream market upgrading and expansion. According to predictions from Light Counting, China Commerce Industry Research Institute, Forward Industry Research Institute, CCID Consulting, etc., the global market size of the optical communication industry is expected to reach $50 billion by 2025, with China's market exceeding $170 billion. From a market perspective, by 2025, China's optical module market will approach 70 billion yuan, the optical device market will reach 68 billion yuan, and the optical chip market will increase to 15.9 billion yuan.

03 Diversified competition with unique characteristics

In terms of enterprise competition, in the field of optical chips, low-speed optical chips have basically achieved domestic substitution, while the degree of localization of high-speed optical chips is relatively low. The market is composed of Lumentum, Coherent, AOI, Sumitomo MACOM、 Overseas giants such as Broadcom and Mitsubishi dominate, while domestic manufacturers mainly include Powerjet Technology, Shijia Photon, Guangxun Technology, Yunling Optoelectronics, Minxin Co., Ltd., Zhongke Optoelectronics, Huawei HiSilicon, Sanan Optoelectronics, etc.

In the field of optical devices, domestic manufacturers have strong global competitiveness in the field of passive devices; In the field of active devices, domestic substitution has been basically achieved for mid to low end products, while there is still a significant gap between high-end products and foreign leading levels. The main overseas manufacturers include Lumentum, Coherent, II-VI, Broadcom, etc. The main domestic manufacturers include Guangxun Technology, Huagong Technology, Zhongji Xuchuang, Xinyisheng, Hengdongguang, etc.

In the field of optical modules, domestic manufacturers have occupied an important position in the global market with their strong packaging manufacturing capabilities and fast response speed. Major domestic manufacturers include Zhongji Xuchuang, Huagong Technology, Xinyisheng, Tianfu Communication, and Guangxu Technology, while major overseas manufacturers include Intel Cisco、 Broadcom Coherent、 NVIDIA and others.

In the field of fiber optic cables, China is the main producer and consumer of fiber optic cables worldwide, with fierce market competition and significant head effects. Domestic manufacturers such as Changfei Fiber Optic, Hengtong Optoelectronics, FiberHome Communications, and Zhongtian Technology rank among the top, while overseas manufacturers such as Corning, Prysmian, Koga Electric, and Sumitomo Electric occupy important positions in the European and American markets.

In the field of optical communication equipment, the market is highly concentrated, and top manufacturers dominate the market with deep technological accumulation, extensive market channels, and sustained high research and development investment. From a global market perspective, giants such as Huawei, Ciena, Cisco, and Nokia dominate, while the domestic market is dominated by manufacturers such as Huawei, ZTE, and FiberHome.