AI technology drives surge in demand for high-speed optical modules

In recent years, with the rapid development of AI technology, optical module companies have shown a trend of rapid expansion, which has effectively driven the vigorous growth of the high-speed optical module market and injected a steady stream of vitality and opportunities into the optical module industry. As the core component of the optical communication system, the Fiber optic modules plays a key role in photoelectric conversion in data transmission. According to data from market research institutions, the global optical transceiver market has grown at an average annual rate of more than 10% in recent years, and has exceeded US$10 billion in 2022. This is mainly due to the important role of Nvidia, Google and Amazon's order demand.

Optical module global market size growth and growth rate from 2018 to 2026 (billion US dollars, %)

High-speed optical modules are important components used in optical communications, which can achieve high-speed data transmission and long-distance communication. With the rapid development of information technology, the demand for high-speed Fiber optic modules is increasing.

The rapid development of AI technology has provided a powerful impetus for big data processing and machine learning. These advanced applications require the processing and analysis of massive amounts of data, and the transmission and storage of data cannot be separated from the support of high-speed and stable Fiber optic modules. With the continuous advancement of AI technology, the demand for data transmission rate and bandwidth is also growing, which directly promotes the development of high-speed transceiver. In order to meet the rapid transmission needs of massive data of AI companies, the market demand for high-speed transceiver has increased dramatically. The continuous increase in the volume of high-speed transceiver has caused the performance of listed optical module companies in the first three quarters of 2024 to exceed expectations. Innolight’s revenue was 17.313 billion yuan, a year-on-year increase of 146.26%, and its net profit attributable to the parent company increased by 189.59%; Eoptolink’s revenue was 5.13 billion yuan, a year-on-year increase of 145.82%, and its net profit attributable to the parent company increased by 283.20%.HGGenuine and Accelink also increased to varying degrees.

In addition, the localization trend is also a highlight of the optical modules industry. The iteration of optical module technology is accelerating, the advantages of domestic manufacturers are highlighted, and the trend of localization is becoming more and more obvious. In the past, the market for core components such as high-end optical chips and electrical chips was mainly occupied by large foreign manufacturers. However, in recent years, domestic companies have continued to increase investment in R&D and have made significant breakthroughs in the field of Fiber optic modules. Among the top ten manufacturers in the global optical transceiver market in 2023, there are seven Chinese companies including Innolight、Huawei、Accelink、Hisense Broadband、Eoptolink、HGGenuine and Source Photonics.

In terms of localization rate, the localization rate of low-end products below 10Gb/s for optical modules has reached 90%, the localization rate of 10Gb/s products is 60%, and the localization rate of high-end products and components of 25Gb/s and above is 10%. Although the localization rate in the high-end field is relatively low, this provides huge room for growth for domestic companies. Many Optical module companies have increased their R&D investment and actively deployed high-speed Optical transceiver product lines to seize market opportunities. At present, my country's 400G transceiver have achieved independent production and are in a leading position in the world. It also has a certain shipment capacity for higher-speed 800G and 1.6T products. At the same time, domestic companies are also actively deploying core technology fields such as high-end optical chips to achieve domestic substitution.

From the perspective of application areas, data centers and 5G network construction are still important drivers of optical module growth. In terms of data centers, the continuous emergence of ultra-large-scale data centers, such as Amazon, Microsoft and other cloud service giants continue to expand data centers around the world, and there is a strong demand for high-speed transceiver. Among them, 100G optical modules have become the mainstream product for internal interconnection in data centers, and the market share of 400G Fiber optic modules is increasing year by year. It is expected that by 2025, 400G product will account for more than 30% of data center shipments.

In terms of 5G network construction, as the commercialization of 5G in various countries around the world accelerates, the large-scale laying of 5G base stations has driven the demand for fronthaul and midhaul optical transceiver. According to statistics, a 5G base station requires an average of 6-8 transceiver, which is a significant increase compared to a 4G base station. As a leading country in 5G construction, my country has built more than 3 million 5G base stations as of June 2024, which provides related companies with a vast domestic market space.

As the core component of modern optical communication systems, the performance of high-speed optical module directly affects the speed and quality of data transmission. Our company is committed to providing various high-performance optical transceiver products, including the main high-speed optical transceiver modulese on the market, 10G/25G/40G series, etc. At the same time, our company is about to launch the new 100Gbps QSFP28 optical module. They have industry-leading technical specifications and can meet your needs in different application scenarios.

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