①How does the supply-demand mismatch in optical fibers affect prices? ②What opportunities are brought by the technological development of 1.6T optical modules?
The fiber optic sector of the Hong Kong stock market has performed remarkably well. As of the time of writing, $YOFC (06869.HK)$ Up nearly 10%, $FIT HON TENG (06088.HK)$ the stock surged nearly 8%, $TIME INTERCON (01729.HK)$ Up over 4%.
Since the beginning of this year, the popularity of optical fibers and cables has continued to rise. The core driving force behind this boom cycle stems from a significant supply-demand mismatch. On one hand, the accelerated construction of global AI computing infrastructure and the surge in data center interconnection demands have significantly driven up the consumption of optical fiber products. On the other hand, the expansion cycle for production capacity in the optical fiber industry is as long as 18-24 months, resulting in a noticeable lag in capacity release. This structural contradiction has created a 'rigid gap' within the industry, directly propelling both the volume and price of optical fiber products upward. Currently, mainstream optical fiber product orders have been scheduled for production until early 2027, fully verifying the high level of activity in the industry.
Meanwhile, with continuous iterations and upgrades of AI chips, data center optical module technology has achieved a leapfrog evolution from 400G and 800G to 1.6T. This technological upgrade not only enhances data transmission rates but also significantly reduces per-unit bandwidth costs, providing critical support for the large-scale deployment of AI computing infrastructure.
According to data released by LightCounting in January this year, the global Ethernet optical module market size is expected to reach $26.084 billion by 2026, with the combined penetration rate of 800G and 1.6T high-speed optical modules increasing by 53.67 percentage points compared to 2023.
Huatai Securities research report pointed out that thin-film lithium niobate materials are facing an important import opportunity. Estimates show that the market space for thin-film lithium niobate modulators driven solely by 3.2T optical modules could approach 3 billion yuan by 2031, with a compound annual growth rate as high as 271% from 2029 to 2031. The incremental market space brought about by technological iteration is enormous.
Structural pressures under high industry growth
Guosheng Securities noted that the optical communication industry is in a super-boom cycle driven by AI computing power, but companies also face numerous 'growing pains.' The vast market space in North America makes overseas expansion essential, while setting up factories abroad brings various challenges, with geopolitical risks exacerbating uncertainties. Technological generational shifts in optical communications have transitioned from 'linear evolution' to 'multi-point explosions,' leaving companies anxious about their current technological direction being overturned.
The brokerage firm also pointed out that with the imminent mass production of 1.6T optical modules, the supply of upstream core components is facing another round of tightening. Small and medium-sized enterprises are encountering dual difficulties due to a lack of customers and funding. Leading companies that establish advantages in global delivery capabilities, technology platform layouts, forward-looking supply chain locking, and financial strength are expected to continuously benefit from the long-term growth dividends brought by AI, reinforcing the pattern where the strong get stronger.
Editor/KOKO