GOLDEN SUN SECURITIES·2025-05-11 07:30Investment Rating - The report maintains a "Buy" rating for key companies in the optical module sector, including Zhongji Xuchuang, Xinyi Sheng, and Tianfu Communication [14]. Core Insights - The optical module sector has rebounded strongly since early May, with significant increases in stock prices for major companies, indicating a return of mainstream capital [25][20]. - The report emphasizes the need to adjust overly optimistic expectations regarding the rapid upgrade cycles from 400G to 800G and then to 1.6T, suggesting a more rational approach to market growth [26][27]. - The report identifies four key areas of focus: product iteration cycles, coexistence of CPO technology with pluggable solutions, undervaluation of passive components, and the industry's competitive landscape [25]. Summary by Sections 1. Product Iteration and Market Dynamics - The 800G optical module is expected to remain the mainstream product, with 1.6T expected to start scaling in 2026, following a more gradual adoption cycle [26][27]. - The market size for 800G is projected to reach approximately $750 million in 2024, with a CAGR of about 31% expected until 2027 [26]. - The report notes that the industry typically requires 2-3 years for technology iterations, which may not align with market expectations for rapid advancements [27]. 2. CPO Technology - CPO is positioned as one of several solutions rather than a complete replacement for existing technologies, with significant advantages in reducing power consumption and size, but still facing challenges in mass commercialization [31][32]. 3. Passive Components Growth - The passive components market is experiencing a resurgence, with significant growth expected in the AWG chip market, projected to grow from $1.13 billion in 2023 to $2.89 billion by 2032, reflecting a CAGR of 11.1% [32][9]. - Companies like Tongchuang Technology and Shijia Photon are rapidly increasing production capacity, indicating strong demand for high-density interconnect solutions [34]. 4. Industry Structure and Competitive Positioning - The report highlights a stable industry structure with high concentration among downstream CSPs and a few dominant upstream suppliers, which allows companies to carve out competitive advantages in niche markets [35][36]. - Major cloud service providers are expected to significantly increase capital expenditures, driving demand for optical modules [35]. - The report recommends focusing on leading companies in the optical module sector and related components, emphasizing their strong market positions and growth potential [12][36].