SHIJIA TECH(SZ:002796) NORTHEAST SECURITIES·2026-01-05 01:13Investment Rating - The report maintains an "Outperform" rating for the communication industry, consistent with the previous rating [5]. Core Insights - The report highlights that CPO (Co-Packaged Optics) is expected to have significant applications in scale-up networks, addressing transmission bottlenecks associated with copper cables and meeting bandwidth density requirements. It is noted that CPO offers a more favorable total cost of ownership (TCO) and performance/TCO ratio compared to scale-out networks [2][3]. - The report discusses the recent investment by Seagate Technology in Guangcai Xincheng, acquiring a 20% stake for 275 million yuan, indicating confidence in the optical communication sector's market prospects [2][29]. - China Telecom's AI subsidiary successfully completed its first round of financing, attracting major strategic investors, which underscores the recognition of its technological capabilities and growth potential [3][32]. Summary by Sections Market Review - During the week of December 29, 2025, to January 4, 2026, the Shenwan Communication Index fell by 1.41%, while the Shanghai Composite Index rose by 0.13%. The communication sector ranked 23rd among 31 Shenwan primary industries [13]. - Among the communication sub-sectors, communication application value-added services saw the highest increase of 1.41%, while other communication equipment and network devices experienced declines of 0.10% and 2.12%, respectively [16][19]. Industry Dynamics - The SemiAnalysis report elaborates on CPO technology, analyzing its advantages and challenges from multiple perspectives, including TCO, technical principles, marketization, vendor strategies, and supply chain dynamics [23]. - It is emphasized that CPO will not rapidly penetrate scale-out networks in large data centers due to limited cost and power savings. However, it is positioned as the best application scenario for scale-up networks, where it can significantly enhance performance and scalability [24][26]. - Seagate Technology's investment in Guangcai Xincheng is seen as a strategic move to leverage the company's existing capabilities and market position in the optical communication field [29][30]. - The successful financing round for China Telecom's AI subsidiary reflects strong confidence from national and industrial capital in its technological advancements and future growth [32][33].