Summary of the Conference Call for Shijia Photonics Company Overview - Shijia Photonics initially entered the telecom market with PLC splitter chips and devices, later expanding into data center AWG chips and devices, and further into active chip fields, creating a product portfolio of passive and active chips. In 2024, optical chips and devices contributed approximately 56% of the company's revenue, serving as the main profit source [2][6]. Key Industry Insights - The AWG products are used for wavelength division multiplexing in optical modules, primarily applied in FR optical modules for distances over two kilometers, achieving cost savings on fiber and connectors. Despite a revenue decline in 2023 due to Nvidia's network design impact, AWG demand is expected to recover significantly in 2024 due to network architecture decoupling and demand recovery from clients like Meta [2][14]. - The AWG market is projected to experience several-fold growth from 2025 to 2026, driven by the sustained demand for Meta's 800G FR optical modules. Shijia Photonics holds a significant market share as the largest AWG wafer manufacturer, benefiting from scale effects and cost advantages [2][14]. - The MPO connector market is currently in a high-growth phase, with a market size estimated between 10 billion to 20 billion RMB, driven by the increasing demand for multi-channel transmission [4][22]. Financial Performance - In 2024, the revenue structure of Shijia Photonics shows that optical chips and devices account for about 56% of total revenue, with other products contributing approximately 44%. The breakdown includes PLC splitter chips at 7%, AWG chips and devices at 26%, DFB laser chips at 7%, and fiber connectors at about 12% [6]. Strategic Focus - Shijia Photonics focuses on the optical chip and device sector based on the anticipated future trends in the optical communication industry. The company aims to penetrate the data center market with its core product being high-power CW light sources, which have a significantly lower technical barrier compared to EML and VCSEL chips, presenting opportunities for Chinese manufacturers [3][25][26]. Market Dynamics - The fiber connector market is expected to explode in the second half of 2024, primarily benefiting from the increased construction of data centers in North America. The demand for MPO connectors is driven by data center cabling companies rather than direct sales from optical modules [4][16][18]. - The demand cycle for MPO products differs from that of optical modules, as MPO connectors have a longer lifespan and are primarily driven by the procurement of data center cabling systems [16]. Competitive Landscape - The MPO connector market is highly fragmented, with major players like Changying Sheng, Taichen Light, Shijia Photonics, and Tianfu holding a combined market share of less than 30%. Shijia Photonics reported a revenue of 150 million RMB from fiber connectors in 2023, with significant growth expected in 2024 [22]. Future Outlook - The market for CW laser modules is projected to reach a potential scale of approximately 3.6 billion RMB by 2025, driven by the expected shipment of 30 to 40 million units of 400G and above high-speed optical modules [27]. - The penetration rate of AWG products in FR optical modules is currently low, estimated at under 30%, with potential growth to 50% in the future [28]. - The growth of the MPO product market is driven by the active construction of new data centers and the expansion of channel numbers due to new product forms like CPO and OIO [29][20]. Internal Management Reforms - Shijia Photonics has implemented internal reforms, including the establishment of business units and the introduction of KPI assessment mechanisms, leading to improved management precision and a significant increase in gross margins [31].