Summary of Conference Call Records Company Overview - The company discussed is 太辰光 (Tachyon), a leading manufacturer of MT ceramic inserts in China, focusing on the MPO (Multi-fiber Push On) market and emerging technologies like CPO (Co-Packaged Optics) and GPU direct light technology [1][2][3]. Industry Insights - The MPO market is expected to grow rapidly, with projections indicating a market size exceeding $3 billion by 2026, driven by the high growth of the optical module industry [1][9]. - The MPO industry has a relatively simple structure, with major customers including North American cloud providers like Google, Microsoft, Amazon, and Meta, who rely on wiring companies for comprehensive solutions [5]. Key Points and Arguments - 太辰光 holds a market share of 10%-15% in the MPO market, positioning itself as a significant supplier [1][9]. - The company has achieved improved gross and net profit margins through self-supply of core components, which have been certified by major clients and are now in mass production [1][9]. - CPO switches are gaining attention for their high bandwidth density and low energy consumption, with NVIDIA planning to mass-produce CPO switches in the second half of 2025, indicating increasing market penetration [1][10]. - MMC (Miniature Multi-fiber Connector) connectors are becoming a preferred choice for CPO switches due to their smaller size, allowing for higher density fiber arrangements [1][11]. Emerging Technologies - The company is actively investing in new technologies such as CPO and GPU direct light, collaborating with high-quality clients to prepare for future technology implementation [2][15]. - GPU direct light technology could significantly increase the demand for cables and connectors, as each GPU may require 60 to over 100 fibers in the future [13][14]. Historical Development and Future Potential - Established over 20 years ago, 太辰光 quickly became an industry leader in MT ceramic inserts and has continuously reduced costs, contributing significantly to broadband network development in China [7][8]. - The company has a diversified product line, including MPO/MTP jumpers, low-speed optical modules, and PLC/AWG planar waveguide products, with major clients like Corning and Huawei [6]. Additional Important Insights - The company is not significantly affected by tariffs, as partnerships with large American firms like Corning provide tariff exemptions [3][15]. - The internal connection lines in the CPU era are expected to evolve, requiring more compact designs for efficient installation and maintenance [12]. This summary encapsulates the key insights from the conference call, highlighting the company's strategic positioning within the MPO market and its proactive approach to emerging technologies.

Core Viewpoint - The CPO (Co-Packaged Optics) concept remains active, with significant stock price increases among related companies, driven by optimistic market forecasts for optical modules in the coming years [1] Market Forecast - Goldman Sachs predicts that the sales volume of 800G optical modules will reach 19.9 million and 33.5 million units in 2025 and 2026, respectively, representing upward adjustments of 10% and 58% from previous forecasts [1] - The total market value for optical modules is expected to reach $12.73 billion and $19.37 billion in 2025 and 2026, showing year-on-year growth of 60% and 52% [1] - LightCounting forecasts a continued growth rate of around 50% for the global Ethernet optical module market in 2025, followed by a stable phase with a compound annual growth rate (CAGR) of 15% to 18% over the next five years [1] Industry Dynamics - Guoyuan Securities notes that while the current scale of CPO technology is small, its performance advantages are significant, suggesting a long-term potential for data center optical conversion modules [1] - Domestic suppliers are primarily involved in the upstream segments of the CPO supply chain and are pursuing global capacity expansion to mitigate complex international conditions [1] - Guoxin Securities highlights an intensified global competition in computing power, with increased capital expenditures from North American cloud companies (e.g., Meta, OpenAI), accelerating the iteration of CPO switch and optical module technologies, which further promotes domestic substitution in the CPO-related industry chain [1]

Summary of the Conference Call on Switch Industry and AI Computing Power Industry Overview - The report focuses on the **switch industry**, highlighting its critical role in network interconnection and the growing demand driven by data center construction [4][20]. - The global switch market is projected to grow significantly, with the top five manufacturers holding a substantial market share [4][68]. Key Points and Arguments Market Growth and Demand - The global switch market is expected to grow from **$61.9 billion in 2020** to **$96.8 billion by 2025**, with a **CAGR of 9.4%** [24]. - In China, the market is projected to increase from **¥116.8 billion in 2020** to **¥318 billion by 2025**, with a **CAGR of 22.2%** [24]. - The demand for switches is driven by the increasing data center construction and the need for higher data transfer rates [20][30]. Market Concentration - The top five global switch manufacturers, including **Cisco, Arista, Huawei, HPE, and Xinhua San**, hold **69.6%** of the market share, with Cisco leading at **35.9%** [4][68]. - In China, the top five manufacturers account for **89.7%** of the market, with Huawei at **32.4%** [4][68]. Technological Trends - **White-box technology** is emerging, allowing for hardware-software decoupling, which reduces acquisition and operational costs [31][35]. - The **CPO (Chip-Package-Optical)** switch technology is gaining traction, promising lower power consumption and higher efficiency [36][41]. Chip Market Dynamics - The global Ethernet switch chip market is expected to grow, with commercial vendors driving the majority of the growth [81][86]. - The market is currently dominated by overseas giants, indicating significant room for domestic alternatives [87]. Important but Overlooked Content - The report highlights the **risk factors** including the potential underdevelopment of AI applications, escalating US-China trade tensions, intensified market competition, and the risk of failure in new technology and product development [7]. - The **data center switch market** in China is expected to account for **51.7%** of the total switch market by 2026, indicating a growing reliance on data center infrastructure [30]. Recommendations - The report suggests monitoring companies such as **Sengke Communication, Yutai Micro, Ruijie Networks, Unisplendour, ZTE, and Feiling Kesi** for potential investment opportunities [6]. This summary encapsulates the essential insights from the conference call regarding the switch industry and its intersection with AI computing power, providing a comprehensive overview of market dynamics, technological advancements, and investment opportunities.

Market Performance - The three major A-share indices collectively rose, with the Shanghai Composite Index up 0.7% to 3497 points, the Shenzhen Component Index up 1.46%, and the ChiNext Index up 2.39% [1] - The total trading volume for the day reached 1.47 trillion yuan, an increase of 247.6 billion yuan compared to the previous trading day, with nearly 4300 stocks rising across the market [1] Sector Performance - The CPO concept stocks surged in the afternoon, with "Yizhongtian" leading the gains; Tianfu Communication rose over 12%, Zhongji Xuchuang rose over 7%, and Xinyi Sheng rose over 6.7% [2] - The photovoltaic glass sector saw a rise of 5.76%, while other related sectors such as photovoltaic inverters and circuit boards also experienced gains [2] AI ETF Performance - The ChiNext AI ETFs from Guotai, Huaxia, Huabao, and Nanfang all rose over 3%, with Guotai's ETF increasing by 3.78% [3][4] - The largest ChiNext AI ETF by size is Huabao's, with a latest scale of 1.545 billion yuan [5] Company Updates - Industrial Fulian expects a net profit attributable to shareholders of 6.727 billion to 6.927 billion yuan for Q2 2025, representing a year-on-year increase of 47.72% to 52.11% [5] - The company reported that its cloud computing business grew rapidly, with overall revenue in the segment increasing by over 50% year-on-year, and AI server revenue increasing by over 60% [5] Technology Developments - Citigroup noted that NVIDIA's Blackwell GB200 chip has become a core power source for AI clusters, with deployment accelerating [6] - The upcoming CPO switches are expected to open three new incremental spaces, with significant value from high-density MPO connectors [6] Industry Trends - Tianfeng Securities highlighted that the upcoming NVIDIA GB300 chip is expected to drive industry chain resonance, with revenue opportunities increasing by 50 times compared to previous generations [7] - Oracle's cloud service contracts are anticipated to catalyze demand for computing power, with expectations of over 30% year-on-year capital expenditure growth from major cloud providers [7] - The AI-driven evolution of data center architecture is expected to benefit optical modules and devices, with optimistic demand forecasts [8]

Investment Rating - The report initiates coverage with a rating of "Buy" for the company [6]. Core Viewpoints - The company is positioned to benefit significantly from the development of AI, with projected revenues increasing from 139.65 billion to 182.69 billion CNY from 2025 to 2027, and net profits expected to rise from 7.78 billion to 11.79 billion CNY during the same period [4][6]. Summary by Sections 1. Industry Leading Network Solutions Provider - The company focuses on three main product lines: network equipment, network security, and cloud desktop solutions, with network equipment contributing over 70% of revenue [15][21]. - The company emphasizes independent research and development, with over 50% of its workforce dedicated to R&D, and has established eight R&D centers globally [27][28]. - Revenue has shown consistent growth, with a compound annual growth rate (CAGR) of 17.48% from 2017 to 2024, and overseas revenue has significantly increased [36][45]. 2. New Development Opportunities in the Switch Market - The global and Chinese switch markets are steadily growing, with the Chinese market expected to reach 749 billion CNY by 2024 [50][52]. - The rise of white box switches, which offer cost advantages and operational flexibility, is notable, as they allow users to purchase hardware and install software independently [57][58]. - AI is driving the upgrade of data center switches, with significant growth in demand for high-speed ports, particularly 200G and 400G devices [64][67]. 3. Significant Competitive Advantages and Growth Value - The company targets large clients, successfully penetrating the high-end market for operators, and has won significant contracts with major telecom companies [98][100]. - The company maintains a strong focus on product development, achieving a leading market share in several sectors [105]. - The establishment of self-owned production lines ensures delivery capabilities, and the company has built a robust technical service system for rapid response [3][104]. 4. Financial Forecast and Investment Recommendations - The company is projected to achieve revenues of 139.65 billion, 160.84 billion, and 182.69 billion CNY from 2025 to 2027, with net profits of 7.78 billion, 9.70 billion, and 11.79 billion CNY respectively [4][5]. - The report suggests that the company has substantial growth potential due to its deep engagement in the switch product market and active overseas expansion [4].

Core Insights - The article emphasizes the inevitable transition of data centers to Co-Packaged Optics (CPO) switches, driven primarily by the power savings offered by CPO technology [1][2] - It discusses the ongoing debate between CPO and Linear Pluggable Optics (LPO), highlighting the efficiency and complexity concerns associated with CPO [1][2] - The advancements in CPO technology and its reliability improvements over the past two years are noted, suggesting that CPO may become the only viable option for future high-speed data transmission [2] Summary by Sections CPO Technology Overview - CPO technology integrates optical engines within ASIC packages, utilizing both Electronic Integrated Circuits (EIC) and Photonic Integrated Circuits (PIC) [3] - Two main integration methods are discussed: silicon interposer and organic substrate, each with its own advantages and challenges regarding thermal management and packaging complexity [4][6][7] Bandwidth Density - Bandwidth density is defined as the amount of data transmitted per millimeter along the optical interface, crucial for meeting the growing bandwidth demands in data centers [9] Comparison of CPO Solutions: Broadcom vs. NVIDIA - Broadcom's Bailly CPO switch integrates eight optical engines with a total external bandwidth of 51.2 Tbps, while NVIDIA's Quantum-X aims for over 100 Tbps [12][15] - Broadcom's design focuses on a single package integration, whereas NVIDIA's approach allows for detachable optical modules, enhancing maintainability [19][20] Optical Engine and Fiber Coupling - Both companies utilize edge-coupled fiber connections for high bandwidth density, with Broadcom employing a highly automated process for fiber alignment [23] - The article highlights the challenges of fiber coupling and the need for efficient laser integration to maintain low power consumption [27][28] Power Efficiency and Thermal Management - CPO technology significantly reduces power consumption per bit compared to traditional pluggable modules, with Broadcom reporting 5.5W per 800 Gb/s port versus 15W for equivalent modules [32] - Both companies require liquid cooling solutions to manage the heat generated by their high-density ASIC packages [32][40] Future Directions and Challenges - The article discusses the potential of photonic fabrics and advanced coupling methods to further enhance bandwidth density and reduce thermal issues [34][44] - It also addresses the challenges of deploying CPO technology, including ecosystem disruption, operational complexity, and reliability validation [39][40] Conclusion - The successful deployment of CPO switches is seen as a critical step for the industry, paving the way for broader adoption of photonic technologies in various applications [50]

Core Viewpoint - The transition of data centers to Co-Packaged Optics (CPO) switches is inevitable, primarily driven by the power savings offered by CPO technology [1][2]. Group 1: CPO Technology and Market Trends - CPO technology is gaining traction as it significantly reduces power consumption, with potential savings of 30-50% compared to traditional optical devices [1][2]. - The industry has made substantial progress in CPO reliability over the past two years, making it a viable option for future high-speed data rates [2]. - The upcoming 400G SerDes generation may see CPO as the only feasible choice due to excessive insertion loss from traditional PCB traces and cables [2]. Group 2: Technical Integration of CPO - CPO solutions typically integrate electronic integrated circuits (EIC) and photonic integrated circuits (PIC) within the same package [3]. - Two main integration methods for optical engines within ASIC packages are the silicon interposer approach and the organic substrate approach [4][5]. - The silicon interposer method allows for high-density connections but complicates thermal management due to the proximity of high-power EICs [6]. - The organic substrate method offers better thermal isolation and modularity, allowing for independent testing of optical engines before assembly [7][8]. Group 3: Bandwidth Density and Performance - Bandwidth density, a critical metric for CPO solutions, measures the amount of data transmitted per millimeter along optical interfaces, typically expressed in Tbps/mm [9]. - Higher bandwidth density is essential to meet the explosive growth in bandwidth demand in data centers and high-performance computing systems [9]. Group 4: Competitive Landscape - Broadcom's Bailly CPO switch integrates eight 6.4 Tbps optical engines, achieving a total external bandwidth of 51.2 Tbps [12]. - NVIDIA's Quantum-X InfiniBand switch aims for higher scalability, targeting over 100 Tbps with advanced optical engine integration [17][18]. - Broadcom's next-generation switches are expected to reach 102.4 Tbps, while NVIDIA's architecture is designed for future demands of 200G SerDes and beyond [16][19]. Group 5: Power Efficiency and Thermal Management - Both Broadcom and NVIDIA report significant reductions in power consumption per bit with their CPO solutions, with Broadcom achieving approximately 5.5W per 800 Gb/s port compared to 15W for traditional modules [35]. - Effective cooling solutions, such as liquid cooling, are necessary to manage the heat generated by high-density ASIC packages [35][36]. Group 6: Future Directions and Challenges - The industry is exploring advanced coupling methods, such as vertical coupling and multi-core fibers, to enhance optical connectivity and bandwidth density [38][40]. - Challenges in deploying CPO include ecosystem disruption, operational complexity, and the need for robust reliability validation [42][43]. - CPO's prospects appear brighter in vertical scaling applications, where integrated solutions from single vendors can simplify procurement and deployment [45].

Group 1 - The computing power sector is experiencing significant growth, with Nvidia reducing costs by 70%, and analysts optimistic about an 80% penetration rate and a market size of $40 billion [4][5] - The demand for low-power, high-speed cluster solutions is driving the need for higher integration, which may provide better solutions [6] - Leading communication equipment manufacturers have mature solutions, indicating that the CPO switch industry may soon be industrialized [7] Group 2 - The compound annual growth rate (CAGR) for shipments in the next five years is expected to reach 123%, with a market opportunity of $250 billion on the horizon [9][10] - The solid-state battery industry is accelerating its 0-1 industrialization due to increasing support from policies and applications [10] - The global market for solid-state batteries is projected to exceed $250 billion by 2030, with rapid growth expected in the domestic market by 2027 [12]

Group 1 - Ren Zhengfei stated that China has opportunities in mid-to-low-end chips, with numerous domestic chip companies making efforts [1] - The transition to large model era is driving the demand for enhanced interconnectivity between computing cards, leading to an upward trend in domestic computing power construction [1] - Dell'Oro Group predicts that by 2025, the adoption rate of 800G switch ports is expected to exceed 400G data center switch ports, accounting for over 25% of data center switch ports [1] Group 2 - The global sales volume of CPO switches is projected to grow from 50,000 ports in 2023 to 4.5 million ports by 2027 [2] - OCS all-optical network switches are expected to address bandwidth latency and dynamic topology issues in large cluster training across cabinets and regions [2] Group 3 - Leading companies in the switch sector include Ruijie Networks and Fenghuo Communication [3] - Key players in the copper cable market are Huafeng Technology and Wolong Nuclear Materials [3] - Notable companies in the optical module sector include Zhongji Xuchuang, Xinyi Sheng, and Tianfu Communication [3]

Investment Rating - The report maintains a "Strong Buy" rating for the telecommunications sector [4]. Core Insights - Tencent and Alibaba have shown initial results from their AI investments, indicating a positive impact on their business growth and revenue generation [1][13]. - The report emphasizes the importance of AI capabilities in enhancing advertising effectiveness and user experience in gaming [11][12]. - The investment focus is on three key areas: computing power sector, quality dividend assets in telecom operators, and sectors like military communication, submarine cables, IoT, and smart controllers that are expected to recover gradually [1][16]. Summary by Sections Investment Recommendations - The report suggests focusing on high-growth, low-valuation stocks in the computing power sector, quality dividend assets in telecom operators, and sectors with potential recovery [1][16]. - Recommended stocks include China Mobile, Qii712, Haige Communication, Hengtong Optics, Tuobang Co., and Yiyuan Communication [17][23]. Market Review - The telecommunications sector performed moderately, with the telecommunications index down by 0.12%, underperforming the CSI 300 index by 1.23 percentage points [2][26]. - Among sub-sectors, communication services fell by 1.15%, while communication equipment rose by 0.48% [26]. Industry News - Tencent and Alibaba's Q1 2025 financial results show significant revenue growth, with Tencent's revenue at 180 billion yuan (up 13%) and Alibaba's at 236.5 billion yuan (up 7%) [11][12]. - Both companies reported substantial capital expenditures, with Tencent at 27.5 billion yuan (up 91%) and Alibaba at 23.993 billion yuan (up 136%) [11][12]. Recommended Focus Areas - Suggested areas for attention include smart controllers, IoT modules, telecom operators, military communication and satellite sectors, cables and deep-sea technology, cloud computing, liquid cooling, industrial internet, and cloud communication [24].