Guosheng: PIC will reshape the structure of the optical communication industry, and design capabilities and process accumulation will become the core barriers.

Guosheng's research report states that Photonic Integrated Circuits (PIC) achieve highly integrated and modularized optical signal processing by integrating multiple optical devices on a single chip. This is not only a technological evolution but also a paradigm shift in the optical communication industry from an "assembly mode" to a "chip manufacturing" model. The bank believes that PIC is the inevitable path for the long-term development of the optical communication industry, and its design capabilities and process accumulation will become core barriers. The bank suggests focusing on enterprises that have a leading layout in PIC design, key processes, and upstream materials: PIC design, PIC supporting chips/devices, and packaging and system integration. Guosheng's key points are as follows: 1. PIC- Photonic Integrated Circuits are the core of silicon photonics. 2. Silicon photonics/PIC is not a simple upgrade of the industry chain but a systemic restructuring of optical communication. With the increasing demand for AI-driven computing power, traditional discrete device solutions are gradually facing bottlenecks in capacity, cost, power consumption, and integration. PIC achieves highly integrated and modularized optical signal processing by integrating multiple optical devices on a single chip, revolutionizing the optical communication industry from an "assembly mode" to a "chip manufacturing" model. 3. Shift of industry value core to design and process end with PIC. In the traditional optical module value chain, the upstream optical/ electronic chips and downstream packaging and assembly occupy the main value. However, with PIC design, the core capabilities are shifted to photon chip design and process implementation, enabling companies with independent PIC design capabilities to define optical architectures, lead process routes, and control the discourse power and high-value-added links of the industry chain, restructuring the profit distribution pattern. 4. Coordinated advanced packaging and system architecture opens up the full-scene optical interconnection space for PIC. PIC is not only a chip-level integration breakthrough but also lays the foundation for new generation technologies such as CPO, LPO, and 3D optical packaging. Its high density, low power consumption, and scalability characteristics drive optical interconnection from data center scale-out scenarios to further penetration into scale-up scenarios, opening up larger markets from medium to short distances and from device level to chip level. 5. The inevitable result of the expansion of the photonics industry is PIC. Currently benefiting from the demand for optical communication driven by AI, the demand for optical modules/engines has increased from millions to tens of millions, with the potential to reach hundreds of millions in the future. From the perspective of capacity, cost, power consumption, and other aspects, the industry chain needs new forms of capacity to meet the growing demand. Silicon photonics empowers photons with mature semiconductor processes, transforming optical communication from "craftsmanship" to "precision industry", achieving high precision, high consistency, and scalable manufacturing. Risk alerts: Lower-than-expected increase in silicon photonics penetration rate; intensifying competition in the PIC industry; AI development falling short of expectations.