Guosheng: The photonic chip EIC is the core hub for optical communication, and the domestic market share is expected to increase.

Guosheng released a research report stating that there are fewer optical communication companies involved in the field of chip manufacturing, and the global competitive landscape among suppliers is relatively stable. With the continuous improvement of domestic chip manufacturing capabilities and the increasing market share of domestic optical module companies, domestic chip manufacturers are expected to enter an upward cycle. The bank believes that chips are the core foundation for the long-term development of the optical communication industry, and high-speed design capabilities and process accumulation will be key barriers. It is recommended to focus on core companies in the field of optical communication chip layout. Guosheng's main points are as follows: Chips are the signal engine of optical interconnection. Chips (TIA/Driver/CDR, etc.) are not just simple accessories for optical modules, but the core hub that determines signal rate and power consumption. Among them, TIA amplifies the signal received by the detector PD at the receiving end and converts it into a voltage signal, while Driver converts the electrical signal into a current signal for driving the laser at the transmitting end. The deep integration and balance of TIA/Driver, clock recovery and other functions represent not only technological upgrades, but also a value transition for the optical communication industry from "module assembly" to "chip definition". Domestic chip market share is expected to increase. In the market for speeds above medium-high rates, China's self-sufficiency in optical communication chips is very low, and downstream manufacturers rely heavily on imports. According to ICC data, in the field of optical communication chips with speeds of 25G and above, Chinese manufacturers only account for 7% of the global market in terms of revenue value. Therefore, high-end chips are still a "weak link" in China's optical communication industry chain, urgently needing breakthroughs. At the same time, the bank sees a large space for domestic substitution, as local companies have natural advantages in cost responsiveness, supply chain security, and customer collaboration, and are expected to accelerate their market share catch-up in this round of AI waves. At the same time, as the XPO (LPO/NPO/CPO) technology evolves, the value of chips is expected to increase significantly. With the XPO solution aiming to save energy by removing the high-cost and power-consuming DSP chip, the signal equalization/compensation tasks originally handled by the DSP chip now have to be taken on by other components, including SerDes, TIA, Driver, etc. For example, TIA needs to integrate CTLE (continuous time linear equalization) to pre-compensate the signal at the transmission end. Therefore, the value space originally occupied by DSP has also shifted to these directions. The absolute value and proportional value of these chips such as TIA+Driver in the system will increase. By coordinating advanced packaging and system architecture, EIC chips open up the full-scenario optical interconnection space. EIC not only represents an increase in speed but also lays the foundation for next-generation technologies like LPO, CPO, 3D optical packaging, etc. In architectures like LPO, TIA/Driver must integrate the equalization functions of DSP, penetrating the optical interconnection market from data centers' scale-out scenarios to scale-up scenarios, opening up a larger market from medium to long-distance interconnections to chip-level interconnections. Risk warning: Slow progress in domestic chip substitution; Increased competition in the chip industry; AI development falling short of expectations.