Soochow: The development of AI is driving explosive demand for optical modules, and we are optimistic about packaging and testing equipment suppliers benefiting fully.

Soochow released a research report stating that demand expansion combined with intergenerational technology upgrades for optical modules will drive growth in equipment sales. As the proportion of high-end specifications increases, the investment in equipment for single production lines continues to rise. The global market for optical module packaging and testing equipment is expected to double in capacity, with a strong continuity in the prosperity of the equipment industry. The localization rate of the middle and low-end segments of the industry is already high, providing ample space for import substitution in areas such as high-precision mounting, wire bonding, and advanced testing instruments. Key points from Soochow include: AI computing power drives intergenerational upgrades for optical modules, leading to a high-demand cycle for equipment. The scale of AI training and inference clusters continues to expand, with optical module speeds transitioning from 400G to 800G and accelerating towards 1.6T. The product mix is rapidly shifting towards high-end specifications. The requirements for precision mounting, coupling stability, testing bandwidth, and consistency have significantly increased for high-speed products, driving equipment upgrades towards high precision, high automation, and high consistency. Additionally, the architecture is evolving from traditional pluggable to CPO/OIO, with the addition of advanced packaging and integrated testing requirements, leading to an increase in unit production line investments. With demand expansion and technological upgrades, equipment sales are being driven by both volume growth and price increases. Mounting, coupling, and testing are high-value core areas, leading to rapid industry expansion. The optical module packaging process includes mounting, bonding, coupling, and testing, with coupling and testing representing the highest value segments, accounting for over 60% of the total value. Products above 800G require coupling precision to improve to the 0.05m level, demanding higher stability and repeatability in automation platforms. Testing is shifting from discrete instruments to integrated ATE platforms, with aging tests, functional tests, and AOI online inspections becoming standard for mass production. As the proportion of high-end specifications increases, investments in equipment for single production lines continue to rise, with the global market for optical module packaging and testing equipment expected to double in capacity, demonstrating strong continuity in the prosperity of the equipment industry. Opportunities in import substitution, automation upgrades, and advanced packaging create structural opportunities for equipment manufacturers. The localization rate in the middle and low-end segments is already high, but areas such as high-precision mounting, wire bonding, and advanced testing instruments are still dominated by overseas suppliers, leaving ample space for import substitution. The optical module industry was previously labor-intensive, but with overseas factory construction and rising labor costs, automation and integrated solutions have become core strategies for capacity expansion. Furthermore, CPO/OIO will push optical module packaging towards advanced semiconductor-level packaging, introducing processes such as 2.5D/3D packaging, TSV, and hybrid bonding. Investment recommendations include Robotechnik Intelligent Technology (coupling equipment), Shenzhen Colibri Technologies (mounting, coupling machines), GKG Precision Machine (packaging, mounting machines), Bozhon Precision Industry Technology (mounting, coupling machines), Rigol Technologies (testing instruments), Wuxi Autowell Technology Co., Ltd. (AOI equipment), Quick Intelligent Equipment (packaging, AOI equipment, mounting machines, etc.), Suzhou TZTEK Technology (AOI equipment), and suggest keeping an eye on LQZ Intelligent (proposed listing) (coupling, mounting machines), and Lianxun Instruments (proposed listing) (testing instruments & testing ATE). Risk warning: Slow investment pace in AI computing power leading to slowed optical module demand, lower-than-expected penetration of 800G/1.6T and CPO technology, uncertainties in the pace of domestic substitution, intensified industry competition, and risk of price decline.