The optical communication market is currently undergoing significant structural adjustments influenced by factors such as the emergence of AI-driven large models, changes in traditional data center and telecom metropolitan network structures, and accelerated adoption of new technologies. A notable feature in this transformation is the rise of consumer upgrades, particularly the rapid increase in demand for high-speed 400G+ solutions. This shift is evident in both the telecom metropolitan network's move towards 400G wavelength and the data communication market's transition to 400G/800G interconnects, prompting a resurgence of European and American companies in the optical module manufacturing sector.
On the morning of October 30, 2023, Intel announced the divestiture of its silicon photonics-based pluggable optical module manufacturing business, which is now taken over by Jabil. Intel retains its capabilities in silicon photonics chip manufacturing. Industry opinions on this move vary, with some viewing Intel's initial foray into silicon photonics module manufacturing as a validation of the technology's maturity. The accumulated experience in producing silicon photonics modules for Intel remains a core asset. However, questions arise about whether Jabil's takeover implies the emergence of an independent optical module manufacturer. Jabil, historically positioned as a large-scale contract manufacturer, contrasts with Intel, a major driver of silicon photonics commercialization. Intel's silicon photonics modules secured a substantial market share (20%~30%) in the 100G CWDM4 market from 2018 to 2022, challenging several internet giants.
Another acquisition has sparked confidence in the high-speed optical module market. Lumentum's $750 million cash acquisition of Cloud Light Technology is noteworthy. Four years ago (March 2019), Lumentum sold its data communication optical module business to Cambridge Technology, focusing on more challenging DWDM coherent optical modules and VCSEL/EML laser chip businesses. The acquisition of Cloud Light Technology marks Lumentum's re-entry into the data communication optical module manufacturing market, opening up possibilities for future market competition. Cloud Light Technology, spun off from TDK in 2018, headquartered in Hong Kong, with R&D centers in Hong Kong and Taiwan, and a production base in Dongguan, China, has benefited from breakthroughs with Google, selling 100G/400G SR optical modules, ranging from 100G SR4 a few years ago to recent 400G SR8. Lumentum's move, leveraging its chip manufacturing, enhances Cloud Light Technology's manufacturing capabilities for high-speed optical modules, potentially providing a competitive advantage in supplying 800G SR8 optical modules to NVIDIA or breaking the historical pattern where only Coherent and NeoPhotonics shared NVIDIA's high-speed optical module orders.
The optical communication market in 2023 is experiencing rapid changes, with the capital market's sharp awareness leading optical communication-related stocks to historic highs in the first half of the year. Notably, it witnessed the first optical module stock exceeding a market capitalization of one trillion (Intellux surpassed this mark on June 14, 2023). The demand surge triggered by AI truly manifested in June 2023 and continues to be revised upward, gaining favor from more edge market enterprises.
In the high-speed optical communication market, undergoing a transformation in demand, numerous new technologies are emerging, including silicon photonics, thin-film lithium niobate technology platforms, breakthroughs in LPO/CPO technology capabilities, and challenges in supply chain integration and the timing of new solutions' entry points. As more European and American companies re-enter the optical module manufacturing sector, the competitive landscape in the high-end market appears to be disrupted.