China Galaxy Securities: Systematic Expansion of Optical Interconnection Empowers a Transition in AI Computing Power

The Zhitong Finance App learned that China Galaxy Securities released a research report saying that recently, ECOC 2026 (European Optical Communications Conference) was successfully held in Malaga, Spain. CPO/NPO/OCS deployment accelerated, technology iteration towards consensus, and the boom in the light industry continued to rise; as the optical interconnection usage multiplier expands, the optical chip supply gap may continue, and domestic substitution opens up new space. As high-end optical chip technology continues to break through, the optical communications industry chain is expected to begin a new round of volume and price increases.

The main views of China Galaxy Securities are as follows:

CPO/NPO/OCS deployment is accelerating, technology iteration is moving towards consensus, and industry prosperity continues to rise

The optical industry continues to evolve towards CPO (co-packaged optics) and NPO (near-package optics), achieving high-density interconnection between optical engines and switching ASICs with minimal electro-optical loss, increasing data transmission rates and reducing voltage consumption. The optical interconnection requirements for AI computing power clusters are expanding in depth from a single scale-out scenario to scale-up and scale-in high bandwidth density scenarios. Judging from the release of the new technology, Huawei released the world's first Ascend 960 supernode using NPO technology on the eve of ECOC. As the world's first supernode to use an NPO optical engine, the Ascend 960 supernode uses a leading orthogonal architecture and full liquid cooling design to achieve unified memory addressing based on Lingqu, which can be expanded to 4096 card scale to achieve 8EFLOPS FP8 and 16EFLOPS FP4. The Shengteng 960 supernode uses 5,500 Hi-ones, reducing power consumption by more than 550 kilowatts, doubling the trouble-free operation time of the system, and reaching 99.8% system availability, speeding up training and inference innovation in cutting-edge models. Marvell released a single-channel 400g optical PAM4 DSP technology based on a 2nm process, which supports a 3.2T link rate. Huagong Zhengyuan exhibited a 6.4T NPO silicon optical optical engine and a 3.2T ultra-high speed optical interconnection solution based on single-wave 400G, entering the European market for the first time for a new generation of high-speed optical interconnection solutions. Avicena Tech showcased microLED-based connectorized optical interconnect technology. The 1Tbps rate positioning is biased towards board-level and chip-level short-range interconnect scale-in scenarios. Overall, the speed of everything continues to break through at a single point. As demand for bandwidth expansion continues to increase, the superposition of the number of interconnection layers is expected to cause a systematic expansion of optical usage, and companies that have mastered core technology and supply chain integration capabilities will continue to benefit.

The optical interconnection usage multiplier is expanding, and the optical chip supply gap may continue, and domestic substitution opens up new space

Optical chips have the highest technical barriers in the optical communication industry chain and are the core link of domestic substitution. Judging from the global supply and demand pattern, there is a large gap in production capacity for high-end EML optical chips, high-power CW light sources, high-precision lenses, and more upstream indium phosphide (InP) substrate materials. There is a bottleneck in the processing and transmission rate of optical signals in optical devices, so the performance of optical devices directly determines the quality of the entire optical communication network. The most critical thing in optical devices is that semiconductor materials containing III-V compounds such as gallium arsenide (GaAs) and InP account for about 50% of the cost of optical chips, and usage increases as the rate of the optical module increases. Optical chips evolved from EML to CW+ silicon light and CPO+ external light sources (ELS), with the InP substrate at the light-emitting end as the core material. Under the boom in optical communications, there is a shortage of upstream materials, raising the threshold for optical chip research and development. This is where the conflict between supply and demand is prominent. High-tech barriers to optical chips are building moats. Some upstream materials are still in short supply, and domestic substitution continues to advance. Overall, along with continued breakthroughs in high-end optical chip technology, the optical communication industry chain is expected to start a new boom cycle of sharp rise in volume and price.

Risk Alerts

Risk of fluctuations in overseas industry and trade policies; risk of AI application development falling short of expectations; risk of CAPEX decline in major CSP vendors; risk of optical communication technology path changes, etc.