【广发通信】Optical Interconnect Fundamentals and Stock Prices Seriously Diverge; We Firmly Favor Leading Companies

English summary

Today, the optical interconnect sector saw significant stock price adjustments and false rumors emerged, but actual industry fundamentals continue to improve, with strong supply and demand, stable competitive landscape and product prices: 1. Price: The rumor of significant price cuts is false. We have verified with multiple optical module companies that the average 1.6T quote is far higher than market rumors. Optical module prices are the result of supply-demand dynamics. In an environment of prolonged material shortages and supply shortfalls, optical module prices are highly rigid. We believe next year's 1.6T optical module prices will see a normal annual decline but with very limited magnitude, and new products may be priced at a premium, effectively 'raising prices in disguise'. 2. Demand: 2028 demand is clear and accelerating YoY. Recently, leading companies have seen from customer demand that 2.4T, 3.2T, and NPO will ramp up significantly in 2028. Demand growth in 2027/2028 is in an accelerating state, i.e., the second derivative of demand is positive from 2026 to 2028. Leading optical module manufacturers have signed long-term supply MOUs with some customers, locking in materials and capacity for several years. Multiple leading optical module companies have stated that 2028 demand is already very clear. 3. ...