Kaiyuan Securities has released a report noting that the 2026 Optical Fiber Communication Conference and Exhibition (OFC) opened in Los Angeles on March 17, where major optical communication manufacturers emphasized their capacity expansion plans for core optical module components and materials. The optical module industry is currently in a period of parallel development between traditional solutions and silicon photonics technology. Demand for optical chips and materials is expected to rise continuously, benefiting from the rapid advancement of AIGC, which is accelerating the upgrade and iteration of optical communication. As the fundamental components for photoelectric signal conversion, optical chips are seeing increased demand. The firm believes that with the ongoing upgrade of optical networks, demand for EML, VCSEL, and CW lasers is likely to grow, presenting a golden development opportunity for optical chip companies. Investment opportunities in optical chips and materials should be prioritized. Key points from Kaiyuan Securities are as follows:

Major optical chip manufacturers announced capacity expansion plans at the OFC conference, indicating a high-growth cycle for the sector. At the event, companies highlighted their strategies to increase production of key devices and materials. Lumentum stated that by the end of 2026, its EML capacity will increase by over 50% compared to 2025. The company had previously advanced a plan to expand indium phosphide (InP) production by approximately 40% and predicts that the compound annual growth rate of AIDC demand for InP will reach 85% by 2030. In terms of shipments, Lumentum expects the annual growth rate of OCS shipments from 2025 to 2028 to exceed 150%, targeting revenue of over $10 billion by 2027. Coherent management similarly indicated that InP capacity would achieve a "double-then-double" growth between 2026 and 2027. The report views these expansion plans as proactive measures by leading companies in response to the continuous scaling of AI computing clusters, confirming from the supply side that demand for optical chips is expected to remain robust.

Lumentum's performance exceeded expectations across the board, with optimistic guidance reinforcing the logic of volume and price increases. On February 3, 2026, Lumentum announced its FY2026 Q2 financial results, with revenue reaching $666 million, a 65.5% year-on-year increase, nearing the upper end of its guidance range. Its non-GAAP operating profit margin was 25.2%, up by more than 1700 basis points year-on-year, indicating significant improvement in profitability far beyond expectations. Driven by AI infrastructure development, the company's OCS business is expanding rapidly, with a backlog of over $400 million. It has secured incremental orders worth hundreds of millions of dollars in the CPO sector, scheduled for delivery in the first half of 2027. For guidance, the company expects FY2026 Q3 revenue to be between $780 million and $830 million, representing year-on-year growth of over 85%. The non-GAAP operating profit margin is projected to further improve to 30.0%-31.0%, with non-GAAP EPS estimated at $2.15-$2.35. According to management, the company is still in the early stages in both OCS and CPO fields, with substantial growth potential as capacity ramps up and orders are fulfilled. The report believes that Lumentum's strong performance and positive outlook stem from robust AI demand, from which optical chip companies are likely to continue benefiting.

With multiple technological pathways advancing, including traditional solutions and silicon photonics, demand for optical chips and materials is poised to rise. Benefiting from the rapid development of AIGC, the upgrade cycle of optical communication is accelerating, increasing the need for optical chips as essential components for photoelectric conversion. The optical module industry is currently experiencing parallel development of traditional and silicon photonics technologies. In the traditional path, EML, as the core device for electro-optical conversion in optical modules, will be the main driver of demand in the short to medium term. In the silicon photonics path, CW-DFB lasers as external light sources are the current mainstream solution. Additionally, Coherent proposed a multi-mode pluggable CPO based on high-speed VCSEL at the OFC conference. The report suggests that as optical networks continue to upgrade, demand for EML, VCSEL, and CW lasers is expected to increase, offering a golden opportunity for optical chip companies.

In the era of ultra-high-speed AI, optical chips are transitioning from competition based on single materials to a phase of synergistic growth involving multiple material systems: (1) Indium phosphide (InP) is the core substrate for optical chips like EML and DFB. Due to complex epitaxial processes and long expansion cycles, it may become a supply bottleneck; (2) Silicon, with its CMOS compatibility, low cost, and suitability for large-scale integration, serves as the core platform for silicon photonics modules; (3) Thin-film lithium niobate (TFLN) is an emerging material for next-generation ultra-high bandwidth applications, offering high bandwidth, low drive voltage, and high linearity. The report believes that these material systems occupy distinct strategic positions and are likely to benefit collectively from technological iterations.

Investment opportunities in optical chips and materials should be emphasized. (1) Optical chips. Recommended stocks: Zhongji Innolight (silicon photonics chips), Eoptolink (silicon photonics chips), Sanan Integrated (EML+CW), HG Tech (EML+silicon photonics chips+CW+TFLN); potential beneficiaries: Focuslight (EML+CW), Accelink (EML+CW+TFLN), Yongding Shares (EML+CW), Shijia Photon (CW+AWG), Dongshan Precision (EML+silicon photonics chips+CW), Guangku Tech (TFLN), Anfu Tech (silicon photonics heterogeneous integration TFLN), Lumentum, Coherent, Broadcom, Marvell, Sumitomo Electric, Tower Semiconductor. (2) Optical materials. Potential beneficiaries: TDG Holding (TFLN substrate), Castech (TFLN crystal), Zhongci Electronic (TFLN substrate), Yunnan Germanium, AXT, IQE, Coherent.

Risk warnings include slower-than-expected 5G deployment, AI development delays, and Sino-US trade friction.