Central China: The supply of key materials for upstream optics modules remains tight, with industry-leading large customers shifting to silicon photonics solutions first.

Central China released a research report stating that in January-December 2025, the total export value of optical modules in China was 37.46 billion yuan, a year-on-year decrease of 15.6%. CignalAI expects the total shipment volume of high-speed optical modules of 400G and above to reach 42 million in 2025, and the CAGR of the optical module market revenue from 2024 to 2029 will exceed 20%. The supply of key materials such as core components in the upstream of the optical communication industry chain continues to be tight, especially there is a certain degree of shortage of optoelectronic chips. After industry-leading large customers first turned to silicon photonics solutions, driving the entire industry to follow suit, LightCounting predicts that over half of the optical module sales in 2026 will come from modules based on silicon optical modulators. Key points from Central China: Changfei and Hengtong won the bid for the China United Network Communications hollow core optical fiber joint procurement. From January to November 2025, the cumulative telecom business revenue reached 1.6096 trillion yuan, a year-on-year increase of 0.9%. By November 2025, 5G mobile phone users of the three major operators and China Broadcasting accounted for 65.3% of mobile phone users; the average monthly data usage per household in November reached 22.0GB, a year-on-year increase of 15.1%; fiber broadband users with access speeds of gigabit or above accounted for 34.1% of the total number of users. In January 2026, China United Network Communications announced the public notice of the 2025 large channel hollow core optical fiber hybrid cable joint procurement project, with Yangtze Optical Fibre And Cable Joint Stock and Hengtong Optic-Electric winning the bid. Operators focus on key areas such as industrial manufacturing, digital government, healthcare, education, and energy, fully leveraging the integration advantages of cloud-network convergence and new generation digital technologies to promote the close integration of digital technology with the real economy. In December 2025, the total retail sales of communication equipment in China increased by 20.9% year-on-year. According to Omdia's estimate, the global shipment volume of smartphones in 2025 increased by 2% year-on-year to reach 1.25 billion units. The global smartphone market in 25Q4 increased by 4% year-on-year, benefiting from the rebound in seasonal demand and improved inventory management, but some manufacturers began to be affected by the rising costs of components. The tight supply of DRAM brings significant supply pressure to the smartphone industry and is expected to be a key factor in market trends in 2026. Canalys predicts that the penetration rate of AI smartphones will reach 34% in 2025, and the streamlining of edge models and the upgrade of chip computing power will further promote the penetration of AI smartphones into the mid-range price segment. The latest 5G AI smartphone NPU chip with 3nm process, computing power of 60 to 200 TOPS, memory of 23GB, supports inference of 33 billion parameters on the edge, built-in dedicated algorithms for voice recognition, image processing, and brings revolutionary experience upgrades in real-time interaction, creative empowerment, privacy security, personalized services, etc. AI smartphones are expected to continue to penetrate at a high speed from 2025 to 2026. In December 2025, the total export value of optical modules in China decreased by 0.5% year-on-year, while the total export value of communication equipment including optical modules in Thailand increased by 152.1% year-on-year. From January to December 2025, the total export value of optical modules in China was 37.46 billion yuan, a year-on-year decrease of 15.6%; in December 2025, the export value of Hubei Province was 659 million yuan, a year-on-year increase of 122.8%; the export value of Zhejiang Province was 194 million yuan, a year-on-year increase of 89.9%; and the export value of Shanghai Municipality was 136 million yuan, a year-on-year increase of 89.3%. In 25Q3, the total capital expenditure of the four major cloud players in North America was 112.43 billion US dollars, a year-on-year increase of 76.9%. CignalAI predicts that the total shipment volume of high-speed optical modules of 400G and above in 2025 will reach 42 million, and the CAGR of the optical module market revenue from 2024 to 2029 will exceed 20%. The supply of key materials such as core components in the upstream of the optical communication industry chain continues to be tight, especially there is a certain degree of shortage of optoelectronic chips. LightCounting predicts that the shortage of EML and CW laser chip will constrain market growth until the end of 2026. After industry-leading large customers first turned to silicon photonics solutions, driving the entire industry to follow suit, LightCounting predicts that over half of the optical module sales in 2026 will come from modules based on silicon optical modulators. Targets: Recommended to pay attention to: 1) Optoelectronic chips/optical devices/optical modules: Yuanjie Semiconductor Technology (688498.SH), Henan Shijia Photons Technology (688313.SH), Suzhou TFC Optical Communication (300394.SZ), T&S Communications (300570.SZ), Zhongji Innolight (300308.SZ), Eoptolink Technology Inc.,(300502.SZ), Accelink Technologies (002281.SZ), Hgtech (000988.SZ); 2) Optical fiber cables: The demand for computing power drives the rise in optical fiber prices. Hollow core optical fibers, with advantages of low latency, low loss, and wideband transmission, have been deployed by North American cloud players Amazon, Microsoft, and the three major domestic operators. Domestic optical fiber cable manufacturers are expected to occupy more market share with technological and cost advantages; 3) AI smartphones: Shenzhen Sunway Communication (300136.SZ), ZTE Corporation (000063.SZ); 4) Telecom operators: China Mobile Limited (600941.SH), China Telecom Corporation (601728.SH), China United Network Communications (600050.SH). Risk factors: Risk of international trade disputes; Risk of supply chain stability; Cloud player or operator capital expenditure falling short of expectations; AI development falling short of expectations; Intensification of industry competition.