GF SEC: Testing Revolution Under the AI Optical Interconnection Wave, the Process of Domestic Instrument Substitution is Expected to Accelerate.

GF Securities released a research report stating that testing equipment, as the core equipment of optical module production lines, is expected to benefit from three major trends: downstream manufacturers expanding production, increasing value, and changes in new technologies. In the future, as domestic manufacturers continue to break through in the high-end product lines, local companies are expected to further increase their market share in the optical communication testing equipment market, and the process of domestic substitution is expected to accelerate. New technologies such as silicon photonics and CPO bring new testing demands, and optical-electrical joint testing will become mainstream. GF Securities' main points are as follows: - Testing equipment is the core link of the optical module production line, benefiting from the dual logic of downstream optical module expansion and value increase. - The testing equipment for optical module production lines includes optical signal testing equipment and electrical signal testing equipment. According to Semight Instruments' second round inquiry reply announcement, currently testing equipment expenditures in optical module production lines account for about 40-50% of total expenditures, making it a core component. The optical module testing equipment market mainly benefits from two major logics: (1) In the past 23 years, leading optical module manufacturers have initiated a capacity expansion cycle, with Zhongji Innolight's capital expenditure in Q1 2026 reaching 1.929 billion RMB, a year-on-year increase of 380%; as downstream optical module manufacturers expand their capital expenditures, the market size of testing equipment is expected to grow rapidly; (2) As optical modules evolve from 800G to 1.6T and other high-speed rates, the demand for testing equipment's detection accuracy continues to increase, with the value proportion of high-end testing equipment expected to increase further. According to Semight Instruments' prospectus, the average price of the company's sampling oscilloscope has increased from 116,500 RMB in 2022 to 280,000 RMB in 2025, mainly driven by the increasing demand for high-bandwidth equipment brought about by high-speed rate optical modules. - The competitive landscape is highly concentrated, with overseas leaders nearing monopoly, and the timing for domestic substitution is opportune. - According to Frost & Sullivan data cited in Semight Instruments' prospectus, by 2024, overseas companies such as Keysight and Anritsu collectively occupied approximately 84% of the global optical communication testing equipment market, showing a clear dominance by industry leaders. Domestic companies collectively hold a market share of about 16%, with Semight Instruments ranking third with a market share of 9.9%, the only domestic manufacturer among the top five. In the future, as domestic manufacturers continue to break through in high-end product lines, local companies' market share in the optical communication testing equipment market is expected to further increase, and the domestic substitution process is expected to accelerate. - New technologies such as silicon photonics and CPO bring new testing demands, and optical-electrical joint testing will become mainstream. - In addition to the packaging testing demand of traditional pluggable optical modules, new technology solutions such as silicon photonics and CPO are expected to bring new changes to the testing system. (1) Silicon photonics modules: As the penetration rate of silicon photonics solutions gradually increases, it is expected to drive demand for silicon photonics chip-related wafer testing, COC testing, KGD sorting, etc.; (2) CPO optical co-packaging: CPO, as the next-generation architecture for optical interconnection, presents entirely new requirements for the testing process. CPO testing currently requires five major steps: EIC wafer testing, PIC wafer testing, double-sided wafer testing, optical engine packaging testing, and system-level testing, involving collaboration among wafer fabs, optical component packaging fabs, and post-test fabs, with optical-electrical joint testing expected to become the mainstream solution. Risk warning: - The progress of downstream production expansion of optical modules is less than expected, the overall cooling of global investment in AI infrastructure construction, and the risk of deterioration in technology iteration and competitive landscape.