Potential U.S. restrictions may disrupt China's optical module supply chain; Nomura maintains a positive view on Zhongji InnoLight

Overview

This report interprets Reuters' report that the United States may restrict imports of Chinese data center components and assesses the impact of different regulatory scopes on Chinese optical transceiver module manufacturers and the global AI data center supply chain. The report focuses on Zhongji InnoLight and also mentions Eoptolink, concluding that policy news may intensify near-term share price volatility but is not yet sufficient to change the positive fundamental view on Zhongji InnoLight.

Core views

There are two main scenarios for the potential policy. The first scenario is restrictions on China-made data center components, including optical transceiver modules produced in China; because leading manufacturers have built overseas high-end capacity years in advance, the impact may be relatively small. The second scenario is restrictions on all next-generation optical transceiver modules from Chinese suppliers; this would create a lose-lose situation because Chinese manufacturers have a large share of the global high-end product market, while the optical communications industry is highly globalized and interdependent, and restrictions could lead to supply tightness, higher costs, and delays in AI data center deployment.

Analysis framework

The report uses a combination of policy scenario analysis and company fundamental assessment: it first distinguishes two scenarios based on the restricted targets, namely China-made products and all next-generation products from Chinese suppliers; then assesses the impact from overseas capacity, global market share, product performance, cost efficiency, dependence on key materials, and difficulty of supply-chain substitution; and finally uses 2027E earnings per share and P/E multiples for valuation.

Methodology notes

• Policy impact analysisTwo-scenario analysis

  Assess supply-chain impact by scope of restrictions

  The report separately analyzes two scenarios: restrictions only on China-made products, and restrictions on all next-generation optical transceiver modules from Chinese suppliers, to identify the different shocks borne by company capacity layouts and the global supply chain.

• Relative valuationForward P/E valuation

  2027E earnings per share multiplied by the target P/E

  The report values the company using 2027E EPS of CNY 65.47 and a 21x P/E multiple, referencing the historical median P/E of A-shares or the median P/E of the WIND China A-share technology and electronic components sectors.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Zhongji InnoLight (300308 CH / 3308 HK)

  Core covered company in the report and a Chinese leader in high-end optical transceiver modules

  Strengths

  It has deployed overseas high-end capacity in advance, has strong product performance and cost efficiency, and holds an important market share in the global AI supply chain.

  Weaknesses

  It is relatively sensitive to global data center capital expenditure, product upgrade cycles, export markets, and the cross-border regulatory environment.

  Comparison

  Together with Eoptolink, it is one of China's leading optical transceiver module suppliers; Zhongji InnoLight is rated Buy by Nomura, while Eoptolink is not rated.

  Risks

  Expansion of U.S. restrictions, adjustments in global customer procurement, weaker-than-expected demand for high-end modules, intensified competition and price wars, and slower-than-expected upgrades of 800G and 1.6T products.

• Eoptolink (300502 CH)

  A Chinese leading optical transceiver module supplier mentioned in the report

  Strengths

  It has prepared overseas high-end optical transceiver module capacity, which may cushion restrictions targeting China-made products.

  Weaknesses

  It also faces risks from an expanded scope of U.S. regulation and adjustments to global customer supply chains.

  Comparison

  Both Zhongji InnoLight and Eoptolink have overseas capacity preparations, but the report marks Eoptolink as Not rated.

  Risks

  Policy restrictions, demand slowdown, industry competition, product iteration, and export risks.

Key data

• Regulatory newsThe U.S. Federal Communications Commission may announce related measures within 2026The measure may still be modified or shelved, and the definition of “new Chinese optical transceiver modules” has not yet been clarified.
• 300308 CH price and ratingCNY 1,021.99; BuyPrice date is August 4, 2026.
• 3308 HK price and ratingHKD 1,177.00; BuyPrice date is August 4, 2026.
• Valuation parameters21x 2027E P/E2027E earnings per share is CNY 65.47.
• Disclosed target pricesHKD 1,375.00 and HKD 1,595.00The provided text does not clearly preserve the item-by-item mapping between the two target prices and 300308 CH and 3308 HK.

Impact & implications

If the final measures use product origin as the restriction standard, Chinese leaders with overseas capacity may maintain supply to global customers through capacity transfer, and the fundamental impact would be relatively controllable. If the measures use supplier nationality as the standard and cover all next-generation products, global customers will face insufficient replacement capacity, rising procurement costs, and risks of data center project delays; China's control over certain materials may further exacerbate bottlenecks. From an investment perspective, policy uncertainty may increase short-term volatility, but Nomura believes Zhongji InnoLight's competitiveness, earnings performance, and valuation still provide support.

Risks

• The final U.S. restrictions may cover next-generation optical transceiver modules from all Chinese suppliers, rather than only China-made products.
• Demand for high-end optical modules in data communications and telecom markets may be weaker than expected.
• Competition in the 400G and 800G optical module markets may intensify.
• The upgrade pace of products such as 800G and 1.6T may be slower than expected.
• Escalating price wars may affect the company's exports to global customers and profitability.
• China's control over certain key materials may create additional bottlenecks in an already tight supply market.
• The relevant regulatory reports have not yet been confirmed by final rules, and the policy may be modified or shelved.

What to watch

• Whether the U.S. Federal Communications Commission formally releases the measures and the specific timetable.
• Whether the rules will define restricted products by place of manufacture or by supplier nationality.
• The specific technical scope of “new” or “next-generation” optical transceiver modules.
• The capacity, certification progress, and ability to supply U.S. customers at Zhongji InnoLight's overseas factories.
• Changes in global AI data center construction progress and deployment costs.
• 800G and 1.6T product upgrades, customer demand, and industry price competition.
• China's export policy for key materials and its impact on the global optical communications supply chain.