Potential U.S. Import Restrictions Are Unlikely to Change the Competitive Advantages of Optical Module Leaders, with Southeast Asian Capacity Becoming a Key Buffer

Overview

Media reports indicate that the U.S. government may ban imports of Chinese data center components, and the FCC is studying measures to restrict optical modules manufactured in China. The report does not forecast the final policy outcome, but instead assesses the potential impact on the competitive landscape of optical modules. Goldman Sachs believes that the rapid evolution of AI infrastructure, rising difficulty in designing and manufacturing high-speed optical modules, tight raw material supply, and long customer certification cycles will make large cloud service providers more reliant on industry leaders with established partnerships. Meanwhile, leading suppliers have reduced geopolitical, tariff, and other macro uncertainties through high-end capacity deployments in Southeast Asian regions such as Thailand.

Core views

First, existing leaders have long served cloud service providers and the AI infrastructure industry chain, enabling them to understand demand and product design changes earlier and maintain R&D leadership amid ongoing evolution in speed, form factors, materials, and fiber types. Second, leaders have advantages in capacity commitments, automated production, self-developed equipment, and manufacturing efficiency, allowing them to deliver new products faster at competitive prices; smaller manufacturers find it harder to replicate this quickly. Third, Southeast Asian production bases are already capable of manufacturing high-end products such as 1.6T, and continued capacity expansion will mitigate potential trade restrictions and supply chain disruption risks. Therefore, policy uncertainty may change production locations, but may not necessarily weaken existing leaders' customer positions.

Analysis framework

The report uses three debates formed through investor discussions as its main framework, combining customer introduction and certification processes, technology roadmaps and SKU complexity, capacity and automation efficiency, the global supplier competitive landscape, Southeast Asian capacity expansion cases, and forecasts for global market size, shipments, product speeds, and material mix from 2025 to 2028 to form an integrated assessment.

Methodology notes

• Competitive Advantage AnalysisCustomer Stickiness and Technology Migration Framework

  Assess supplier replacement risk based on customer collaboration, R&D capability, certification cycles, and the difficulty of ecosystem integration.

  Optical modules continue to evolve toward 1.6T, 2.4T, and 3.2T, while involving multiple routes such as pluggable, LPO, NPO, CPO, as well as SiPh, EML, and lithium niobate. Broad SKUs and long development cycles mean new suppliers need more time to verify stability and reintegrate into the chip, system, and component ecosystems.

• Industry Chain AnalysisCapacity and Manufacturing Efficiency Analysis

  Compare scaled capacity, automation capability, self-developed equipment, and complex product manufacturing capability.

  High-speed modules need to integrate more fibers and lasers without increasing size, adding difficulty in coupling and thermal dissipation. Leaders retain automation know-how through self-developed production lines and proprietary equipment, and ramp new products with higher efficiency.

• Scenario AnalysisSupply Chain Geographic Diversification Framework

  Assess manufacturing base relocation and risk mitigation capability under U.S. import restrictions, tariffs, and other macro uncertainties.

  Leading suppliers have built and expanded bases capable of producing 1.6T products in Southeast Asian regions such as Thailand, while diversifying capacity into more countries, thereby reducing policy shocks from any single region.

• Market Size ForecastOptical Module TAM and Technology Mix Forecast

  Forecast the global optical module market by speed, material, shipment volume, and average selling price.

  The forecast covers 2025 to 2028 and distinguishes products below 400G, 400G, 800G, 1.6T, and 3.2T, as well as SiPh and EML material structures; the report also assumes that average selling prices for comparable products decline year by year.

Asset mapping & comparison

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

• FOCI, RoboTechnik, LandMark, Eoptolink, VPEC

  Leading companies in the Chinese optical module industry chain that the report is focused on positively; all are rated Buy

  Strengths

  Benefit from strong AI demand, rapid technology migration, early customer collaboration, stronger R&D capabilities, capacity commitments, and manufacturing efficiency.

  Weaknesses

  The report does not separately disclose specific operating weaknesses for each company.

  Comparison

  Compared with smaller suppliers, existing leaders have greater advantages in customer certification, SKU coverage, automated production, cost efficiency, and mass production of high-end products.

  Risks

  The scope and implementation of U.S. import restrictions, overseas capacity ramp-up, raw material tightness, changes in technology routes, and declines in average selling prices.

• Eoptolink

  A beneficiary with clear progress in Thailand capacity expansion

  Strengths

  Thailand phase I capacity is already running at full utilization, and phase II expansion is planned for 2026, helping diversify manufacturing bases and capture demand for high-end products.

  Weaknesses

  New overseas capacity still faces construction, ramp-up, and operational execution risks.

  Comparison

  Its Thailand capacity progress provides a relatively clear buffer against trade and supply chain uncertainties.

  Risks

  Potential policy requirements may exceed existing geographic diversification arrangements, and expansion returns depend on AI demand and the ramp-up of high-end modules.

• Small suppliers in the optical module industry

  Relatively pressured participants in the competitive landscape

  Strengths

  May provide supplementary supply in certain niche products or regional markets.

  Weaknesses

  Relatively insufficient R&D resources, customer certification experience, scaled capacity, automation efficiency, and ecosystem integration capability.

  Comparison

  During rapid technology iteration, smaller suppliers need more time to reach leaders' manufacturing efficiency and complete customer validation.

  Risks

  Insufficient product upgrade speed, weaker cost competitiveness, limited customer willingness to switch, and difficulty in mass-producing high-end products.

Key data

• Global optical module market size2025 US$34,211m; 2026E US$50,883m; 2027E US$72,593m; 2028E US$69,135mThe market reaches its forecast-period peak in 2027 and declines in 2028 due to factors such as falling average selling prices for comparable products.
• Global optical module shipments2025 403,046 thousand units; 2026E 452,269 thousand units; 2027E 528,286 thousand units; 2028E 556,429 thousand unitsTotal shipments continue to grow during the forecast period.
• 2028E high-speed product shipment share800G at 8%; 1.6T at 10%; 3.2T at 5%This corresponds to the report's core view on the technology migration of high-speed optical modules.
• 2028E high-speed product revenue share800G at 16%; 1.6T at 34%; 3.2T at 31%The three categories of high-speed products together account for 81% of global optical module market revenue.
• 1.6T market size2025 US$3,857m; 2026E US$18,722m; 2027E US$27,403m; 2028E US$23,264m1.6T is expected to ramp quickly in 2026, with revenue share rising from 11% in 2025 to 37% in 2026.
• 3.2T market size2027E US$13,340m; 2028E US$21,625mIt is expected to begin forming a significant market size in 2027, with revenue share reaching 31% in 2028.
• SiPh revenue share2025 28%; 2026E 43%; 2027E 56%; 2028E 62%This shows the continued increase in revenue penetration of the silicon photonics material route.
• Competitive position of Chinese suppliersSeven of the world's top ten optical module suppliers by revenue are located in ChinaThese suppliers' market share in 2025 increased compared with 2024.
• Eoptolink Thailand capacity2026E phase II capacity expansionThailand phase I capacity is already at full utilization.

Impact & implications

Potential U.S. restrictions may further push the optical module supply chain to migrate toward Southeast Asia and increase the strategic value of overseas capacity, customer certification, and local delivery capabilities. However, rapid technology upgrades and complex manufacturing requirements make it difficult for customers to switch suppliers in the short term, and Chinese leaders with leading R&D, scaled capacity, automated manufacturing, and multi-region deployments may instead consolidate share. For investors, the key is to distinguish between leaders with high-end overseas mass production capabilities and smaller manufacturers lacking R&D, certification, and manufacturing efficiency.

Risks

• U.S. import restrictions on optical modules manufactured in China remain at the potential policy stage, with significant uncertainty regarding final scope, timing, and implementation.
• Southeast Asian capacity construction or ramp-up may fall short of expectations, potentially weakening the buffering role of supply chain geographic diversification.
• AI infrastructure demand growth below expectations would affect high-speed optical module shipments and utilization of new capacity.
• Continued raw material tightness may constrain deliveries and push up costs.
• Rapid changes in 1.6T, 2.4T, 3.2T, and different packaging and material routes may lead to R&D missteps or technology route substitution risks.
• Average selling prices for comparable products continue to decline, and the 2028E global market size may fall even as shipments grow.
• Extended customer certification cycles, substandard product stability, or failed ecosystem integration may delay new product ramp-up.
• Geopolitical, tariff, and regulatory measures may further expand to Southeast Asian production or other supply chain links.

What to watch

• Formal rules, scope of application, and effective date from the U.S. government and FCC regarding import restrictions on optical modules manufactured in China.
• Whether major cloud service providers adjust supplier lists, procurement regions, or product certification requirements.
• Construction progress, yield, and utilization of Eoptolink Thailand phase II and other leaders' high-end Southeast Asian capacity.
• Customer adoption, shipment growth, and revenue mix changes for 800G, 1.6T, and 3.2T products.
• Increasing SiPh penetration and competitive changes in material routes such as EML and lithium niobate.
• Supply and demand conditions for lasers, fibers, and other key raw materials required for high-speed optical modules.
• Market share, pricing, and manufacturing efficiency gaps between leaders and smaller suppliers.
• The magnitude of declines in average selling prices for high-speed products and their impact on industry revenue in 2028.