Potential import restrictions do not alter leaders' advantages; barriers to competition in AI optical modules may rise further

Overview

The report centers on media reports that the United States may restrict imports of China-made optical modules and summarizes the three debates investors are most focused on: why existing leaders can continue to win customers, how capacity and cost efficiency affect competition, and whether diversification of production bases can reduce macro uncertainty. Goldman Sachs does not make a judgment on the final outcome of the restrictions, but continues to favor the industry leaders within its China optical networking coverage.

Core views

Chinese optical module leaders have long served CSP customers and are deeply involved in the AI infrastructure supply chain, participating early in customer design, which helps them identify demand changes in advance. As products upgrade from 800G to 1.6T, 2.4T, and 3.2T, form factors, materials, fiber types, and SKU counts continue to increase, while barriers in R&D, validation, ecosystem collaboration, and scaled manufacturing rise in tandem. New suppliers need more time to prove product stability and complete integration with chip, system, and other component suppliers; therefore, rapid supply chain migration does not necessarily weaken Chinese leaders and may instead increase customers' reliance on existing suppliers. At the same time, leaders are expanding high-end capacity in Southeast Asia to reduce production and trade policy risks from a single region.

Analysis framework

The report builds a three-debate framework based on investor discussions and assesses the competitive landscape across three dimensions: customer collaboration and R&D capabilities, capacity and manufacturing costs, and geographic diversification of production bases. It also uses forecasts for global optical module revenue, shipments, speed mix, material mix, and ASPs to assess the industry migration path from 2025 to 2028.

Methodology notes

• Competitive landscape analysisThree investor debates framework

  Assess the potential impact of import restrictions through customer acquisition, manufacturing efficiency, and production base diversification.

  This framework does not forecast policy outcomes, but compares the relative competitiveness of existing leaders and new entrants under policy uncertainty.

• Market size forecastOptical module TAM breakdown

  Break down the global optical module market by speed, material, shipments, and ASP.

  The forecast covers 2025 to 2028 and separately examines products below 400G, 400G, 800G, 1.6T, and 3.2T, as well as SiPh and EML material structures.

• Equity factor analysisGS Factor Profile

  Compare stocks using growth, financial returns, valuation multiples, and composite percentiles.

  The growth factor is based on forward sales, EBITDA, and EPS growth; financial returns are based on ROE, ROCE, and CROCI; valuation multiples are based on metrics such as P/E, P/B, and EV/EBITDA. This report only discloses the general methodology and does not present specific factor results for the relevant companies.

Asset mapping & comparison

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

• FOCI, RoboTechnik, LandMark, Eoptolink, VPEC

  Buy-rated names in Goldman Sachs' China optical networking coverage

  Strengths

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

  Weaknesses

  Still exposed to trade policy, raw material supply, customer concentration, and execution risks in mass production of high-speed products.

  Comparison

  Compared with new entrants and smaller vendors, existing leaders have greater advantages in product validation, automated production, delivery speed, and costs.

  Risks

  If U.S. import restrictions are broad in scope and difficult to buffer through overseas capacity, they could affect orders, costs, and delivery cadence.

• Eoptolink

  Industry leader case with clear progress in Southeast Asian capacity expansion

  Strengths

  Phase I capacity in Thailand is already running at full utilization, and Phase II expansion is planned for 2026E, which can enhance geographic diversification of production.

  Weaknesses

  Overseas expansion requires continued assurance of yield, supply chain support, and operating efficiency.

  Comparison

  Compared with vendors that have not yet established overseas high-end mass production capabilities, it has stronger buffering capacity against potential location-based import restrictions.

  Risks

  Expansion progress, capacity ramp-up, local operating costs, and changes in policy rules may affect expected returns.

Key data

• Global optical module TAM2025 US$34,211m; 2026E US$50,883m; 2027E US$72,593m; 2028E US$69,135mExpected to reach the forecast-period peak in 2027, then decline somewhat in 2028 due to factors such as ASP declines 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 unitsShipments continue to grow, but the revenue mix tilts more markedly toward high-speed products.
• 2028E revenue share of high-speed products800G at 16%; 1.6T at 34%; 3.2T at 31%The three categories of high-speed products are expected to contribute 81% of optical module revenue in total.
• 2028E shipment share of high-speed products800G at 8%; 1.6T at 10%; 3.2T at 5%The lower volume share corresponds to a higher revenue share, reflecting the higher unit prices and value content of high-speed modules.
• SiPh revenue share2025 28%; 2026E 43%; 2027E 56%; 2028E 62%Silicon photonics solutions are expected to continue replacing some EML solutions.
• Position of Chinese suppliersSeven of the world's top ten optical module suppliers by revenue are located in ChinaThese suppliers' market share in 2025 expanded versus 2024.
• Eoptolink Thailand capacityPhase I is already running at full capacity, and Phase II is planned to expand capacity in 2026EThis reflects leaders' efforts to diversify supply chain risk through capacity in Southeast Asia.

Impact & implications

If the United States tightens imports of Chinese optical modules, it may disrupt orders, delivery, and production location allocation in the short term, but customers remain highly reliant on mature suppliers' R&D collaboration, product stability, and scaled manufacturing capabilities. Leaders with overseas high-end capacity are more likely to buffer policy shocks through origin adjustments, while smaller suppliers lacking automation capabilities, customer validation records, and cross-regional manufacturing systems will find it difficult to quickly take on demand. Over the medium term, industry value will concentrate toward 1.6T, 3.2T, and SiPh solutions, but continued ASP declines mean market share, yield, and cost control are more important than shipment growth alone.

Risks

• There is significant uncertainty around the scope, implementation timing, rules of origin, and exemption rules for U.S. import restrictions.
• Persistent shortages of key raw materials may limit capacity release and push up costs.
• The difficulty of coupling, thermal management, yield, and scaled mass production increases for 1.6T and higher products.
• Continued ASP declines for comparable products may offset some shipment growth.
• Southeast Asian new capacity ramp-up may fall short of expectations or may not fully meet customer certification requirements.
• Changes in AI capital expenditure, server architecture, or CSP procurement strategies may cause demand to fall below forecasts.

What to watch

• The formal text, implementation timing, and applicable product scope of proposed measures by the FCC and the U.S. government.
• Whether CSP customers adjust supplier certification, order allocation, and origin requirements.
• Construction, utilization, and yield of high-end optical module capacity in Southeast Asia, including Thailand and Vietnam.
• The mass production cadence of 1.6T and 3.2T products and their penetration in revenue and shipments.
• The pace at which SiPh replaces EML solutions.
• Changes in key raw material supply, product ASPs, and leaders' market share.