Huagong Tech management is upbeat on 2026 growth in optical modules and laser businesses

Overview

This report is Goldman Sachs' company research following a visit with Huagong Tech management during the GS Tech AI Outlook Corp Day in Hong Kong. Huagong Tech is based in Wuhan, China, and mainly operates in laser equipment, optoelectronic devices, sensors, and other businesses, with end markets spanning AI data centers, consumer electronics, industrial, and automotive sectors. The report focuses on optical module shipment growth, 800G/1.6T specification upgrades, customer penetration gains, and recovery opportunities for the laser business in 2026.

Core views

The core view is that Huagong Tech's growth momentum mainly comes from two lines: first, AI infrastructure expansion is driving optical module demand, especially higher 800G adoption among Chinese cloud customers, 1.6T upgrades among U.S. cloud customers, and silicon photonics adoption; second, the laser business is expected to benefit from improved demand in 3D printing, high-power ship lasers, precision agriculture, and PCB equipment. Management believes the company is competitive in its high-end optical module product mix and in penetration of top-tier global customers.

Analysis framework

The report combines management interviews with a supply-chain demand framework, analyzing the company's operating feedback in the context of global AI servers, AI chips, cloud capex, and optical module specification upgrades, while cross-checking against Goldman Sachs' sector views on optical modules, epiwafer/CW lasers, and ODMs.

Methodology notes

• Industry demand analysisAI Infrastructure and Optical Module Specification Upgrade Framework

  Assess supply-chain momentum for optical modules by looking at AI server demand, GPU/ASIC chip demand, cloud vendor upgrade cadence, and forecasts for 800G/1.6T optical module shipments.

  Goldman Sachs expects global AI chip demand of 11 million, 16 million, and 21 million units in 2025-2027E, with ASIC share rising from 38% to 50%; it also expects 2026E global 800G and 1.6T optical module shipments of 38 million and 14 million units, respectively.

• Company operating analysisManagement Interview

  Assess future growth direction based on management feedback on orders, product upgrades, customer expansion, and business recovery.

  This interview suggests management remains positive on 2026 growth in optical modules and lasers, with particular emphasis on expansion from Chinese cloud customers to U.S. cloud customers and competitiveness in high-end modules.

• Disclosure frameworkGS Factor Profile, M&A Rank, and Quantum

  Goldman Sachs' commonly used framework for growth, returns, valuation, composite factors, M&A probability, and financial database disclosures.

  These items are mainly part of the disclosure appendix and provide background on Goldman Sachs' research methodology, rather than the report's core investment conclusion on Huagong Tech.

Asset mapping & comparison

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

• Huagong Tech (000988.SZ)

  Report subject, rated Not Covered

  Strengths

  Based in Wuhan, China, with coverage across laser equipment, optoelectronic devices, and sensors; the optical module business serves a diversified end-market mix including AI data centers, consumer electronics, industrial, and automotive sectors; management is positive on growth in high-end optical modules and lasers.

  Weaknesses

  The report does not provide full financial forecasts, earnings elasticity, valuation, or a target price, and the company is not formally covered by Goldman Sachs.

  Comparison

  The company's optical module business, HG Genuine, ranked among the global top 9 in 2024; the report also cites Innolight, Eoptolink, and TFC Optical as Goldman Sachs' preferred peers in optical modules.

  Risks

  Pace of high-end customer onboarding, speed of 800G/1.6T upgrades, silicon-photonics mass-production competition, volatility in AI infrastructure investment, and slower-than-expected recovery in the laser business.

• Optical module supply chain

  Core beneficiary theme

  Strengths

  Benefits from AI server growth, parallel expansion of GPU and ASIC demand, 800G/1.6T upgrades, and higher silicon-photonics penetration.

  Weaknesses

  The industry is highly sensitive to cloud capex and upgrade cadence, with considerable pricing and technology-iteration pressure.

  Comparison

  Goldman Sachs' preferred names include Innolight, Eoptolink, and TFC Optical.

  Risks

  Slower cloud demand, oversupply, failed product-generation transitions, and longer customer qualification cycles.

• Epiwafer/CW laser and ODM chain

  Related beneficiary supply chain

  Strengths

  Goldman Sachs categorizes Landmark and VPEC as beneficiaries in epiwafer/CW lasers, and Ruijie as a beneficiary in ODM.

  Weaknesses

  The report only lists investment preferences and does not provide company-level financial or valuation analysis.

  Comparison

  Compared with finished optical module makers, upstream epiwafer/CW lasers and ODMs correspond to the materials/device and system-manufacturing segments, respectively.

  Risks

  Changes in downstream optical module demand, customer concentration, shifting technical specifications, and fluctuations in capacity utilization.

Key data

• Report date2026-01-17The report was published at 1:54AM HKT on January 17, 2026.
• Company code000988.SZThe report covers Huagong Tech, with rating status of Not Covered.
• AI chip demand forecast2025-27E: 11 million/16 million/21 million unitsImplied AI chip demand from Goldman Sachs' global AI server volume forecast.
• ASIC share of AI chips2025E/2026E/2027E: 38%/40%/50%Reflects rising ASIC penetration in AI servers.
• 2026E global 800G optical module shipments38 million unitsGoldman Sachs' forecast for global 800G optical module shipments.
• 2026E global 1.6T optical module shipments14 million unitsAbout 60% from GPU AI servers and 40% from ASIC AI servers.
• China optical module shipmentsDouble-digit growth in 2026EManagement expects China optical module shipments to rise with 800G and silicon photonics growth.
• Company industry positionTop 9 globally in optical modules in 2024The report says Huagong Tech's optical module business, HG Genuine, ranked among the global top 9 in 2024.

Impact & implications

The report strengthens the positive transmission from AI infrastructure investment to the optical module supply chain: cloud vendors upgrading from 800G to 1.6T, higher ASIC mix, and the development of China's domestic AI ecosystem all benefit high-end optical modules and silicon-photonics-related companies. For Huagong Tech, the key investment implication is whether it can translate growth in Chinese cloud demand into penetration of U.S. cloud and other global top-tier customers, while maintaining product and delivery advantages in high-end module competition.

Risks

• AI infrastructure buildout slows more than expected, leading to weaker optical module demand and shipment growth.
• High-end product upgrades or customer qualification for 800G, 1.6T, 3.2T, NPO, LPO, and other products fall short of expectations.
• Expansion into U.S. cloud customers is slower than management expects, limiting gains in penetration of global top-tier customers.
• Silicon photonics adoption, yields, or cost curves do not meet expectations.
• Recovery in the laser business in 3D printing, shipbuilding, agriculture, and PCB applications is weaker than expected.
• Regulatory disclosure indicates Goldman Sachs may have shareholdings, investment banking relationships, or other interests in relevant companies; investors should assess the disclosure carefully.

What to watch

• Whether 2026 China cloud demand and shipments of 800G optical modules achieve double-digit growth.
• Progress in Huagong Tech's expansion from Chinese cloud customers to U.S. cloud customers.
• The pace of adoption of 1.6T and faster optical modules in GPU AI servers and ASIC AI servers.
• Customer qualification, mass production, and gross margin performance of high-end products such as silicon photonics, NPO, and LPO.
• Order recovery in the laser business for 3D printing wearables, high-power marine lasers, precision-agriculture laser weeding, and PCB equipment.
• The lift to structural optical module demand from changes in AI chip demand and the ASIC mix.