Recently, I noticed an interesting investment direction—silicon photonics and CPO concepts. There are indeed quite a few stocks in this category showing upward momentum, with some silicon photonics concept stocks fluctuating around 16 yuan. I spent some time organizing my thoughts and found that this sector is truly worth a deeper understanding.

First, let’s talk about why these two technologies are so popular. The hardware baseline for AI servers is already quite high, and capital is looking for the next high-growth area. Silicon photonics and CPO are technologies just beginning to emerge, with enormous growth potential over the next 5 to 10 years. Traditional copper wire data transmission faces bottlenecks—heat generation, slow speeds, and high energy consumption—while replacing electrical signals with light can solve these issues, representing a fundamental technological upgrade.

Simply put, silicon photonics miniaturizes large optical components down to the microchip level, integrating them onto silicon substrates. CPO (Co-Packaged Optics) involves directly packaging optical transceiver modules next to CPUs or GPUs, reducing transmission distances and saving over 30% of energy consumption. Both are closely related, with silicon photonics being the core technological foundation of CPO.

Looking at the supply chain in Taiwan’s stock market, Taiwan’s integrated advantages in the semiconductor field are very evident. From wafer foundries and packaging/testing to optical communication components, all are covered. By 2026, mass production will begin on a large scale, which is a critical period to test each company's implementation capabilities.

TSMC (2330) remains the leader, not only in chip manufacturing but also in defining CPO packaging standards. The COUPE platform it launched is central. The CPO packaging technology expected to enter mass production this year is led by TSMC. Innolux-KY (6451), under Foxconn Group, was among the earliest to deploy CPO packaging and has leading technology in high-speed transmission modules. ASE (3711) is a global leader in packaging/testing and has partnered with TSMC to enter advanced silicon photonics packaging. Advanced Optoelectronic (3363) collaborates deeply with TSMC to develop fiber array connection technology, which is very critical; currently, the market believes it benefits the most.

Other noteworthy companies include BoroWave (3163), which controls passive optical components; Lianya (3081), providing core laser light sources for CPO; and Panxuan (6830), whose optical path positioning and inspection technology can improve yield. These silicon photonics stocks have different logic but all contribute substantively to the supply chain.

The logic in the US stock market is somewhat different. Broadcom (AVGO) is currently the leading chipmaker in the CPO field, with its Tomahawk series becoming the standard for AI data centers. Marvell (MRVL) competes with Broadcom in high-speed optical interconnect chips. In March this year, NVIDIA announced a deep collaboration with Marvell, investing billions to integrate optical interconnects into next-generation architectures. Credo (CRDO) recently acquired DustPhotonics for $1.3 billion, directly gaining control of photonic integrated circuit technology, with full capabilities from 800G to 1.6T, and its stock surged over 40% after the announcement. Coherent (COHR) and Lumentum (LITE) are global leaders in optical transceiver modules and are accelerating their shift toward silicon photonics solutions.

However, investing in this sector requires attention to several risks. First, yield issues: CPO combines optical components and chip packaging, so if any part fails, the entire expensive chip may need to be scrapped. Watch the gross margin trends in financial reports—rising revenue with declining gross margin is a warning sign. Second, specification wars: LPO (Linear Pluggable Optical Modules) is another technical route, cheaper and easier to maintain than CPO, and may capture significant market share before 1.6T becomes widespread. Next, verify the company's actual revenue—don’t be fooled by concept stocks riding the hype. Lastly, pay attention to geopolitical and policy risks; the US broadband infrastructure plan will influence demand, and US-China tech tensions can create noise.

Honestly, silicon photonics and CPO are not short-term themes but rather structural growth trends over the next 5 to 10 years. 2026, as the watershed year for transitioning from verification to large-scale mass production, will truly test each company's technological strength. The investment logic is quite simple—look at standards setting in the US market, and focus on supply chain performance in Taiwan. While chasing new themes, it’s essential to return to fundamentals—prioritize companies that have been certified by major manufacturers and where optical communication revenue share is clearly increasing. Only then can you seize truly valuable companies in this fast-paced sector.