China Merchants Securities: Optical Module Capacity Expansion & Technology Iteration Trend Development - Recommends Focusing on Optical Module Equipment Industry

CMB International Securities released a research report stating that optical modules are the core track of AI computing infrastructure. Downstream demand for high-speed pluggable optical modules continues to grow, prompting capacity expansion to meet the rapid current growth, while ongoing investment in R&D of new technologies like CPO opens long-term space. The industry’s expansion cycle and technological iteration cycle are both favorable for equipment. Additionally, in the past, optical module production lines relied heavily on manual labor. Major players expanding overseas is a major trend. To improve overseas production efficiency, demand for automation equipment is increasing, so it is recommended to focus on the optical module equipment industry.

CMB International Securities’ main points are as follows:

Pluggable optical modules are the core devices for optical-electrical conversion in optical communications. They are important hardware for high-speed internal data center interconnection. The key processes include die attachment, wire bonding, optical coupling, packaging, soldering, and aging testing.

(1) Die attachment: Attaching the optoelectronic chip onto a carrier, with manual and automated methods, mainly relying on die bonder and eutectic bonding machines.

(2) Wire bonding: After chip placement, metal wires connect the chip’s solder bumps to the PCB pads to form reliable electrical bonds, requiring wire bonding machines.

(3) Optical coupling: The goal is to efficiently and high-quality couple light into the fiber, ensuring transmission performance. Core equipment includes fully automated optical coupling platforms and high-precision six-axis micro-adjustment platforms. After coupling, UV curing machines or thermal curing furnaces fix the assembly.

(4) Packaging: After optical coupling, the internal optical path and chip are protected, fixed, and sealed with an enclosure to form a complete optical module. The industry is upgrading this process to automation.

(5) Aging testing: Mainly for lasers. The first stage is at the chip level, where chips are loaded into dedicated aging fixtures after necessary production steps. The second stage is at the optical module level, where assembled lasers are tested within the module using testing fixtures.

Compared to traditional pluggable optical modules, CPO technology offers higher integration and smaller size, with significant improvements in bandwidth, power consumption, and space efficiency.

Traditional pluggable optical modules connect to switch PCBs via pluggable interfaces, with electrical signals traveling through PCB traces that can be several centimeters long, causing signal attenuation and affecting transmission stability. CPO technology uses advanced techniques like silicon intermediary layers or micro-bump interconnects to integrate optical components directly into the switch ASIC package, reducing high-speed electrical signal transmission distances to millimeters, effectively suppressing signal attenuation and crosstalk.

The core difference in manufacturing processes between CPO and traditional pluggable optical modules is essentially the difference between discrete component assembly and advanced system-level integration:

(1) Chip interconnection: Traditional modules mainly use wire bonding; CPO employs flip-chip, micro-bumps, and hybrid bonding, with higher interconnect density, precision, and complexity.

(2) Optical coupling: Traditional modules couple fiber to discrete devices with larger tolerances; CPO directly couples light into silicon photonic waveguides with sub-micron alignment accuracy, involving more complex processes.

(3) Packaging and heat dissipation: Traditional modules mainly use TO, BOX, COB packages with lower thermal pressure; CPO requires co-packaging with high-performance ASICs, with high thermal density, often needing microchannel liquid cooling, heat spreaders, vacuum welding, and other advanced thermal management techniques.

(4) Testing systems: Traditional modules can be tested component-wise; CPO, being highly integrated, can only be tested after packaging, requiring optoelectronic combined testing systems, high-speed electrical and optical testing, with new development of testing schemes and equipment.

Risk warnings: Downstream demand fluctuations, technological iteration and route selection risks, customer concentration, and supply chain dependence risks.