(Yicai) Sept. 11 -- The rapid expansion of artificial intelligence computing power is driving strong demand for optical communication products and accelerating performance upgrades, pushing the industry into a new cycle of technological advancement.

Visitor numbers are up significantly this year, compared to previous years, Yicai noted at the ongoing China International Optoelectronic Expo in Shenzhen.

Demand is such that firms across the optoelectronics industry, from optical modules, optical chips, optical fibers, connectors and testing equipment, are facing product shortages and limited production capacity, Yicai learned.

Several companies attending the expo, now in its 27th year, said that orders for some products have already been scheduled until 2027, and some customers have even started to lock in production capacity further into the future.

The industry is also seeing increasingly rapid advances in technology and product performance. Yicai noted that optical modules capable of transmission speeds of 1.6 terabits per second or even 3.2T per second are being showcased by several companies.

Although optical modules of 800 gigabits per second remain the main product this year, some 1.6T optical modules have already started to be shipped, a technician at an optical communication company told Yicai. A surge in demand for 1.6T optical modules may not happen until next year. Companies are accelerating technology upgrades to avoid falling behind their competitors, he added.

Optical modules convert electrical signals into optical signals and vice versa. In AI server clusters, graphics processing units, servers and switches need to exchange huge amounts of data. As computing workloads continue to grow, traditional electrical connections are increasingly unable to handle these data volumes, making high-speed optical interconnects an important solution.

“At present, it is mostly top manufacturers which have the ability to deliver 1.6T optical modules on a large scale. For most firms in the industry, the development of these new products is still at the stages of production-line construction, sample validation or customer testing,” another leading optical module manufacturer told Yicai.

Testing Race

Rapid growth in demand for optical modules and faster product upgrades are driving changes across the entire optical communication supply chain, not just higher transmission speeds. As higher-performance products move into development and mass production, competitive pressure to upgrade technology is spreading to upstream areas including optical chips, electrical chips, testing equipment and near-packaged optics.

“Each time the speed of optical modules is upgraded, testing equipment also needs to be upgraded accordingly,” said Tan Jian, the research and development director at Wanliyan, a testing equipment supplier. High-speed optoelectronic testing is expanding from testing individual devices to testing the entire chain, including components, modules and optoelectronic systems.

“Competition among testing companies used to focus mainly on testing individual products, but it is now gradually shifting toward competition in full-scenario testing solutions,” Tan said.

In addition, the rapid evolution of optical modules in China, from 400G and 800G to 1.6T, is also creating an opportunity for domestic testing-equipment developers to challenge overseas manufacturers which have long dominated the market for high-speed optical communication testing instruments, Tan said.

China’s optical communication testing instrument market was worth about CNY3.3 billion (USD491.8 million) in 2024 and is expected to reach CNY6.6 billion in 2029, according to data from US business consultancy firm Frost&Sullivan. Overseas manufacturers currently account for about 84 percent of the market, while domestic firms hold only about 16 percent.

Editors: Tang Shihua, Kim Taylor