Written by: Rita
Reuters reported on August 4 that the Trump administration and the FCC are drafting a plan to ban U.S. imports of Chinese data center components, with optical modules specifically mentioned. In a research report on August 10, Goldman Sachs addressed the three questions investors care most about: why Chinese optical module leaders continue to win customer favor, whether production capacity and cost efficiency constitute a moat, and whether overseas capacity deployment can hedge risks. Goldman Sachs believes that rapid technological iteration, strong AI demand, tight raw material supply, and high R&D requirements for multiple SKUs make customers more dependent on existing leading manufacturers in the current environment, and they will not easily switch to new suppliers. Goldman Sachs gave Buy ratings to Chinese optical module leaders Eoptolink and Robotechnik, and also gave Buy ratings to FOCI, LandMark, and VPEC (all Taiwan-listed), believing these companies have difficult-to-replicate competitive advantages in technology, capacity, and customer synergy.
Rapid technological iteration, leading manufacturers' R&D advantages continue to expand
AI server architectures are still evolving rapidly, with optical module speeds going from 400G to 800G to 1.6T, packaging forms from pluggable to LPO to NPO to CPO, materials from EML to silicon photonics to lithium niobate, and fiber types from single-mode to multi-mode. The SKU variety is extensive and continuously expanding, and each new specification requires manufacturers to have rapid response and R&D capabilities.
Goldman Sachs believes that this rapidly evolving technological environment only increases customers' reliance on existing leading manufacturers. New suppliers need more time to prove product stability and must re-coordinate with chip suppliers, system integrators, and other component manufacturers to meet quality and design specifications. Historically, Chinese leading manufacturers successfully launched the world's first 400G (2018), 800G (2020), and 1.6T (2023) optical modules, and this leading position is expanding as AI continues to upgrade.
Capacity and cost form barriers, small and medium manufacturers hard to catch up in short term
Seven of the world's top ten optical module suppliers are headquartered in China, and their market share in 2025 further expanded compared to 2024. In addition to R&D capabilities, leading manufacturers also have outstanding advantages in capacity commitment, automated production, and manufacturing efficiency. Self-developed production lines and specialized equipment allow them to achieve rapid product deployment at competitive prices.
Goldman Sachs pointed out that the upgrade of product specifications to 1.6T and above not only increases design difficulty but also manufacturing difficulty. The size of optical modules has not increased, but more optical fibers and lasers must be packed into the same space to achieve higher speeds, and coupling and heat dissipation challenges multiply. In a rapidly evolving technological environment, small and medium manufacturers need more time to reach the same level of manufacturing efficiency.
Overseas capacity deployment underway, Southeast Asian factories already in mass production
Macro uncertainty is not new. From geopolitical tensions in 2019, the pandemic from 2020 to 2022, to tariff increases in 2025, the technology supply chain has reduced risks over the past few years through geographically dispersed production. Leading manufacturers are not only expanding capacity in Southeast Asia (already capable of producing high-end products such as 1.6T), but also deploying in other countries to further diversify manufacturing bases.
Eoptolink's Thailand Phase I is already at full capacity, and Phase II is being expanded in 2026. Goldman Sachs believes that the early deployment of overseas capacity provides a buffer for leading manufacturers, which is not contradictory to Citi's assessment that "overseas capacity is not yet sufficient to fill the gap." In the short term, it cannot cover all demand, but the long-term diversification trend is established.
Goldman Sachs concludes that market concerns about the U.S. ban are understandable, but the moat of Chinese optical module leaders is much deeper than short-term tariff shocks. The accumulation of technical R&D, efficiency of automated production lines, deep synergy with customers, and early deployment of overseas capacity together constitute competitive barriers that are difficult to replicate in the short term. AI-driven demand for optical modules is still accelerating upgrades, and the trend of market share expansion for leading manufacturers will not be reversed by a draft ban that has not yet been implemented.
This article is a compilation and interpretation by Tide Research of a third-party brokerage research report (Goldman Sachs, August 10, 2026), combined with public market information. The ratings, target prices, earnings forecasts, and related judgments quoted in the article are the views of the brokerage's analysts and only represent the position of their institution, not the views of Tide Research, and do not constitute any investment advice.
Market risk exists, and decisions must be made independently. This article should not be used as a basis for buying or selling any securities.
