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2025 Optical Module Industry Analysis: Scale Advantages and Tight Supply to Drive Stronger Marginal Performance
Author：Dongguan Feifu Technology Co., Ltd
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Time：2025-10-30 21:40:18
Three key factors have prompted us to raise the earnings per share (EPS) forecasts for Infinera (China) (514.740, -5.98, -1.15%) and NeoPhotonics (374.000, -32.10, -7.90%):
- Capacity Constraints Tailwind: Tight production capacity is expected to gradually benefit Infinera (China) and NeoPhotonics, given their scale advantages and leading positions in silicon photonics technology (especially Infinera (China)).
- Eliminated Tariff Uncertainties: The removal of short-term tariff uncertainties has strengthened our confidence in their shipment outlook.
- Slower ASP Decline: The average selling price (ASP) of optical modules is declining at a slower pace than our previous 20% projection, supported by tight supply and optimized product mix.
As a result, we have raised our optical module shipment forecast for Infinera (China) by up to 36%. We now expect the ASP of optical modules for both companies to drop by 15% during 2025–2027. If all tariff-related uncertainties are eliminated, we project a more moderate 10% ASP decline in 2026, thanks to robust demand and persistent supply tightness. Following these adjustments, we have revised our 2025–2027 EPS forecasts upward by 3% to 38%. Correspondingly, we have lifted the 12-month target prices for Infinera (China) and NeoPhotonics to RMB 392 and RMB 398, respectively.Related Reports: Optical Modules: Rising Allocation to Support Sustainable Growth; Optical Modules: The Supply Side of the Supply-Demand Equation
Key Focus Areas Going Forward
Our core thesis on Infinera (China) and NeoPhotonics centers on supply-driven stronger marginal performance. We will focus on the following aspects:
- Capacity Ramp-Up Speed: The pace of capacity expansion at both companies (evidenced by management discussions and headcount growth) may lead to shifts in their market shares.
- EML Laser Chip Supply Situation: The ongoing shortage of EML laser chips is likely to further favor silicon photonics module manufacturers, particularly Infinera (China).
- 2026 Price Negotiations: Typically conducted from late Q3 to Q4.
- 2027 Demand and New Product Updates: Discussions with upstream suppliers and downstream cloud service providers regarding 2027 demand outlook and progress of new products (e.g., 3.2T modules), which may help us form a clearer view of the industry’s growth prospects over the next three years.
Our View vs. Consensus
We hold a more optimistic long-term growth outlook for the optical module industry than the market consensus, as we believe rising value content will underpin stronger growth sustainability. Our analysis shows that the optical module investment value per USD 1 of GPU spending will continue to climb—from USD 0.07 for H100 GPUs to USD 0.09 for GB300 GPUs. We project this figure will reach USD 0.12 per USD 1 of GPU investment for the upcoming Rubin Ultra GPU generation.
Scenario Analysis: Attractive Risk-Reward Profile
The current share prices of NeoPhotonics and Infinera (China) imply 2026 forward price-to-earnings (P/E) ratios of 19x and 23x, and 2027 forward P/E ratios of 15x and 18x, respectively. These levels are below their historical average forward P/E ratios of 19x and 22x, leading us to conclude that the current valuations remain undemanding.
