Finance and Economics APP has learned that Huafu Securities released a research report stating that in the optical interconnection field, CPO is a weapon to break through the backend network's Scale out cost and power consumption bottlenecks. CPO switches have signal, power consumption, and cost advantages over traditional switches in high-bandwidth connections. OIO provides a solution for chip-to-chip connections, with the potential for large-scale expansion. Therefore, it is recommended to focus on investment opportunities in optical devices, optical chip coupling, and packaging equipment under the driving force of CPO. It is suggested to pay attention to relevant companies in optical modules, optical engines, and technological optical devices.

Huafu Securities' main points are as follows:

CPO: A weapon to break through the backend network's Scale out cost and power consumption bottlenecks.

CPO refers to the co-packaging of exchange ASIC chips and silicon optical engines on the same high-speed main board, reducing signal attenuation, lowering system power consumption, reducing costs, and achieving high integration. Based on Broadcom's products, on the optical interconnect level, Bailly CPO can reduce power consumption by about 70% compared to traditional pluggable optical solutions. At the switch level, Bailly CPO can reduce power consumption by about 30%. At the cluster level, for a 32K GPU cluster, CPO can achieve over 1MW of power savings. In terms of market space, a paper by Cyriel Minkenberg and others states that driving the application of CPO requires its price to be significantly lower than pluggable optical devices, and the average selling price of optical engines is expected to decrease from less than $1.2/Gbps in 2021 to less than $0.6/Gbps in 2024.

Based on this price decline, the bank estimates that the average selling price of optical engines will reach $0.24/Gbps in 2028. 650 Group predicts that the shipment volume of 51.2Tbps switches will increase from 0.077 million units in 2024 to 1.8 million units in 2028. Considering the advantages of signal, power consumption, and cost of CPO switches over traditional switches in high-bandwidth connections, assuming all 1.8 million 51.2T switches shipped in 2028 are CPO switches, the corresponding market size of CPO switch optical engine in 2028 will reach approximately $22 billion.

Optic IO: Vertically expanding the ultra-bandwidth domain to achieve more GPU Scale up.

Optic IO is an optical interconnect integrated with computing chips (such as CPU, GPU, ASIC, or FPGA) in the same package. Optical I/O provides chip-to-chip connectivity solutions, using light instead of electric-based I/O within a single IC. Broadcom's solution adopts a 2.5D multi-chip package, utilizing silicon as an intermediate layer to package the optical engine Chiplet and HBM through CoWoS, creating an optical engine with 6.4Tbps I/O bandwidth for each CPO. This solution demonstrates its potential in large-scale expansion, with the entire optical link capable of achieving transmission distances of 5m-30m and enabling the interconnection of 512 GPUs through 64 high-port-density switches for Scale up.

Focus on investment opportunities in optical devices, optical chip coupling, and testing equipment under the drive of CPO.

Regarding active devices, Suzhou TFC Optical Communication has laid out the development of multi-channel high-power laser suitable for CPO-ELS module applications; Zhongji Innolight has made significant progress in silicon optical chip design research and technical reserves, having certain capabilities in CPO-related product development; Accelink Technologies unveiled a self-developed optical source module at OFC 2023 that can support 3.2T CPO optical engine, laying the technical groundwork for future CPO product releases; Alpine Optoelectronics, a subsidiary of Eoptolink Technology Inc., also has its independently developed nCP4 silicon photon technology platform.

Regarding passive devices, as CPO adopts multi-channel high-density packaging, it requires fiber array FA, MT, or MPO and other high-density connectors, with high requirements for this type of specification jumper process. Domestic manufacturers such as Suzhou TFC Optical Communication, T&S Communications, Advanced Fiber Resources, Henan Shijia Photons Technology, and others have layouts for related passive devices.

In addition, high-precision coupling equipment is the core equipment for silicon optics and CPO packaging processes. FiconTEC is one of the world's leading manufacturers of optical automation micro-assembly and testing equipment, with its produced devices aiding global renowned optoelectronic manufacturers like Intel, Cisco, Broadcom, Nvidia in achieving the development, validation, and large-scale production of high-speed silicon optical modules, CPO, and other new technologies. LQSi Intelligent Technologies in China is laying out large-scale optoelectronic integration and photon integration automated bonding equipment for the new process routes towards CPO, silicon optics, and generalized semiconductors.

Recommend paying attention to,

Optical Modules & Optical Engines: Zhongji Innolight (300308.SZ), Eoptolink Technology Inc. (300502.SZ), Suzhou TFC Optical Communication (300394.SZ), Accelink Technologies (002281.SZ)

Technology Optoelectronic Devices: T&S Communications (300570.SZ), Advanced Fiber Resources (300620.SZ), Henan Shijia Photons Technology (688313.SH)

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