Throughout the third quarter, the A-share optical module supply chain experienced a minor wave of capacity expansion, with total investment amounting to approximately 40 billion yuan.

Hui Lyu Ecology (001267.SZ) is the latest entrant, announcing on the 27th that its controlling subsidiary Wuhan Junheng Technology Co., Ltd. (hereafter "Wuhan Junheng") plans to invest 309 million yuan to build a research and development production base, adding an annual capacity of 2 million high-speed optical modules, bringing the total planned capacity in the Wuhan region to 3.5 million units per year.

However, on the other side of industrial capital increasing its bets is the withdrawal of secondary market funds.

On September 28, the A-share optical communications sector suffered a sharp sell-off.

Hui Lyu Ecology's stock fell 9.63% on the first trading day after its announcement; on the same day, Zhongji Innolight (300308.SZ) dropped 9.03%, the "Yizhongtian" trio saw approximately 170 billion yuan in market value evaporate in a single day, and Hengtong Optic-Electric (600487.SH) and Fiberhome Telecommunication Technologies (600498.SH) hit the daily limit down.

Fund concerns are not unfounded.

Extending the timeline across the entire third quarter, expansion actions appeared密集: Hengtong Optic-Electric disclosed a 6.636 billion yuan private placement plan on September 25, with 3.148 billion yuan directed toward optical communications; JPT Opto-electronics (688025.SH) proposed a 1.373 billion yuan private placement, primarily investing in high-density optical interconnect products; Fuxin Technology (688662.SH) planned a private placement for expanding production of micro thermoelectric cooling devices upstream of optical modules.

Earlier, from July to August, new investment projects from multiple supply chain companies including Pengding Holdings (002938.SZ), Dongshan Precision (002384.SZ), Yuanjie Technology (688498.SH), and Linktel Technologies (301205.SZ) were announced successively.

The expansion wave and stock price declines occurred almost in sync, and this is no coincidence.

What the market sees is not a single prosperity signal of "demand visibility," but rather concerns about "overcapacity" finding concrete grounding through equity dilution from private placements, supply-side shocks from new capacity, and expansion cycles longer than technology generation windows.

Over 10 Optical Communications Companies Disclosed Expansion Plans in Q3

According to incomplete statistics from this reporter, the total investment in these expansion projects amounts to approximately 40 billion yuan.

Among them, Hui Lyu Ecology, through its controlling subsidiary Wuhan Junheng, conducts optical module business, with major customers including Coherent, Source Photonics, and New H3C. The listed company has also achieved a main business transition amid this computing power wave.

Its semi-annual report shows that in the first half of 2026, the company's operating revenue was 1.037 billion yuan, a year-on-year increase of 49.01%, of which revenue from optoelectronic device business, mainly optical modules, AOC, and optical engines, was 958 million yuan, accounting for 92.36% of total revenue, further increasing from 2025; revenue from the original landscaping business declined 46.18% year-on-year, accounting for only 7.64% of total revenue.

Regarding the reason for this investment expansion, Hui Lyu Ecology explained that optical modules are undergoing generational change, and through this project to build the Junheng Technology R&D production base, the company can expand capacity during the industry's rising demand period, ensure stable supply to customers, and reserve technical capabilities for next-generation products.

The reporter noted that in addition to Hui Lyu Ecology, several optical communications supply chain listed companies disclosed expansion plans in September, covering optical modules, optical devices, optical chips, and other product segments, with private placement fundraising being the mainstream method.

Hengtong Optic-Electric plans to raise 6.636 billion yuan through private placement, of which five optical communications projects together account for 3.148 billion yuan, including 1.051 billion yuan for AI advanced optical interconnect projects and 196 million yuan for CPO advanced packaging R&D projects.

JPT Opto-electronics plans to raise no more than 1.373 billion yuan, mainly investing in high-density optical interconnect product production and construction projects, with products including MPO multi-core fiber connectors, MMC micro multi-core fiber connectors, and FAU fiber array units. The production base construction period is 24 months, and the production line construction period is 12 months.

Fuxin Technology also plans to raise no more than 270 million yuan through private placement, with 150 million yuan directed toward micro semiconductor thermoelectric cooling device (Micro TEC) production and construction projects. This product is mainly used for temperature control of optical modules. After the project reaches full production, it will add 42 million Micro TEC units per year in new capacity, compared to the company's existing capacity of 24 million units per year.

The common point among these three companies planning private placements for expansion is that their optical communications businesses are in a high-growth phase.

Hengtong Optic-Electric's optical communications business revenue in the first half grew over 130% year-on-year, with gross margin exceeding 60%, driving the company's overall profit surge.

JPT Opto-electronics's fiber device business revenue increased from 143 million yuan in 2025 to 399 million yuan in the first half of 2026; Fuxin Technology's Micro TEC products for communications achieved sales revenue of 56.1646 million yuan in the first half, a year-on-year increase of 145.96%, with downstream customers including Coherent, HGTECH, and Source Photonics.

Looking at the third quarter over a longer span, July-August saw a batch of even larger projects.

Pengding Holdings released a private placement plan in early July, planning to raise no more than 9.6 billion yuan, investing in the "Qingding AI Server and High-Speed Optical Module High-Density Interconnect Build-up Board Project," with total project investment of approximately 12.73 billion yuan. Upon completion, it will add approximately 655,600 square meters of high-end HDI annual capacity.

Shijia Photons (688313.SH), Mentech Optical & Magnetic (002902.SZ), and Focuslight Technologies (688167.SH) also launched private placement plans, proposing to raise approximately 2.8 billion yuan, 1.283 billion yuan, and 1.021 billion yuan respectively, investing in expansion and construction of high-speed optical communications products.

In addition to the above private placement projects, some leading stocks also announced new investment expansion projects.

Yuanjie Technology announced in August that it plans to invest approximately 4.268 billion yuan through self-raised or owned funds to build a semiconductor technology industrial park, focusing on high-end laser chips; Dongshan Precision increased investment in its Source Photonics optical chip and optical module expansion project from 1.2 billion USD to 1.7 billion USD in August; Linktel Technologies plans to increase capital in its subsidiary with its own funds, investing approximately 150 million USD to build an 800G/1.6T optical module production base in Malaysia.

Three Drivers of Expansion: Demand Upgrades, Generational Iteration, and Upstream Tightness

Rapid growth in AI computing power demand is driving rapid growth in AI server demand, and the global optical module market size continues to rise.

Goldman Sachs released a global optical module industry report on September 7, which raised its global optical module shipment forecasts for 2026 to 2028 by 21%, 31%, and 31% respectively, with shipments of 1.6T and above products raised by 29%, 61%, and 50% respectively, and 800G and above products raised by 31%, 39%, and 36% respectively.

The sources of Goldman Sachs' upward revision are threefold: upward revisions to rack-level AI server and ASIC server shipments, upward revisions to optical module usage per chip, and continuous specification upgrades.

According to public information, the report adjusted the 1.6T optical module usage per chip for the Rubin Ultra platform from previously not included to 2 units, raised 3.2T from 3 units to 5 units, and added forecasts for Google's TPU v9 servers.

Second is the technological generational iteration of optical modules driven by various application scenarios.

A communications analyst interviewed by the reporter said that currently 800G demand remains resilient, 1.6T large-scale deployment is accelerating and is expected to begin volume shipments next year, 3.2T has begun customer and system verification, and 6.4T/7.2T NPO and 12.8T XPO are mainly for technology reserves and forward-looking demonstrations.

"In terms of product form, pluggable modules remain the current commercialization mainstay, LPO/LRO optimizes around low power consumption, NPO is extending toward various connection solutions, and CPO continues to advance technology reserves凭借 its advantages in energy efficiency and bandwidth density. From a development trend perspective, the various technical routes of optical interconnect are not simply substitution relationships, but form differentiated adaptations based on application scenarios, interconnect distance, bandwidth density, power consumption, cost, and maintainability. It is difficult to converge to a single technical route in the short to medium term," the analyst said.

Another driver of the industry's collective expansion comes from upstream supply constraints.

Currently, the core optical chips of optical modules still rely on indium phosphide (InP) substrates.

According to estimates by Omdia and Yole, global indium phosphide substrate demand in 2026 will be approximately 2.6 million to 3 million units, with effective capacity of approximately 750,000 units, leaving a gap of over 70%.

Expansion by domestic manufacturers is equally difficult. Single crystal growth is the core bottleneck, industry yield rates are generally low, and single crystal furnace equipment customization cycles are long; EML chip expansion is also constrained by MOCVD equipment that relies on imports, with long delivery times.

After Expansion: The Time Gap Between Capacity Landing and Prices

Companies choose to expand because they see upward revisions in industry demand expectations and industry development trends.

Zhongji Innolight (300308.SZ) stated directly in its latest institutional research: "This year's overall expansion efforts are relatively large, and capital expenditure in the second half will also be relatively high. This is also because order visibility is very high and demand is very strong."

The reporter noted that the construction cycles of this round of expansion projects in the third quarter generally require more than one year. Hui Lyu Ecology's project period is 20 months, Fuxin Technology's is 3 years, and Pengding Holdings' project also requires cross-year construction.

However, there is a time gap between the landing of new capacity and demand matching, creating a practical problem: the volume ramp window for 1.6T optical modules may be shorter than the construction cycle of many expansion projects.

From volume production starting in 2026, peaking in 2027, to being squeezed by 3.2T in 2028, it is only three years.

For projects that only broke ground in the second half of 2026, by the time capacity ramp-up is complete, the mainstream specification may have already changed by a generation.

Generational switching also means that supporting materials and core components must change accordingly.

In addition, large-scale expansion will trigger chain reactions in two directions.

First, industry supply will become more abundant, and the supply-demand landscape will change; second, after supply becomes sufficient, product prices may decline.

Optical modules are AI hardware, and their demand depends on the continued capital expenditure of global cloud vendors and computing centers.

Once the pace of capital expenditure slows, the capacity formed by expansion may face the loss of corresponding orders.

Goldman Sachs' forecast shows that the average selling price of optical modules of the same specification declines year by year: 800G products are expected to drop from about 440 USD to 314 USD by 2028, and 1.6T from about 798 USD to 600 USD.

The reason the overall average price in the optical communications industry had been continuously rising previously was structural upgrading brought by an increased proportion of high-speed products, not price increases for individual products.

Regarding the risk factors of expansion projects, Hui Lyu Ecology warned in its announcement that if AI computing power construction slows or competition intensifies, capacity absorption may fall short of expectations.

Fuxin Technology's statement is more direct: if the growth rate of AI computing power demand falls short of expectations and capital expenditure by terminal computing centers and cloud service vendors enters a downward cycle, the new capacity from the fundraising projects may not be absorbed in a timely manner, or product prices may decline.

"The rapid development of global AI is increasing demand for computing power day by day, and optical interconnect generational iteration is accelerating. Higher-end products correspond to higher gross margins and better competitive landscapes. What supports industry profitability is also product structure upgrading, so companies with first-mover advantages will directly benefit from the dividends of product iteration, which is conducive to relative stability of gross margins. But in the medium to long term, as high-end products complete penetration and the dividends of structural upgrading are fully released, the industry's overall average price may be dominated by individual product price declines. At that time, concentrated capacity deployment and unit price decline may occur simultaneously. In addition, infrastructure expenditure investment cycles are relatively long, and during the capacity ramp-up phase, fixed asset depreciation, personnel, and raw material expenses转化为 revenue have objective cyclicality," the aforementioned communications industry analyst told the reporter.