Second-tier CPO manufacturers are accelerating their breakthrough. Who has greater flexibility?
As the core technology for next-generation optical interconnection, CPO (Co-Packaged Optics) integrates the optical engine and switch chip through co-packaging, achieving reduced power consumption, increased density, and optimized costs. It is the core technological direction for ultra-high-speed optical modules of 3.2T and above.
Previously, market concerns about CPO were concentrated in three major areas: "slow technology implementation, high commercialization costs, and monopoly of core resources." However, since 2026, these three concerns have been continuously dispelled.
With the exponential growth of AI computing power driving the optical module industry to evolve towards high-speed and integration, 800G/1.6T has become the current mainstream. Meanwhile, the commercialization of CPO technology has been progressing faster than expected, opening a window for second-tier manufacturers to enter the market.
01 A Valuable Entry Window
In terms of technology implementation, the application boundary of CPO is extending from the long-term 3.2T to the current mainstream 1.6T, and its dilution effect on traditional optical modules is far lower than expected.
According to Morgan Stanley's calculations, the dilution of optical module demand by CPO was only 3% in 2026 and will be 11% in 2027. Initially, its application is mainly concentrated in products of ≥3.2T, with limited impact on the 800G/1.6T market.
More importantly, the joint development of leading manufacturers with giants such as NVIDIA and Broadcom has completed the preliminary verification of CPO core technology. The technology roadmap has entered the "early stage of industrialization" from the "exploration stage". Second-tier manufacturers no longer need to bear the high costs of core technology R & D. They only need to focus on process implementation, capacity fulfillment, and customer certification, significantly reducing the technological threshold.
In terms of the supply - demand pattern, the systematic capacity gap in the global high - end optical module market is spreading from the 800G/1.6T to the CPO field.
Currently, the production capacity of leading manufacturers is still concentrated in traditional 800G/1.6T optical modules to meet the urgent orders of cloud providers, and their capacity layout for CPO is relatively limited.
According to institutional calculations, the actual demand for 1.6T optical modules globally in 2026 may reach 25 - 30 million units, and the demand for 800G will reach 45 million units. Leading manufacturers can only meet 70% - 80% of the demand. Against this background, as an upgraded solution for 1.6T, the capacity gap of CPO is more significant.
Meanwhile, to ensure supply chain security, cloud providers have begun to actively introduce second and third suppliers in the CPO field, shifting from "single - supplier dependence" to "certified redundant layout".
This provides a valuable opportunity for second - tier CPO manufacturers to access customers.
In terms of the supply chain, the constraints on CPO core materials are gradually easing, "unbinding" second - tier manufacturers.
In 2025, core materials such as high - power CW lasers, silicon photonic chips, and FAU fiber arrays restricted the industrialization of CPO. In 2026, the supply side began to improve:
Domestic manufacturers such as Yuanjie Technology have achieved the release of high - power CW laser production capacity, breaking the overseas duopoly;
Suppliers such as SiFotonics and Sicoya in the silicon photonic chip segment have expanded their production capacity, and the delivery time has been significantly shortened;
The capacity layout of core FAU manufacturers such as Tianfu Communication also provides stable supporting support for second - tier CPO manufacturers.
The alleviation of material constraints has shifted the core competitive barriers of second - tier manufacturers from "material acquisition" to "process manufacturing and customer service", which are the traditional advantages of domestic second - tier manufacturers.
In addition, the value distribution pattern of the CPO industrial chain also provides a differentiated entry path for second - tier manufacturers.
Different from traditional optical modules, the profit core of CPO has shifted to upstream optical engines, laser sources, advanced packaging, etc. However, there is still significant market space in areas such as "system - level assembly, contract manufacturing, and supporting components".
Second - tier manufacturers do not need to participate in the top - level competition of core technologies. They can bind with overseas leading or top - tier manufacturers to undertake contract manufacturing, optical engine assembly, and supply of supporting components of CPO, and share the growth dividends of the CPO industry through "differentiated positioning". This model has been verified in the overflow of traditional optical module orders.
02 Great Opportunities
Previously, second - tier manufacturers in the CPO field were mostly in the stages of "R & D investment and product sampling", lacking actual mass - production data support.
Since 2026, many second - tier manufacturers have achieved key breakthroughs in CPO technology and started to move from the "laboratory" to the "production line".
On the one hand, second - tier manufacturers have quickly broken through the core CPO process through the "self - R & D + cooperation" model:
Huagong Technology has achieved the R & D and small - batch shipment of 3.2T CPO products relying on its self - developed silicon photonic chip technology. The combination of its silicon photonic process and CPO packaging has significantly improved product yield and cost - effectiveness;
Accelink Technologies has completed the development of a 1.6T CPO optical engine through cooperation with domestic research institutions and sent samples to overseas customers for verification.
On the other hand, the "manufacturing process advantages" of second - tier manufacturers have formed a differentiated competitiveness in the system - level assembly and precise coupling of CPO, making up for their shortcomings in the core chip field.
It is worth noting that the technological breakthroughs of second - tier manufacturers do not blindly pursue ultra - high speeds of 3.2T and above. Instead, they closely follow market demand and focus on "CPO products with strong commercialization potential at medium and low speeds". This "from low - end to high - end" technological path enables second - tier manufacturers to quickly achieve performance realization and form a positive cycle of "technology implementation - order acceptance - capacity expansion".
In terms of capacity implementation, second - tier CPO manufacturers are starting to see performance realization.
Capacity fulfillment is the core support for second - tier CPO manufacturers to break through, and their capacity layout precisely matches the overflow trend of global CPO orders.
Currently, overseas leading companies such as Coherent and AOI have a large number of CPO orders but are limited by large - scale manufacturing capabilities and yield control levels, resulting in a significant capacity gap. They urgently need domestic manufacturers to undertake contract manufacturing needs. Leading optical module manufacturers are fully occupied with traditional 800G/1.6T orders and have no spare capacity to expand CPO production. This provides a window for second - tier manufacturers to release their production capacity.
For example, Huilv Ecology entered the CPO contract manufacturing field by acquiring Wuhan Junheng. The CPO production line at its Ezhou base synergizes with the traditional optical module production line. The first - phase production capacity has been fully utilized by Coherent, and the second - phase production capacity will focus on undertaking CPO orders. After the second - phase production line is put into operation in 2027, the annual CPO - related production capacity will increase by more than 2 million units;
Huagong Technology plans to build its overseas base in Thailand into a core CPO production base. Relying on its global delivery capabilities, it will undertake CPO orders from North American cloud providers. At the same time, the company has built a closed - loop supply system for CPO materials through self - R & D and external procurement, avoiding the constraints of material shortages on capacity release.
In addition, the customer relationships established by second - tier manufacturers in the traditional optical module field have become an important springboard for them to enter the CPO market.
Previously, second - tier manufacturers have established stable cooperation with overseas leading companies such as Cisco, Meta, and Coherent and North American cloud providers by undertaking the overflow of traditional 800G/1.6T optical module orders, completing customer certification and building a delivery system. In the CPO field, these customers are more inclined to choose "second - tier manufacturers that have completed certification and have delivery capabilities" rather than re - certifying new suppliers to ensure supply chain continuity, enabling second - tier manufacturers to quickly migrate customers from "traditional optical modules" to "CPO".
03 Three Core Targets
In the accelerated breakthrough of second - tier CPO manufacturers, targets with "technology implementation capabilities, capacity fulfillment expectations, and customer - binding foundations" have become the core beneficiaries.
Among them, Huagong Technology, Cambridge Technology, and Huilv Ecology, with their differentiated positioning advantages, have become the core targets in the second - tier CPO track. They correspond to the three logics of "a platform - type leading company with leading technology", "an overseas entrant with prominent profit elasticity", and "a pure contract - manufacturing leading company with simple orders", forming an investment portfolio for second - tier CPO.
Huagong Technology (000988.SZ): The "technology benchmark" for second - tier CPO, with platform - based advantages strengthening certainty.
Huagong Technology is the most mature target for CPO technology implementation among second - tier manufacturers. Its platform - based full - industrial - chain layout strengthens the certainty of its CPO business.
The company has achieved small - batch shipment of 3.2T CPO products relying on its self - developed silicon photonic chip technology. It has formed independent intellectual property rights in core processes such as optical engine packaging and precise coupling, becoming one of the few second - tier manufacturers in China with full - process CPO manufacturing capabilities.
At the same time, the platform - based advantages provide multiple supports for the CPO business:
The precision processing capabilities of the laser manufacturing business can be directly applied to CPO optical engine manufacturing; the global R & D and production system (4 overseas R & D centers, production bases in Thailand and Vietnam) ensures the overseas delivery capabilities of CPO products; long - term cooperation with core material suppliers such as Yuanjie Technology and Acacia ensures the stable supply of CPO materials.
In terms of performance, the company's CPO business has achieved a breakthrough from "R & D" to "mass production". In 2025, the shipment volume of AI - related optical modules was 6 - 7 million units, including a small batch of 3.2T CPO products. In 2026, the company plans to increase CPO - related production capacity by more than 50%, and orders have been scheduled until the fourth quarter of 2026.
Institutional analysts expect that the company's CPO business will contribute significant revenue growth in 2026, becoming the second growth curve for its connectivity business. Coupled with the performance realization of traditional 800G/1.6T optical modules, the overall performance has strong certainty.
Cambridge Technology (603083.SH): The "king of elasticity" for second - tier CPO, with overseas customer breakthroughs opening up profit space.
Cambridge Technology's core advantage in the CPO field lies in its "ability to break through in overseas customers". Relying on its cooperation foundation with overseas leading companies such as Cisco and Meta in the traditional optical module field, it has become a potential second - tier supplier for these customers in the CPO field, with prominent profit elasticity.
In Q1 2026, the company achieved large - scale shipment of 1.6T traditional optical modules. The 1.6T CPO products have been sent to customers for sampling, and small - batch shipment is expected in Q3 2026. The annual shipment volume of CPO - related products in 2026 is expected to reach hundreds of thousands of units.
Meanwhile, since 2026, the constraints on core materials have been alleviated, and the company has got rid of the dilemma of "having orders but lacking materials". The production capacity of CPO products is no longer restricted by materials, and profit elasticity is expected to be quickly released.
In terms of profitability, the gross profit margin of CPO products is significantly higher than that of traditional optical modules. Institutional calculations show that the gross profit margin of a single 1.6T CPO product is 8 - 10 percentage points higher than that of a traditional 1.6T module. If the company's CPO product shipment volume reaches 500,000 units in 2026, it will contribute hundreds of millions of yuan in profit growth.
The company's annual profit in 2025 was about 265 million yuan. The performance realization of the CPO business will enable the company's quarterly profit to achieve leap - forward growth, making it the target with the most prominent profit elasticity in the second - tier CPO track.
Huilv Ecology (002267.SZ): The "contract - manufacturing leading company" for second - tier CPO, the purest beneficiary of order overflow.
Huilv Ecology is the target with the purest order logic among second - tier CPO manufacturers. It entered the optical module track by acquiring Wuhan Junheng. It is deeply bound to the overseas leading company Coherent and has become the core contract - manufacturing manufacturer for its CPO products, directly benefiting from the overflow of overseas CPO orders.
Coherent has a large number of orders from North American cloud providers in the CPO field but is limited by its insufficient large - scale manufacturing capabilities. It has entrusted most of its CPO contract - manufacturing orders to Huilv Ecology. As soon as the CPO production line at the company's first - phase Ezhou base was put into operation, it was fully utilized by Coherent. The second - phase production line will focus on expanding CPO contract - manufacturing capacity. After it is put into operation in 2027, the annual CPO contract - manufacturing capacity will exceed 2 million units.
In addition, the company has achieved a dual - wheel drive of "contract manufacturing + self - owned brand" in the CPO field: on the one hand, it undertakes CPO contract - manufacturing orders from Coherent to achieve large - scale production; on the other hand, its self - owned brand 1.6T CPO products have started small - batch shipment to North American cloud providers. Although the customers have not been confirmed, it marks a breakthrough for the self - owned brand in the CPO field.
In terms of materials, the company is the target with the most abundant material reserves among second - tier manufacturers. Its inventory reached 660 million yuan in Q3 2025, and it has reached long - term cooperation with core CPO material suppliers such as Yuanjie Technology, Broadcom, and SiFotonics, ensuring the delivery capabilities of CPO products.
Institutional analysts expect that the company's shipment volume of CPO - related products (contract manufacturing + self - owned brand) is expected to reach 600,000 units in 2026, becoming the core driving force for performance growth.
04 Summary
Overall, in the high - growth cycle of the AI optical communication industry, as the next - generation core technology, the trend of accelerated commercialization of CPO is irreversible. The accelerated emergence of second - tier manufacturers will become the core investment theme in this trend.
Although there are still certain risks in the track, second - tier CPO targets with technology implementation capabilities, capacity fulfillment expectations, and customer - binding foundations have met the core conditions for performance realization and will have opportunities for value re - evaluation in the next 1 - 2 years.
For investors, there is no need to be overly concerned about the short - term concerns of "technological barriers". Instead, they should focus on the core logic of "performance verification" and seize the breakthrough opportunities of second - tier CPO manufacturers.
This article is from the WeChat official account “Gelonghui Minefield” (ID: glh - tlq). The author is Value Evolution Theory. It is published by 36Kr with authorization.