Coherent's latest survey: Optical module shipments will at least double in 2027
Although the market popularity of optical modules is not as high as it was at the beginning of the year, it remains one of the most promising AI tracks worldwide.
Among them, Coherent is one of the two leading optical module players in the US stock market (the other is Lumentum).
At present, domestic optical module manufacturers are engaged in a speed war of skyrocketing production capacity and locked orders, while Coherent takes a completely different path — relying on technical barriers of underlying devices, binding two top clients Google and NVIDIA, and securing a position in the next-generation optical interconnection solutions.
Although Coherent has always been half a step slower than domestic leading players with conservative capacity expansion and a relatively bloated organization, no one can deny its right to speak in high-end optical devices, CPO/NPO and cutting-edge rate products.
According to the latest expert survey, Coherent's full-year shipment guidance for 2026 has been basically confirmed: about 7-8 million units of 800G, and about 2 million units of 1.6T. It will further ramp up in 2027: 16-18 million units of 800G, and 7-8 million units of 1.6T will be released in large volume.
At present, the orders in Coherent's hands are actually more than the planned shipment volume, and it is in a state of "production capacity/materials determine performance". The reason is the same as the pain point of the whole industry: the shortage of high-end DSP and 200G EML chips has directly slowed down the delivery rhythm. For example, due to the lack of DSP, Google's single FR order alone was 700,000-800,000 units less in one quarter, and the shipment rhythm was passively slowed down.
In the context of the industry pattern, Coherent is still a core player in the first echelon of overseas manufacturers.
In 2027, the total industry shipment of 1.6T is expected to be 40-45 million units, and the shipment of 800G is 50-60 million units. Coherent's share ranks steadily among the top overseas manufacturers.
The next-generation 2.4T track is dominated by Google's demand. The total industry shipment is expected to be 1-2 million units in 2027. Domestic leading player Innolight will take 60%-70% of the share, and Coherent will take 200,000-300,000 units. The technical route will be uniformly converged to the 8×300G EML solution.
As for the more faraway 3.2T, it has also been advanced with two routes, and the company is more inclined to the 400G indium phosphide EML solution internally, and Google has put forward clear demand for it in 2028.
In terms of price,
At present, the pricing of Coherent's optical modules is 2%-5% higher than that of domestic leading players in an all-round way: 800G FR is about 434 US dollars, DR is about 356 US dollars; 1.6T silicon optical DR is 923-950 US dollars, the EML version is close to 1000 US dollars, and the FR version exceeds 1000 US dollars.
According to the expert survey, the annual price decline of 800G in 2027 is expected to be 5%-10%, which belongs to the normal iteration rhythm of the industry, with a moderate price reduction, far less intense than the involution in the domestic market.
In terms of profitability, the current gross profit margin of Coherent's optical module business is 38%-41%, and the net profit margin is 18%-19%.
It seems lower than that of domestic head manufacturers, but behind it is the difference in design concepts — it used to prioritize performance rather than cost. For example, the size of the isolator in the FR module is twice that of domestic peers, and the DR module uses more isolators, so the material cost is naturally on the high side.
Coherent's goal is very clear: outsource all low-gross-margin passive device businesses, retain high-gross-margin links by itself, and the long-term target gross profit margin is 42% and the net profit margin is 20%-25%.
It is expected that with the increase in volume of high-value products such as 1.6T next year, coupled with the cost optimization route of new NPO/CPO products, the space for profit margin recovery is certain.
Coherent's real long-term barrier actually lies in the devices end and its position in the next-generation track, which is also the part most easily ignored by the market.
Many people only focus on the shipment of pluggable optical modules, but fail to see the surge in the value of core devices such as FAU/DFAU in the CPO/NPO era.
The unit price of traditional FAU is only about 10 US dollars. In the CPO/NPO scenario, the unit price of 36-core FAU is 80-90 US dollars, and the DFAU integrated with prism microlens array directly rises to 150-200 US dollars, with the value increased by more than 10 times.
Coherent outsources its FAU business to three manufacturers: Hengdong Optics, Fiber Optic Systems Technology, and Foxconn Industrial Internet, and then develops and assembles them into high-value DFAU by itself, firmly grasping the most profitable link.
It is precisely because of the company's core position in the CPO industrial chain that NVIDIA has made a strategic investment of 2 billion US dollars to lock in long-term supply until the end of 2030.
In terms of cutting-edge technology layout, Coherent has also kept up with the industry rhythm: the OCS optical switch adopts the liquid crystal technology route, and it is Google's core supplier. Google's demand will reach 18,000 units in 2026 and nearly 40,000 units in 2027. Meanwhile, it will support the R&D of the next-generation 2D FA + 2D MEMS solution.
The more underlying logic is that the current expansion of super-node scale is opening up a new incremental market for Scale-Up optical interconnection. The transmission distance of copper cables drops sharply at high speed. 512-card single cabinet and NVIDIA NVL576 have fully introduced optical interconnection, which will directly drive the long-term demand for high-end optical devices and OCS. Coherent is exactly the core beneficiary of this track.
Of course, this company's shortcomings are also very distinct, which is almost a common problem of typical overseas technology giants.
On the one hand, the slow pace of capacity expansion is widely recognized. The company's current monthly output of optical rotators is 80,000 pieces, which will be expanded to 120,000 pieces by the end of the year, and most of them are for its own use. The capacity expansion speed is far behind that of domestic manufacturers.
There are three reasons behind this: first, the asset-light strategy, the company relies entirely on renting factories in China, and once it could not rent sites last year, which slowed down the progress; second, the redundant organizational structure, and the low efficiency of department collaboration; third, the conservative business strategy, domestic manufacturers expand production capacity before negotiating prices, while it negotiates prices before securing production capacity, so the access to materials is naturally passive.
Fortunately, adjustments have been made this year, sites in Wuxi and other places have been settled, and the company plans to recruit 30,000 more employees in China, and the pace is beginning to accelerate.
Another hard constraint is upstream materials. Like all manufacturers, the high-end DSP production capacity is squeezed by TSMC, and the advanced process needs to compete for production capacity with GPUs and processors, which is a common problem across the whole industry. Just because of the limited materials, its order fulfillment will be discounted, and the short-term performance elasticity is not as good as that of domestic manufacturers.
To sum up, Coherent's core logic is very clear: in the pluggable era, it stands firm with performance premium; in the CPO/NPO era, it opens up new space by the surge in the value of core devices; the super-node Scale-Up wave has opened up its second growth curve. It does not earn fast money from the skyrocketing short-term production capacity, but earns premium money from technical barriers, value-added money from next-generation products, and performance money from profit margin recovery.
It can be said that Coherent is not the most explosive player in the optical module track, but it must be one of the players with the thickest barriers and the longest life cycle.
The core variables for subsequent tracking mainly focus on three aspects:
First, the easing rhythm of high-end DSP supply, which directly determines the order fulfillment rate; second, the implementation progress of capacity expansion and staff recruitment in China, to observe whether it can make up for the efficiency short board; third, the volume release rhythm of new products such as 2.4T, OCS and DFAU, which is the core catalyst for its performance improvement.
This article is from the WeChat Official Account "Gelonghui Mine Detection Zone" (ID: glh-tlq), the author is Theory of Value Evolution, and it is published with authorization from 36Kr.