During the 21st China International Optoelectronic Exposition (CIOE 2019), Liu Sheng, the CEO of optical module leader Zhongji Innolight (stock code: 300308), introduced the development characteristics of the optical module industry during an interview. He shared an optimistic view about the data communication market in 2019 H2 and 2020, and indicated that market introduction of 400G optical modules is on its way. In addition, the company will begin to focus on the 5G front-haul, mid-haul, and back-haul markets in the near future.
Data communication industry chain will rally
As a core subsidiary of the listed company, Suzhou Innolight was established in 2008, and has gradually grown into a leading company in the global high-speed optical module industry. It was reorganized into Zhongji Innolight in 2017. Currently; Zhongji Innolight's business mainly covers two sectors - high-end optical communication transceiver modules and intelligent equipment manufacturing, which serve the two major markets of cloud computing data centers and 5G. Customers mainly include acclaimed Chinese and foreign Internet cloud computing companies or communication equipment suppliers.
Since Q2 of 2019, thanks to factors such as the rising demand for 100G products from some key customers, the increasing volume of shipments of 400G products, and the batch delivery of 5G front-haul products, the company's sales revenues and net profits have stably increased since Q1 of 2019.
At present, the market is stabilizing and rallying. Major data communication customers have increased related capital expenditures.
Seizing the Opportunities of 400G Products
Disclosed information indicates that, in Q1 of 2019, Suzhou Innolight maintained and consolidated its share and competitiveness in the global data center market. Shipments of 40G and 100G products continued leading the industry. New 400G products are also supplied to key customers in small batches. In addition, Suzhou Innolight tapped into the domestic 5G wireless market that is still in its infancy, claiming a considerable share of the market and orders and achieving batch delivery of products.
According to Liu Sheng, there are many traditional and emerging competitors in the 400G optical module market. In the future, the domestic market will be reshuffled. The company is confident that its 400G optical module will maintain a leading market share. Since optical modules are generally customer-tailored, the iterative needs of data center customers are sticky, and the technology threshold for 400G optical module development is high and has a long development cycle, fewer manufacturers can mass-produce the product to meet customer needs.
In late 2018, Zhongji Innolight's non-public offering of shares was approved by the CSRC. The new shares were listed in April of this year. Liu Sheng indicated that the projects funded by the capital raised from the stock market are progressing as planned and that some have been put into production. In addition, the company has unveiled and delivered front-haul products in the 5G wireless market. The mid-haul and back-haul products will be released in the near future.
In addition, the company will actively carry out investment layout of the industrial chain to enhance sustainable development. According to Liu Sheng, the future investment direction will focus on the optical module industry, extend to the upstream of the industrial chain, or expand the product line, and make long-term strategic plans.