Recently, Zhongji Innolight unveiled its strategic move to acquire a 10.47% stake in China Stone Technology via a negotiated equity transfer for RMB 1.747 billion. This deal stands as another prime example of optical module companies' foray into the upper echelons of the industrial chain. Presently, both domestic and international optical communication firms are intensifying their upstream expansion, focusing on areas such as optical components, optical chips, epitaxial wafers, substrate materials, and high-purity metal raw materials.

Industry insiders reveal that the primary impetus behind optical communication companies' upstream expansion is the burgeoning demand for optical modules from artificial intelligence data centers (AIDC), coupled with rapid technological advancements. These factors have positioned optical chips as a critical bottleneck in the industrial chain's production capacity, directly influencing the performance of optical modules. The overarching goal of upstream expansion is to guarantee chip production capacity, expedite research and development cycles, and ensure timely delivery capabilities.

From the vantage point of industrial chain value, as optical modules progress towards higher speeds such as 800G, 1.6T, and even 3.2T, the cost share of optical chips surges significantly, with profits increasingly concentrated in the midstream chip segment. Consequently, venturing upstream and embracing the Integrated Device Manufacturer (IDM) model have emerged as pivotal strategies for cultivating long-term competitiveness in the industry.