Hengtong Optic-electric Co Ltd and the AI-Driven Demand for Optical Modules

In the rapidly evolving landscape of artificial intelligence (AI), the demand for high-end optical modules has seen a significant uptick, with Hengtong Optic-electric Co Ltd emerging as a key player in this sector. As a Suzhou City-based information technology company, Hengtong specializes in manufacturing optical fibers, electricity fibers, rail transit cables, and other solutions, catering to industries such as big data, smart ocean, quantum communication, and electricity.

Market Dynamics and Growth Prospects

The global optical module market has witnessed a robust growth trajectory, with sales revenue increasing by 10% in the second quarter of 2025, primarily driven by the demand for 800G Ethernet optical modules. This growth is further supported by the burgeoning demand for 1.6T products. Industry forecasts by LightCounting suggest that the global Ethernet optical module market is expected to maintain a growth rate of around 50% in 2025, transitioning into a relatively stable phase over the next five years with an annual compound growth rate of 15% to 18%.

Technological Advancements and Future Outlook

The deployment of 800G technology is accelerating, serving as a major growth driver for the optical module market, while 1.6T products are gradually increasing in volume, marking a new phase of market competition. The continuous investment in AI infrastructure is expected to sustain the high momentum of the optical module market. Looking ahead, the industry is poised for advancements towards the 3.2T era, with high-density deployment and the maturation of new technological paths such as LPO and CPO.

Investment Opportunities

The communication ETF (515880), which tracks the communication equipment index, has shown promising performance, reflecting the overall performance of listed companies in the communication equipment industry. This ETF, with a significant focus on optical modules, accounting for over 40% of its composition, and a substantial representation of the “three giants” (Easy, Zhongtian, and Tianfeng) exceeding 32%, is well-positioned to capitalize on the AI-driven demand surge for optical modules.

Hengtong Optic-electric’s Position

Hengtong Optic-electric, listed on the Shanghai Stock Exchange, has a market capitalization of 390 billion CNH and a close price of 16.1 CNH as of July 21, 2025. The company’s involvement in the optical module sector positions it to benefit from the ongoing AI-driven demand. With a price-earnings ratio of 13.67, Hengtong represents a compelling investment opportunity in the context of the broader market dynamics favoring optical module manufacturers.

Conclusion

The intersection of AI development and the optical module industry presents a fertile ground for growth and investment. Companies like Hengtong Optic-electric Co Ltd are at the forefront of this intersection, poised to leverage the technological advancements and market demand to drive future growth. As the industry continues to evolve, stakeholders should closely monitor the developments in AI infrastructure and optical module technology to identify and capitalize on emerging opportunities.