Shares of upstream laser chip suppliers suffered steeper declines compared to downstream optical transceiver manufacturers. A report by Morgan Stanley, earlier this month, warned that the US FCC could introduce restrictions on Chinese Optical transceiver manufacturers.
Chinese optical suppliers’ stocks went down tumbling on Friday after a maximum decline on Thursday, due to renewed fear of US trade curbs, while China’s benchmark CSI300 Index slid 1.3 per cent by midday break to its lowest level since August last year.
The sector-wide decline was triggered by a research report by US investment bank Morgan Stanley, on October 1, which warned that the US Federal Communications Commission may introduce some restrictions on Chinese Optical transceiver manufacturers, this month probably. Optical transceivers are critical for AI data centres converting electrical signals into optical signals enabling high-speed data transmission between computing equipment.
The report noted that measures targeting 3.2-terabit per second (3.2T) products are most likely to be introduced. At the same time it said that Washington may allow Chinese-made optical transceivers if at least 65 per cent of their BOM (Bill of Material) value originated from the US market.
Shares of upstream laser suppliers suffered steeper declines. Shanghai-listed Yuanjie Semiconductor Technology and Suzhou Everbright Photonics suffered drops of 6.5 per cent and 5.4 per cent on Friday after plunging to a daily limit of 20 per cent on Thursday, the first session after the week-long Chinese National holiday. Along with that, Shenzhen-listed Dongshan Precision fell 3.4 per cent on Friday after hitting a 10 per cent daily decline limit on Thursday.
On the other hand major manufacturers of downstream optical transceivers like Zhongji Innolight and Eoptolink fell 2.5 per cent in Hong Kong and 2.14 per cent in Shenzhen respectively.
It’s noteworthy that earlier reports emerged in August about similar US curbs in September but FCC’s finalised rules in September didn’t specify any target products. However, Morgan Stanley reports that the mandate to procure US components could put severe pressure on upstream Chinese suppliers.
Major manufacturers tried to reassure the investors about the limited impacts of US curbs. Dongshan Precision, in its stock exchange filing said that the 65 per cent US-content requirement is just market speculation. It also didn’t rule out setting up manufacturing facilities in the US, if needed. Meanwhile, a representative of Everbright Photonics told the Chinese media that its primary demand is focused on 800G and 1.6T products and 3.2T optical transceivers won’t commence commercial production until 2028 or 2029.
