Western: Major manufacturers are actively promoting CPO applications. It is recommended to focus on flexible incremental segments first.

Western released a research report stating that, at the industry level, Co-packaged Optics (CPO) is accelerating its commercial use under the promotion of industry leaders, while the industry is innovating in various technological routes such as LPO, NPO, and XPO. CPO is making breakthroughs in commercial use in the Scale-out phase, with the penetration rate expected to gradually increase; in the Scale-up phase, the commercial pace is more influenced by the supply side, with a higher urgency for efficiency and demand acceleration. CPO is now in the early stages of industrial acceleration, and the next three years are a critical observation window for the rapid increase in CPO industry penetration rate, the gradual formation of the supply chain structure, and the construction of the industrial chain value division. From the perspective of industrial development pace, it is recommended to focus on: 1) Clear division of labor, actively participating in joint research and development with CPO switch manufacturers or companies with expected orders: high-power CW light sources, FAU and ELS modules; 2) Flexible incremental links compared to pluggable optical modules: CPO coupling/testing equipment, polarization-maintaining fibers, advanced packaging (PIC and EIC packaging), ASIC chips and OE packaging, fiber optic terminal boxes, etc. Western's main points include the following: Discussion on the commercialization pace of CPO Co-packaged Optics (CPO) integrates the optical engine directly with switch ASIC or computing processors, replacing traditional pluggable optical modules (inter-cabinet) and copper interconnects (intra-cabinet). Its advantages include significantly reducing power consumption by increasing integration, but it currently faces challenges in heat dissipation, maintainability, and flexibility. Currently, CPO solutions have not been widely used, and the market mainly focuses on their commercialization pace. Based on this, the report mainly discusses: 1) Technical paths and transition schemes, mainly discussing LPO, XPO, NPO, CPC, and MicroLED CPO solutions; 2) Applications of CPO in the Scale-up and Scale-out phases; 3) Discussing the current manufacturing difficulties and supply chain bottlenecks of CPO from the supply side perspective. Disassembly and core manufacturing processes of CPO components Taking NVIDIA's Quantum X800-Q3450 IBCPO switch as an example, it is equipped with 4 Quantum-X800 ASIC chips, 72 1.6T optical engines (using ring modulators), 18 ELS modules (each module contains 8 CW light sources), emitting and receiving ends totaling 1152 optical fibers, corresponding to 144 MPO and switch ports. Core manufacturing processes include ring modulators, PIC and EIC packaging, OE and ASIC chip packaging, fiber coupling, etc. Recommendations at the individual stock level Suzhou TFC Optical Communication (covered), Robotechnik Intelligent Technology (leading in silicon optical testing equipment, coupling equipment), Shenzhen Zesum Technology (closely cooperates with Senko), Focuslight Technologies Inc. (core supplier of micro lenses), Zhongji Innolight (covered), Eoptolink Technology Inc. (building a CPO production base with US investment), Universal Scientific Industrial (Shanghai) Co. (member of the Foxconn Group). Risk warning: AI development falls short of expectations; optical module demand falls short of expectations; raw material supply risks; international political friction risks; technology development falls short of expectations.