April enters earnings season. As of today, the 2021 annual reports of the four major listed companies in the optical device industry - Zhongji Innolux, Guangxun Technology, Huagong Technology and New Yisheng have all been released.
These four were all ranked in the list of the world's TOP10 optical transceiver manufacturers selected by LightCounting last year, the 2nd place of Innolux Technology (Zhongji Innolux), the 8th of EvernEx Technology, the 9th of New Yisheng, and the 10th place of Huagong Zhengyuan (Huagong Technology). Therefore, its performance is very representative of the development trend of the optical device/optical transceiver industry.
The performance comparison of the four major optical device manufacturers in 2021 is shown in the following figure:
Note: The performance of The optical module subsidiaries of Zhongji Innolux and Huagong Technology, AsahiTron Technology and Huagong Zhengyuan, is listed separately
Innolux Technology: High-end optical transceivers have a solid position
Only in terms of scale, according to the market report released by LightCounting this year, the market share of China's optical device suppliers has grown from 15% in 2010 to just over 50% in 2021, officially surpassing Western competitors. However, in the field of underlying optical chips/electrical chips, China still has a large gap; in the field of high-end optical transceivers, Innolux Technology is a representative of challenging Western competitors.
Innolux's products are divided into two major blocks, one is for cloud data center customers such as 100G, 200G, 400G and 800G high-speed optical modules, and the other is for telecom equipment vendors to provide 5G fronthaul, midhaul and backhaul optical modules, as well as high-end overall solutions for backbone network and core network transmission optical modules. Overall, The performance of Innolux in 2021 is not outstanding, due to the decline in the 5G optical transceiver business due to the slowdown in 5G demand, and the capital expenditure of the three major operators increased by only 2.28% year-on-year.
Sales of Innolux's 200G and 400G products for cloud vendors' data centers continue to grow. According to the annual report, the sales revenue of high-end optical transceivers in 2021 reached 6.364 billion yuan, an increase of 9.10% year-on-year, accounting for 82.70% of the revenue. According to Omdia data, Innolux's market share increased the fastest in 2021, accounting for 10% of the world, of which it reached 12% in the fourth quarter, ranking second in the world, second only to II-VI (the company acquired the optical transceiver boss Finisar).
Source: Innolux Technology 2021 Annual Report
In 2021, Innolux's 800G optical module completed sample delivery, testing and certification to customers, and the yield of 400G silicon optical chip FAB continued to improve, which was ready for stable mass production; 800G silicon optical chip was successfully developed. In terms of coherence, products such as 400GZR and 200GZR for data center interconnection or telecom metropolitan area network scenarios have been produced and shipped in small batches.
In the field of high-end optical transceivers, Innolux Technology is in a leading position in China and continues to challenge the leading position of II-VI. At the same time, Innolux Technology has set up a professional team to dig deeper and research in the epitaxial field of the optical communication industry such as lidar, and explore new performance growth points.
Two more points are worth mentioning. In 2017, Innolux Technology was acquired by Shandong Zhongji Intelligent Equipment Company, and became the core source of Profit of Zhongji Xuchuang, and in 2021, the contribution rate of Xuchuang Technology to the net profit of listed companies even exceeded 100%. In view of this, at the end of December last year, ZJI Innolux officially divested and listed 100% of the equity of its subsidiary Zhongji Intelligence, and Innolux Technology became the only main business. Last year, Innolux Technology also set to raise an additional 2.7 billion yuan to introduce strategic investors such as China Mobile Investment, which is even stronger.
Guangxun Technology: Veteran manufacturers are walking steadily
As the most senior optical device manufacturer in China, Guangxin Technology has long been the leader of China's optical device industry, but in the past decade, its pace has been too steady, and it has been surpassed by the rising stars Hisense Broadband and Innolux Technology, and "relegated" to the third place in China. According to Omdia statistics, as of the third quarter of 2021, the global market share of Everbright Technology was 7.8%, an increase of one percentage point year-on-year, ranking fourth in the world.
As can be seen from the annual report, The domestic market revenue of Guangxun Technology in 2021 was 4.368 billion yuan, an increase of 1.53% year-on-year; the revenue of overseas markets was 2.119 billion yuan, an increase of 21.46% year-on-year, which can be described as decent. In the field of high-speed optical transceivers, Optinus Technology has invested in research and development very early, but there have been no significant achievements.
Overall, although 100G coherent silicon light products have achieved shipments, the shipment volume is not large and they are in a state of testing the water. The 400G has been tested on the client side and is expected to form bulk shipments in the second half of this year, including transmission and digital communication. 800G will start sending samples to customers in the second half of this year, and it is expected to form deliveries next year.
According to The Statement of Everbright Technology in the annual report: the company's main advantage is that the product coverage is comprehensive. It has vertical integration capabilities from chips, devices, modules to subsystems, and has seven major technology platforms of optical chips, coupled packaging, hardware, software, testing, structure and reliability, supporting the company's active devices and modules, passive devices and module products.
In the field of chips, Chinese enterprises are lagging behind as a whole, and Guangxun Technology is a leader and has a strong self-supply ability. At present, 70% of the 25G DFB of Guangxun Technology can be self-supplied; the internal test of 25G EML has passed, and the next step will be commercial; VCSEL is mature and can be put into commercial use. The internal research and development of 50G EML is basically completed and is progressing in commercialization.
Of course, Everbright Technology can continue to maintain performance growth and further market share, which is also a very good achievement.
Huagong Zhengyuan: The highlights of new business shine brightly
Huagong Zhengyuan is a subsidiary of Huagong Technology's optical communication business. Huagong Technology introduced in the 2021 annual report that in the field of optical communication, the company consolidated the wireless network market, 50G series transmission products were smoothly imported and delivered in batches at the top system equipment manufacturers in China, and 5G optical transceivers consolidated the dominant position in the pre-, middle and backhaul market; the successful card slot of digital communication products was the head of the Internet manufacturer resource pool, and the 400G full range of optical modules have been mass shipped; the layout of silicon optical technology, around the intelligent "optical connection + wireless connection" to product diversification evolution, to create a one-stop photoelectric solution.
In addition, the next-generation data center field of high-speed 800G modules, has been released in the third quarter of 2021 OSFP/QSFP-DD package form, and unveiled at this year's OFC.
Source: Huagong Zhengyuan
The above progress is mainly from Huagong Zhengyuan. Huagong Zhengyuan's revenue in 2021 will increase by more than 100%, but the net profit is basically flat, combined with the company's large-scale entry into various intelligent terminal fields such as wireless small stations in recent years, it can be considered that its new business is in the stage of investment and volume, and the pursuit of profits is placed second.
According to the annual report, Huagong Zhengyuan seized the market opportunity of global 5G construction, successfully opened a new market for wireless indoor terminal equipment, and shipped large quantities of wireless small stations in the "Joinsite" series, with a revenue scale of 670% year-on-year.
In 2021, Huagong Technology completed the reform of school-enterprise separation, and the actual controller was changed from Huazhong University of Science and Technology to Wuhan State-owned Assets Supervision and Administration Commission, and the company entered a new stage of systematic growth and expansion of strategic space. Huagong Zhengyuan's business spans wired and wireless, extending from optical modules to intelligent terminals, which can be described as opening up a new path. With the successful restructuring of the group, Huagong Zhengyuan has also ushered in new opportunities for development.
As a confirmation, the first quarter pre-increase report released by Huagong Technology shows that it is expected that the net profit attributable to the shareholders of the listed company in the first quarter of 2022 will be 200 million yuan - 230 million yuan, an increase of 75.88% - 102.27% year-on-year; deducting non-net profit of 182 million yuan - 212 million yuan, an increase of 83.95% - 114.27% year-on-year.
New Yisheng: The performance continues to increase
New Yisheng is the smallest of the four, and it is also the fastest growing performance. According to the annual report, New Yisheng has successfully developed 25G, 50G, 100G, 200G series optical transceiver products covering 5G fronthaul, in-pass and backhaul and realized batch delivery, and is one of the few batch deliveries in China to use 100G, 200G, 400G high-speed optical transceivers for use in the data center market, mastering high-speed optical device chip packaging and optical device packaging enterprises, and launched 800G optical module product portfolio, 400G optical module products based on silicon optical solutions and 400G ZR/ ZR+ coherent optical module.
In the case of relatively small investment in research and development, New Yisheng can break through multiple product lines and achieve good results, which is worthy of admiration. At the same time, the company's acquisition of overseas shareholding company Alpine Optoelectronics has made breakthrough progress, through which it will be deeply involved in the market competition of silicon optical transceivers, coherent optical transceivers and silicon photonic chip technologies.
From a regional point of view, the domestic market revenue of New Yisheng in 2021 was 597 million yuan, down 29.73% year-on-year; the revenue of overseas market business was 2.243 billion yuan, a year-on-year increase of 105.91%. From an angle, New Yisheng still maintains a high-flying attitude in overseas markets, and its growth rate is stronger than that of Xuchuang Technology, which accounts for the majority of overseas markets; but for the development of the domestic market, compared with Guangxun Technology and Huagong Zhengyuan, it still lacks deep roots, and it is easier to be "injured" when facing market changes. This is the focus of the new Yisheng's next need to strengthen.
Summary: Each has a bright future
According to Lightcounting, the optical transceiver market size will continue to grow at 14% CAGR over the next 5 years and is expected to reach $17.6 billion by 2026. Benefiting from data center construction and in-depth layout of 5G networks, China's optical transceiver market is also expected to grow further, Yole predicts that in 2022, China's optical transceiver market size is expected to reach 3.3 billion US dollars, an increase of 22% year-on-year, and the compound growth rate of China's optical transceiver market in the past three years is about 10%.
Source: Lightcounting
Chinese optical device manufacturers have occupied more than half of the global market, and in the high-end field continue to break through the moat of Western competitors, 50% of the share is not the end but the starting point. From the performance analysis of the above four most representative Chinese optical device companies, it can be seen that products, markets and technologies have their own emphases, but the overall competitiveness is outstanding, and they continue to put pressure on Western competitors in the market, forcing them to continue to merge and reorganize in recent years. China's optical communication industry is still very prosperous, the above four as a leading enterprises, I believe it will have a brighter prospects for development. (C114 Liu Dingzhou.)