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China’s optical device industry faces many challenges, and how to “hit hard bones”?

In 2021, China’s 5G scale deployment continued to accelerate and gain a leading edge in the world. The latest data from the Ministry of Industry and Information Technology show that more than 819,000 5G base stations have been built, accounting for about 70% of the world’s total. The number of 5G mobile phone terminal users connected reached 280 million, accounting for more than 80% of the global total. The number of necessary patent claims for 5G standards accounted for more than 38%, ranking first in the world.


As we all know, the launch of the new infrastructure strategy has brought a new opportunity for the rapid development of 5G and other information and communication networks. It is an important strategic deployment made by China in the new historical period. Optical communication is an important infrastructure and a necessary prerequisite for the development of new infrastructure such as 5G. It has risen to become a strategic public infrastructure, and its development level has become an important indicator to measure the comprehensive national strength. Optical devices, located in the upstream of the optical communication industry, realize the functions of optical signal transmission, reception, signal processing and so on through core photoelectric components, which are the core of optical communication system. As an important part of optical communication construction, optical devices have attracted much attention. According to the international market share of China’s optical device products released by the Network Telecommunication Information Research Institute, Guangxun, Solectron, Hisense and ONA have a certain share, but the four manufacturers account for 21.94% of the total global share, which is far from the United States.


The status quo of optical device industry in China is not clear and there are many problems. First, there are many manufacturers of optical communication devices in China, most of which are small and medium-sized enterprises. Their independent research and development and investment strength are relatively weak, and their products are relatively single. They mainly produce middle and low-end products, focusing on packaging business, with different scales and levels, and their total revenue is not large. Second, the main advantages of domestic optical device enterprises are strong cost control ability, relatively low labor cost, and undertaking OEM operations for some specific optical device customers. Therefore, import substitution effect has gradually emerged in the field of middle and low-end products in recent years. Third, chip affects the product cost, accounting for 66% of the cost, and optical chip accounts for 51% of the cost, which is the largest part of the cost. Chips occupy the commanding heights of technology and value, and are still weak at home. Fourth, optical/electric conversion accounts for 80% of the cost, and China’s high-end optical/electric chips are basically dependent on imports. Fifth, at present, the minority of Chinese manufacturers have developed 400G even 800G optical chips, and completed the system tests. Sixth, global sales of optical devices have reached more than $10 billion. Sales in the Chinese market grew rapidly, accounting for about 30~40% of the sales.


The production concentration of optical communication devices is not high. Foreign oligarchs have deep pockets and strong strength, occupying the first-mover advantage and controlling the high-end industry chain, squeezing the market space of domestic manufacturers. Optical fiber and cable enterprises and equipment manufacturers are expanding to the device side, so that the original strength of the device manufacturers are besieged on all sides, difficult to continue. Domestic R & D, production of supporting equipment manufacturing capacity is low, the process line construction relies heavily on foreign countries. Materials, instruments, software, etc., also rely on imports to maintain, difficult to break through. Chinese optical device manufacturers lack intellectual property advantages, lack of original and basic patents and products, most products to follow the pace of foreign countries, lack of competitiveness. In addition, there is no special strong first-class core enterprises in our country, and high-end products require especially high technology and craft levels. Colleges and universities lack in cultivating high-end craft talents, and talents which are not easy to cultivate in enterprises are extremely easy to lose.


It can be seen that the development of optical devices has become the bottleneck of the development of optical communication, so promoting the development of optical devices industry is an indispensable pillar of the development of optical communication industry.


Recently, various optical device manufacturers have voiced and pay action resolutely “chew” under this “hard bone”. Optical communications technology chairman Yu Shaohua say macro environment uncertainty, is the development of the optical device industry faces problems, only to speed up the key technology research for core, high-end optoelectronic devices launch and accelerate the industrialization, solid do a good job in the current with internal deterministic response to external uncertainty, gradually improve their business profitability. Fei Pu Technology Co., LTD., a subsidiary of YIFC, is building an annual output of 10 million high-end optical devices and optical modules this year.


Second, increase the scientific research investment of optical devices, encourage innovation, make the industry develop towards high-end and core products, and improve the competitiveness of enterprises; Third, increase the government support, in the optical device industry policy, environment, taxation, talent, import and export and other aspects to take corresponding measures to promote the development of the industry; The fourth is to organize the cooperation of the weak points in the optical device industry chain, so that materials, precision processing, process equipment, design software, testing instruments and other links can get rid of foreign control and extrusion; Fifth, increase the basic theory, technology, craft personnel training/introduction efforts.


The optical device industry has always been extremely competitive. With the promotion of 5G, data center and other businesses in the future, the optical device industry will usher in a new wave of opportunities. It is hoped that the whole industrial chain will work together to make continuous innovation, break through the technological fortress, and strive to achieve technological upgrading and evolution, so that China’s optical devices will become the top of the world.