Analysis of the Major Trend Market AI Industry Chain (Part 1)

Preface: [Taogu Ba]
The long-awaited analysis of medium- and long-term trading strategies is finally here! Because for me personally, I am relatively better at ultra-short-term trades and grasping rhythm changes, such as switching, leading stocks, and catch-up plays, but there are also those who understand the way in trend markets.
Trend markets have traditionally been considered the domain of institutional traders. Although industry changes, segmentation patterns, and company situations mean institutions get information earlier than us, there’s a problem: institutions need to spend huge costs to obtain first-hand information, while we only need to mine value points from second-hand information online.
Thinking in reverse, isn’t that also saving time and money?
We, as short-term traders, are better at timing our entries than institutions, so by combining ultra-short-term knowledge with second-hand market news to find value points and expectations gaps, we can succeed in trend markets.
There’s nothing new under the sun; any trending stock’s initiation can be supported by news because there’s a time lag between news release and institutions confirming and entering positions. During this time lag, news generally diffuses in the market.
Trend stocks require extensive research and analysis, fundamentally different from the sudden news-driven short-term surges.
The core of trend trading is to identify sectors or stocks with excellent expectations that haven’t yet risen, which are overlooked by the market for various reasons, to discover future value. But essentially, you cannot find the expectation gap directly because you are relying on second-hand news.
So, you can either chase current trends and hot stocks for short-term gains or work on expectation gaps, targeting potential giants like Nvidia.
In the trend domain, the wise ones are definitely the latter; the former mainly relies on ultra-short-term knowledge plus some industry knowledge to assist logical judgment.
How to mine information gaps, find core benefiting stocks, their industry positions, or irreplaceability depends on your understanding of industry trends and perception of expectation gaps—each to their own skill.

Industry Chain Analysis:

Main industry chains in this article:
PCB Industry Chain: Popular and worth exploring
Optical Industry Chain: Very hot, requires understanding industry layout
North American Power Shortage/AI Power Supply Industry Chain: Currently niche, personally very optimistic
Semiconductor Industry Chain: Hot, worth learning and exploring

Other industry chains (potential future research):
Storage Chips Industry Chain: Popular, current stocks are very clear, no need to waste time
Computing Power Leasing Industry Chain: Essentially hot, current stocks are very clear, no need to waste time, with some sentiment stocks mixed in
Liquid Cooling Industry Chain: Not a hot industry chain
Robotics Industry Chain: Overhyped earlier, chip issues, weak money-raising ability, no need for research

1. PCB Industry Chain:
   1.1 Upstream of PCB: Resin, Copper Foil, Electronic Fabric

Resin: Used for adhesive copper-clad boards, determines PCB dielectric, heat resistance, and chemical stability. In high-end PCBs, resin costs account for nearly 40%.
Epoxy resin, general resin… PPO/PPPE resins are higher-end, BT resin is used for IC substrates.

Dongcai Technology: Resin leader, top high-end resin A-shares. M9 major player. Gross margin over 50%, capacity utilization 120%.
Shengquan Group: Second, PPO resin leader, the only mass-produced electronic-grade PPO.
Hongchang Electronics: Third, electronic-grade epoxy resin.

Copper Foil: Conductive layer of PCB, divided into electrolytic copper foil and rolled copper foil. High-end PCBs require very strict thickness, roughness, and purity. Accounts for 42% of CCL cost, highest value.
Copper foil also varies by grade; high-end PCBs generally use HVLP, ultra-thin copper foil for HDI and IC substrates, advanced packaging uses carrier copper foil.
G Copper Foil: High-end HVLP, the only domestic full-spectrum mass production of 1st-4th generation HVLP copper foil, gross margin over 40%.
Defu Technology: Second-largest domestic PCB copper foil supplier, capable of mass production of ultra-thin copper foil below 6μm.
Jiayuan Technology: Third, breakthrough in HVLP copper foil technology, entering AI supply chain.

Electronic Fabric: Glass fiber fabric is the backbone material of copper-clad boards, determines mechanical strength and dimensional stability, accounting for 25% of CCL cost.
Electronic fabric is a type of fiberglass cloth, generally LOW-DK for high-frequency high-speed PCBs. Ultra-thin electronic fabric used for HDI/IC substrates.
Filihua: Highest-end electronic fabric, Q fabric leader, one of the top three global aerospace-grade quartz fabrics, core supplier for Taiguang Electronics and Shengyi Technology. Gross margin 40-55%.
Honghe Technology: Leader in ultra-thin electronic fabric, mass production of fabrics below 4μm, core material for high-end HDI/IC substrates.
China Fiberglass: Global fiberglass giant, second in China after China Fiberglass in low-DK production.
Zhongcai Technology: Second domestically after China Fiberglass, capacity ramp-up.

Resin + Copper Foil + Electronic Fabric casting into CCL:
Shengyi Technology: M9-level copper-clad laminate. Key supplier for Nvidia GB300/Rubin, holds 70-80% market share in Switch Tray CCL, monopolizes over 80% of M9-grade CCL supply for Huidian. Gross margin 35%.
Nanya New Materials: M9 still in progress, mass production below M8.
Huazheng New Materials: Third.
Jin’an Guoji: Fourth.

Other consumables:
Dry film photoresist, drill bits, etc. Drill bits mainly from Dingtai High-Tech, Tungsten High-Tech.

2. PCB:
   Major PCB manufacturers:
   Shenghong Technology: High-end HDI and graphics card PCBs for AI servers. The only global supplier of Nvidia GB300 OAM 5-layer HDI boards, main supplier for Google TPU V7/V8, securing 70%+ of Rubin architecture boards. Expected net profit growth over 150% this year.
   Hudian Co.: First globally to pass Nvidia’s 78-layer M9 orthogonal backplane certification, main supplier for GB300/Rubin, about 40% market share.
   Shengyi Electronics: Third.
   Guanghe Technology: Fourth.

IC Substrate:
Shennan Circuit: FC-BGA and ABF substrates, the only domestic IC substrate company in Nvidia’s advanced packaging supply chain.
Xingsen Technology: IC substrates, small batch samples of FC-BGA substrates for certification, partnering with top AI chip companies.
Hongban Technology: Mastery of mSAP and other processes.

Flexible Printed Circuits (FPC):
Pengding Holdings: Core supplier for FPC, SLP, HDI for Apple, Nvidia AI terminal FPC, global FPC revenue over 10%, top in PCB revenue worldwide.
Dongshan Precision / Jingwang Electronics.

2. Optical Industry Chain

3. Upstream: Core materials and chips (highest technical barrier, profit share 60%+)
   – Optical Chips: EML/DFB/VCSEL lasers, APD/PIN detectors, silicon photonics chips, thin-film lithium niobate modulators
   – Electrical Chips: DSP, TIA, Driver, SerDes, switching chips
   – Optical Materials: Indium phosphide substrates, quartz materials, fiber preforms, lithium niobate crystals
   – Packaging Materials: High-speed PCBs, ceramic substrates, glass substrates, connectors └─ Manufacturing Equipment: Lithography machines, MOCVD, coupling devices, testing equipment

Optical chips are the core of optical modules, accounting for 40%-60% of the BOM cost of 800G/1.6T modules, critical for determining speed, power consumption, and cost.
100G EML / 200G EML / Silicon Photonics / Thin-film Lithium Niobate Modulators
Core bottlenecks and domestic substitution progress:
– 200G EML chips: the biggest bottleneck, global effective capacity about 5 million units/year, supporting only about 6 million 1.6T modules, with a supply-demand gap of 70%, lead time 40-52 weeks, orders booked until 2028.
– Indium Phosphide Substrates: 91% of capacity controlled by Sumitomo (Japan), AXT (USA), JX Metals (Japan), with domestic self-sufficiency below 5%, expansion cycle 2-3 years.

Yuanjie Technology: the only domestic manufacturer of 200G EML chips in mass production, first in domestic market share for 100G EML chips, Q1 2026 gross margin up to 77.81%, the only hope for domestic substitution.
Dongshan Precision: acquired Sores Photonics, becoming the second IDM enterprise in China to achieve self-developed mass production of 200G EML optical chips, gross margin 36%-40%, 1.6T modules validated by Nvidia, mass production in Q4.
OptoX Technology: one of the few domestic companies to mass produce 100G EML chips, with a complete optical chip industry chain, yield over 95% for 1.6T silicon photonics chips.
Changguang Huaxin: leading domestic VCSEL and DFB chip supplier, 200G EML chips shipped in small batches, optical communication chip revenue up 120% YoY.

Electrical chips: domestic penetration below 1%, heavily reliant on imports, mainly DSP chips, almost monopolized by overseas giants like Broadcom and Marvell.
Huawei HiSilicon has developed mid-to-low speed DSPs, but high-speed still depends on overseas capacity.

Optical Materials:
Thin-film Lithium Niobate: 3.2T+ era’s core material, TFLN, is currently the only material capable of supporting ultra-high-speed transmission above 3.2T, with no substitutes. 2026 is the commercialization year.
– Wafer stage: fewer than 5 companies globally can supply high-quality 4-inch TFLN wafers; Jinan Jingzheng holds about 78% of the global share, an absolute leader.
Tian Tong Co.: the only domestic producer of 8-inch TFLN wafers, 4-inch wafers supplied in bulk, 8-inch wafers in customer validation stage.
– Modulator stage: Guangke Technology is one of the only three companies worldwide to mass produce TFLN high-speed modulators (alongside Fujitsu and Sumitomo), with over 50% global market share, 1.6T products validated by Nvidia.
Guangke Technology: 1.6T/3.2T products validated by Nvidia.

Indium Phosphide Substrates:
Yunnan Geology (002428): domestic InP substrate leader, its subsidiary Xin Yao Semiconductor is the only domestic 6-inch InP substrate mass producer, with over 60% domestic market share, Huawei Hubble holds 23.91%. In Q1 2026, InP revenue increased 215% YoY.

Quartz Materials: core raw material for fiber preforms.
Quartz Co.: one of the few domestic companies capable of large-scale supply of synthetic quartz tubes, essential for fiber preform production.
Filihua: leader in semiconductor quartz materials, breakthroughs in large-diameter capillaries for hollow-core fibers, yield over 70%, quartz tubing market share over 30%.
Fujing Technology: largest non-linear optical and laser crystal manufacturer globally, Faraday rotators are key components in high-speed modules, orders up 200% YoY in 2026, Q1 gross margin 44.93%.

Passive Optical Devices: high domestic penetration, accounting for 10%-12% of BOM in optical modules, dominated by Chinese companies globally.
Tianfu Communications / Changxin Bochuang / Zhongci Electronics / Shijia Photonics / Taichen Photonics.

2. Midstream: Optical Modules / CPO / Optical Fiber Cables

Optical modules are core devices for optical-electrical signal conversion, currently in the first year of large-scale 1.6T volume, with exponential demand growth.
By 2026:

• 800G demand: 45-50 million units
• 1.6T demand: 25-30 million units (+600% YoY)
  By 2027:
• 800G demand: 55-60 million units
• 1.6T demand: 70-80 million units (doubling again)

Core competitive barriers:
Yield rate: Few manufacturers achieve over 85% yield for 1.6T products; Zhongji Xuchuang and Xin Yisheng exceed 90%.
Customer certification: Cloud providers’ certification cycles of 1-2 years, high switching costs, forming a strong moat.
Capacity and supply chain: High-end optical chip expansion cycle 8-13 months; leading firms lock upstream scarce capacity via prepayments.

Zhongji Xuchuang: global leader in optical modules, nearly 50% market share for 800G, 50%-70% for 1.6T, Q1 2026 gross margin 46.06%. Key Nvidia supplier, over 70% of Nvidia’s optical module orders, booked until 2028.
Xinyisheng: second-largest global high-speed optical module company, about 30% market share for 1.6T LPO modules, Q1 2026 gross margin 49.16%. 96.16% overseas revenue, deeply tied to Meta, Microsoft, and other North American clients.
Dongshan Precision: rising star via acquisition of Sores Photonics, supplying 800G modules to Meta and Microsoft, validated by Nvidia, gross margin 36.74%, net profit surged 143.47% YoY in Q1 2026, nearly matching full-year 2025 in a single quarter.
Guangxun Technology: domestic leader, complete industry chain from optical chip to module.
Huangong Technology: leading domestic supplier, sales of optical modules over 800G increased 13,974% YoY in Q1, prominent in automotive optical modules.
Cambridge Technology: global top supplier, supplying to Microsoft and Meta, 1.6T modules shipped in bulk.
Dekele: key supplier for Google OCS systems, strong in coherent modules, leading 400G coherent module global market share.
Liante Technology: capable of large-scale delivery of 10G to 1.6T full-rate optical modules, 1.6T modules tested with multiple clients, smooth validation process.

CPO (Coherent Processing Optics) is well known: it integrates optical engine and switching chips on the same substrate, reducing signal transmission distance, cutting power consumption by 50%-70%, and increasing bandwidth density tenfold—an essential scalable commercial solution to break through AI computing power “power wall” and “bandwidth wall.”
Zhongji Xuchuang / Tianfu Communications / Guangxun Technology (1.6T silicon photonics CPO modules certified and shipped in small batches, first in the world 3.2T silicon photonics NPO modules)
Huangong Technology (built the world’s first 3.2T CPO mass production line, self-developed 200G silicon photonics chips, launched CPO supercomputing engines with power consumption below 11W)

Optical Fiber Cables: about 70% of profit in the fiber industry chain concentrates in upstream fiber preform segment, with high technical barriers and long expansion cycles of 1.5-2 years. The most benefited are integrated industry chain leaders.
FiberHome: global leader in optical fiber and cable, 18% global market share, 28% in China, Q1 2026 gross margin 41.51%. The only company worldwide mastering three major fiber preform processes.
Hengtong Optoelectronics: second-largest globally, 15% global share, 25% in China, nearly 50% gross margin in optical communications, leading in submarine cables.
Zhongtian Technology: third-largest, 11% global share, 20% in China, 45%+ gross margin in optical communications, stable cash flow from new energy business.
Corning (USA): 14% market share.