2024 year-end inventory: Surging demand for AI computing power, challenges and opportunities for production capacity and delivery

Optical fiber online news, the annual change, the new chapter. 2024 is about to play the final movement, looking back at this year, benefiting from the further breakthrough of artificial intelligence (AI) technology, the optical communication industry ushered in another year of brilliance. According to the statistics of Chord Industry Research Center, in the first three quarters of 2024, the revenue of listed optical communication companies increased by 52% year-on-year, and the total net profit increased by 72% year-on-year. Some companies even doubled their performance.

With the end of 2024, people began to look forward to the New Year, the expectation of domestic computing power, the expectation of the "Trump administration 2.0" policy and the worry of tariffs, it seems to bring new uncertainties to the market, but in the face of these complex and changing environment, our companies need to be cautiously optimistic to meet these challenges.

Sailing Southeast Asia
A significant trend in the optical communications industry in 2024 is the expansion into Southeast Asia. According to the latest statistics of Chord Industry Research Center in November 2024, more than 110 optical communication companies have established new manufacturing bases in Southeast Asia, which are mainly distributed in Vietnam, Thailand, Malaysia, Indonesia, Singapore, Laos and the Philippines.

Specifically, optical module related manufacturers mostly choose to set up bases in Thailand and Malaysia, passive device and jumper manufacturers tend to develop in Vietnam, and optical cable manufacturers are mainly concentrated in Indonesia and Vietnam. It is worth noting that some companies have achieved shipments from Southeast Asian factories this year.

These brave enterprises do not simply fall into a price war, although Southeast Asia's factory rent and labor costs are not significantly lower than the domestic, they pay more attention to adapt to the local market, and prepare for the large-scale production of next-generation products. This shows that Chinese manufacturing enterprises are changing from a simple geographical expansion to a deeper globalization strategy, which is not only a market expansion, but also a strategic upgrade.

High speed optical module technology feast
Driven by AI computing power, the high-speed optical module (400G/800G) market ushered in a technological feast. The growing demand for low power consumption, low latency and high bandwidth for AI interconnection has spawned the development of a series of new technologies and the expansion of application scenarios. AI interconnection's urgent need for low power consumption, low latency, and high bandwidth, Led to the development of a number of technologies including LPO (Linear drive Pluggable Optics), Half LPO (including LRO/TRO), CPO (Co-Packaged Optics), and silicon optical integration technology. It is reported that Nvidia will officially launch its own CPO switch in Q3 2025, and plans to put it into commercial use in 2026.
The OIO demand for Sale-up for AI architecture has also been pushed to a climax this year, and Ayar Labs around OIO has received investment from Nvidia, Intel, and AMD, with a valuation of more than $1 billion. Around the development of OIO, there are also several start-ups in North America, which shows the attractiveness of the market.

FTTR from home wide to government and enterprise gateway
With the evolution of the optical access network market from FTTH to FTTR, the industry is actively exploring new growth points, but it is still difficult to change the trend of volume and price decline in the market. According to C&C statistics, the number of FTTR open tenders by the three major operators - especially China Telecom and China Mobile - has exceeded 21.55 million units in 2024.

China Telecom is the first in the industry to launch the pilot bureau procurement of 50G PON, demonstrating its leadership in technology evolution. Despite the market's wait-and-see attitude towards future technological evolution, the application of FTTR technology is expanding from home networks to enterprise networks, where FTTR-H helps to enhance the home business experience, and FTTR-B helps small and micro enterprises digital transformation.

The conjecture of the Trump 2.0 era
With the US election in November, entering the Trump 2.0 era, trade policy is expected to be more aggressive, Trump has said that more than 60% of Chinese goods will be imposed targeted tariffs, which will undoubtedly exacerbate the trade friction between China and the United States, and may force Chinese enterprises to further shift production bases to Southeast Asia and other regions to avoid high tariffs. Chinese companies may need to be more flexible in adapting their global strategies to this new global trading environment.

In summary, in 2024, the progress of AI computing power and technology has brought unprecedented opportunities to the optical communication industry, and the advancement of new technologies has also brought new challenges and opportunities to the industry, and it is difficult to determine what changes Trump will bring to the industry once again. But our companies should be optimistic about the new changes and actively respond to seek opportunities. You are also welcome to share your 2024 summary and predictions in the comments section.