Goldman Sachs: Innolight & Optical ModulesMark

Goldman Sachs: Innolight & Optical Modules

Market Trends and Technology Migration

> Speed Evolution: The industry is aggressively migrating toward higher-speed optical modules. 1.6T modules are moving toward volume production as the next mainstream standard, while 3.2T optical modules are expected to begin volume ramp-up in 2027.

> Silicon Photonics (SiPh) Dominance: Silicon photonics is increasingly displacing traditional EML-based solutions due to lower power consumption, superior performance, and simplified packaging.

> Penetration Rates: By 2026, SiPh penetration is projected to reach 60% for 800G, 80% for 1.6T, and 100% for 3.2T products.

> Revenue Share: Silicon photonics' share of total optical module revenue is expected to surge from 28% in 2025 to 62% by 2028.

Innolight Shipment and Market Share Highlights

> Leadership: Innolight is the leading supplier of 1.6T pluggable modules. It is projected to hold a 50–60% market share of 1.6T modules in 2026. Other industry reports indicate Innolight's market share for 1.6T modules may reach as high as 50–70%.

1.6T and 3.2T Outlook:

> 1.6T: Expected to become the "absolute mainstream" by 2027, with 45.72 million units projected to be shipped that year.

> 3.2T: Following the ramp-up of 1.6T, 3.2T shipments are expected to double in 2028 compared to their initial volume ramp year in 2027.

> Manufacturing & Capacity: To support this demand, Innolight planned a 155% year-on-year increase in capital expenditure for 2026 to expand production capacity.

Market Dynamics: Volume, Revenue, and ASP

> Speed Migration (Volume Mix): The market is shifting rapidly from legacy "Below 400G" speeds toward high-speed AI-focused modules.

While "Below 400G" accounted for 89% of shipment volume in 2025, that share is projected to decline to 77% by 2028E.

Conversely, high-speed modules are capturing significant volume: 1.6T modules are projected to grow from 1% of volume in 2025 to 10% by 2028E, and 3.2T modules are expected to reach 5% of total shipment volume by 2028E.

> Average Selling Price (ASP) Trends: The report explicitly notes an assumed year-over-year (YoY) ASP decline for "like-for-like" products.

For example, the ASP for 1.6T modules is expected to drop from $840 in 2025 to $435 by 2028E.

The 3.2T module, which enters the market in 2027, has a high starting ASP of $1,023 in 2027E, which is then projected to decline to $768 by 2028E.

Technological Shift: SiPh vs. EML

> Silicon Photonics (SiPh) Adoption: The market is undergoing a significant transition from traditional EML-based materials to Silicon Photonics.

SiPh revenue penetration is expected to increase from 28% in 2025 to 62% by 2028E.

Correspondingly, the SiPh penetration rate (by volume) is projected to climb from 6% in 2025 to 18% by 2028E.

Market Opportunity (TAM)

> Total Addressable Market (TAM): The global optical module TAM is expected to grow from $34.2 billion in 2025 to a peak of $72.6 billion in 2027E, before moderating slightly to $69.1 billion in 2028E.

> High-Speed Revenue Growth: The 1.6T and 3.2T segments represent the primary growth engines, with combined revenue for these categories projected to grow from $3.9 billion in 2025 to $44.9 billion in 2028E.