Moody's: U.S. Plans to Restrict Chinese Optics Components; Coherent and Others See Replacement Opportunities

According to Chaoxiang Research, Reuters reported on August 4 that the Trump administration and the FCC are preparing to restrict Chinese data center components from entering the U.S., with optical modules specifically mentioned. A Morgan Stanley report released the same day noted that InnoLight and Eoptolink together account for approximately 50% of the optical module market; if the ban is implemented, this demand would shift to non-Chinese suppliers. Coherent (COHR) is the primary beneficiary, while Lumentum (LITE) indirectly benefits from ongoing EML supply constraints; Applied Optoelectronics (AAOI) and Fabrinet (FN) also possess the capacity to absorb this demand. Morgan Stanley believes the short-term implementation of the ban faces two major bottlenecks: non-Chinese manufacturers cannot rapidly fill the demand gap; and indium phosphide (InP) substrates remain dependent on China’s AXTI—Lumentum just signed a new supply agreement last week, and one of the key purposes of Coherent’s CEO’s visit to China months ago was to secure InP supply. In the short term, the ban will cause a supply shock, but in the long term, it will benefit the restructuring of non-Chinese supply chains.