Optical communication orders are fully booked for one and a half years, and upstream material supply constraints are affecting short-term deliveries.

The optical communication order book is full for a year and a half, but upstream material shortages hinder short-term deliveriesDriven by demand for artificial intelligence networks, the production capacity of optical device and system manufacturers has been almost entirely sold out for the next 12 to 18 months. However, a packed order book does not immediately translate into increased shipments. The supply of indium phosphide (InP) substrates from AXTI and Sumitomo is severely constrained, directly restricting the delivery of electro-absorption modulated lasers and continuous-wave lasers. Although Cisco and Nokia have secured some strategic supplies and Ciena has maintained most of its line system market share, before substrate production capacity is expanded and laser chip yield rates improve, the short-term revenue ceiling for the entire sector will continue to be limited by upstream material constraints.To overcome the bottleneck in traditional connectivity, the industry widely anticipates that Near Package Optics (NPO) will be tested in artificial intelligence expansion networks by 2028. The Open CPX standards organization is establishing unified parameters for optical engines, alleviating major cloud providers’ concerns about being tied to the technology of a single supplier. Commercial deployment is advancing through long-term agreements. Coherent plans to ramp up its PhotonLink solution in 2027, and Lumentum is also expected to sign deals in the coming months. As the first-generation architectures still rely on external high-power lasers, both Coherent and Lumentum will directly benefit from the surge in demand for laser chips.In contrast to the increasingly standardized NPO, the deployment speed of Optical Circuit Switch (OCS) solutions among cloud providers remains highly uneven. Currently, only Google has completed the largest-scale actual deployment and plans to shift future mass production to Lumentum in the coming years, while other cloud providers’ test scales remain small. Some potential cloud customers have even canceled deployments after solutions fully passed verification, indicating that resistance to replacing existing systems with OCS still exists. Although OCS can improve supplier profit margins, until more cloud providers follow suit, short-term revenues for related manufacturers will remain dependent on Google’s purchasing tempo as the sole major client.