Moody's: U.S. Weighs Limits on Chinese Optical Components; Coherent Seen as Top Replacement Winner
AI Market Summary
Reports that the U.S. and FCC are preparing restrictions on Chinese data-center components, explicitly including optical modules, would re-route demand from Chinese leaders toward non-Chinese suppliers. Morgan Stanley flags Coherent as the primary beneficiary, with potential spillover to Lumentum, Applied Optoelectronics and Fabrinet. Near-term execution risks include limited non-Chinese capacity and dependence on Chinese indium phosphide substrates, implying short-term supply disruption despite longer-term supply-chain reshoring.
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● Medium
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Chaoxiang Research cited a Reuters report dated August 4 saying the Trump administration and the Federal Communications Commission (FCC) are preparing measures that would curb the entry of Chinese-made data center components into the U.S., explicitly including optical modules.
Morgan Stanley said in a note released the same day that InnoLight and Eoptolink together control roughly 50% of the optical module market. If restrictions take effect, the bank expects demand to migrate to non-Chinese suppliers.
Coherent (COHR) is viewed as the main beneficiary. Lumentum (LITE) could see indirect upside as ongoing EML supply tightness persists. Applied Optoelectronics (AAOI) and Fabrinet (FN) are also seen as having capacity to take on incremental demand.
Morgan Stanley flagged two near-term obstacles to rapid implementation. First, non-Chinese manufacturers may not be able to scale quickly enough to close the supply gap. Second, indium phosphide (InP) substrates still rely on China's AXTI. Lumentum signed a new supply agreement last week, and Morgan Stanley noted that one key goal of Coherent's CEO visiting China months ago was to secure InP supply.
The bank said any near-term move would likely trigger a supply shock, while a longer runway could accelerate the build-out and rebalancing of non-Chinese supply chains.
