Chinese Firms Hold 60% of the Global Optical Module Market
The global push for AI computing power is unleashing an unprecedented wave of infrastructure buildout, and China sits at the center of it. Xinhua reports that two critical hardware categories, optical modules that shuttle data between servers and the chips that process it, are now dominated by Chinese manufacturers, and new data from the first months of 2026 confirms the scale of that dominance. Chinese firms claim seven of the world’s top 10 optical module vendors, with their combined global market share exceeding 60 percent, according to LightCounting, a research firm. In the first four months of 2026, China exported 117 billion integrated circuits, worth 103.5 billion US dollars, up 83.7 percent year-on-year. Export orders for optical modules have already stretched into 2028.
The optical module story is the most striking. If AI is the brain, optical modules are the nerves, converting electrical signals to light and back at blinding speed, shuttling data between servers inside data centers and across continents. A single 1.6-terabit optical module can transmit 95 high-definition movies in one second. Zhongji InnoLight, based in Yantai, Shandong, held over 40 percent of the global 800G optical module market and an estimated 50-70 percent of the 1.6T segment last year, securing first place for four consecutive years. Eoptolink, InnoLight’s cross-province rival based in Chengdu, ranked second. Both companies have secured positions in the supply chains of NVIDIA, Google, and Amazon. Delivery cycles that once took 12 weeks have been compressed to eight or fewer, as North American clients race to expand computing capacity measured in weekly increments.
Huagong Tech Launches World’s First 12.8-Terabit Module as Prices Surge
The pricing data tells its own story. In March 2026, China’s average export price of optical modules rose 23 percent year-on-year, while fiber and cable exports soared 263.8 percent in value year-on-year, with the average export price surging 204.3 percent. Huagong Tech, an optical module manufacturer based in Wuhan, opened the world’s first 12.8-terabit XPO module in March. It bundled the capacity of eight 1.6T modules into a single unit tailored for next-generation AI clusters of 100,000-plus GPUs. Ma Xinqiang, the company’s chairman, noted that the North American market for 1.6T modules has already exceeded 20 billion dollars. The global market will be well above 30 billion dolalrs this year.
IC Exports Up 83.7% in Value as SMIC and Hua Hong Hit Near-Full Capacity
The chip story is newer but no less striking. Xinhua notes that China produced 127.2 billion integrated circuits in the first quarter of 2026, up 24.3 percent year-on-year. High-value products have become the mainstay of China’s chip exports. In April alone, export value doubled to 31.1 billion dollars, an increase of 100.1 percent year-on-year, while export volume edged up a modest 3.8 percent. Industry insiders say that such a gap, rarely seen in China’s chip trade, signals a systemic revaluation of export product value rather than simple volume growth. Among China’s leading chipmakers, SMIC ran at 93.1 percent capacity utilization in the first quarter of 2026, while Hua Hong Semiconductor saw net profit rise 458.1 percent year-on-year to 20.9 million US dollars, with capacity utilization remaining high at 99.7 percent.
Equally significant is what is happening on the equipment side. According to data from the China Semiconductor Industry Association, the domestic semiconductor equipment localization rate climbed from 25 percent at the end of 2024 to 35 percent in 2025. On new wafer-fab production lines, domestically made equipment accounted for 55 percent of total procurement value by the end of 2025, exceeding the national 50-percent target ahead of schedule. The downstream demand picture is equally robust: MOS memory sales surged 236.4 percent in the first quarter, while logic chip sales increased by 40.1 percent, according to a recent report by the European Semiconductor Industry Association.
A Complete Domestic Supply Chain Underpins China’s Hardware Dominance
The stories about the optical module and chip are converging. The same AI boom driving insatiable demand for high-speed optical interconnects is also reshaping the chip landscape. The phrase “compute-power coordination” appeared in China’s government work report for the first time this year, and a CICC research report identified it as a major industrial trend driven by soaring AI demand and the low-carbon energy transition. The competitiveness of Chinese optical modules also hinges on the synergy of a complete upstream industrial chain covering optical chips, ceramic packages, and precision structural components. China has formed highly concentrated industrial clusters in the Yangtze River Delta, the Pearl River Delta, and Wuhan’s Optics Valley. There, the localization rates now exceed 90 percent.
Zhang Zhe, a researcher at the Electronic Information Research Institute under the China Academy of Information and Communications Technology, said the large-scale construction and expansion of AI data centers worldwide have driven strong hardware demand. “While overseas manufacturers face supply-side constraints and limited capacity expansion,” he said, “Chinese manufacturers, backed by sufficient raw material supplies and a complete industrial chain, can rapidly respond to this round of demand explosion.”
The implications for the US-China tech war are profound. While the United States maintains a clear lead in the design of the most advanced AI accelerators and the development of frontier models, the physical infrastructure supporting this ecosystem is heavily reliant on Chinese manufacturing capabilities. Even as geopolitical tensions rise, the practical realities of the global supply chain dictate a significant degree of ongoing trade. The surge in Chinese optical module and chip exports demonstrates that targeted restrictions on specific technologies do not prevent China from capturing significant value in other critical segments of the AI hardware stack and that, for now, the global AI buildout runs on Chinese components.