Taiwan Optical Industry Reaches Turning Point Shifting From Smartphones to AI Data Centers and CPO Architecture
Taiwan’s thriving optical industry, responsible for a significant shift in global technology trends from smartphones to artificial intelligence, has reached a crucial turning point. The optical suppliers such as Largan Precision, Genius Electronic Optical, and Advanced Optoelectronic Technology have witnessed tremendous growth in the past 20 years thanks to increased demand for improved mobile cameras. But given the saturation of global phone sales and aggressive competition from China, these firms are searching for a new source of growth, and that growth will come from the infrastructure of AI data centers, silicon photonics, and CPO (co packaged optics).
Optical lenses are no longer solely small components inserted into the body of a cell phone but are key elements of a next generation computing architecture.
This is an upgrade of sorts that moves Taiwanese optical manufacturers away from consumer electronics and into the high margin semiconductor space. Why CPO represents the cutting edge of optics AI requires massive computational power, necessitating data centers to handle an exponential increase in data volume. As data transmission rates evolve, from 400G and 800G to 1.6T and even 3.2T, traditional copper wires will be unable to support increased data transfer and will also consume considerable power, causing heat buildup. This creates a strong impetus for the use of optics, in which information is carried on light.
CPO technology solves this speed issue by packaging the optics together with the semiconductor switch silicon, drastically reducing signal lengths, minimizing power consumption and heat, and boosting data speeds to 1.6T.
Although CPO is a type of hardware and silicon, there is immense technological value attached to its optical implementation. Typical CPO systems require complex elements such as prisms, micro lens arrays, collimators, fiber array units, and V Grooves all requiring micro fabrication techniques below 1 micron. This is exactly the manufacturing precision these companies developed during the smartphone era.
Largest of the big three, Largan Precision’s push for the future of AI Largan, widely known for being one of the dominant lens suppliers for Apple’s iPhone, has quickly pivoting into CPO.
“given that the overall market may eventually shift towards AI as its mainstream transition…it will be difficult for our current business to not be replaced by this transition.”
Chairman Lin Enping said that thus, Largan has been working diligently on the manufacture of prism, collimator, and fiber array components. In a corporate announcement, it disclosed plans to provide client samples beginning this month, and will establish an automated fiber array production pilot line by September.
It has also, according to market sources, demonstrated a CPO product with a transmission capacity of 6.4T at least three generations ahead of the existing solutions, pushing the stock price above NT$5000 for the first time in six years.
In a more aggressive push into this market, Genius Electronic Optical has advanced to client validation and limited production. Chairman Chen Tianqing said it had begun testing the commercial viability of mechanical transfer ferrule, collimator, prism, and V Groove products. GSEO expects its passive CPO offerings will enter stable mass production between 2027 and 2028, bringing a significant secondary revenue stream along with its smartphone camera lens sales. Even smaller company Advanced Optoelectronic Technology is making a name for itself through its work on the V Groove the base unit within the fiber array assembly. Chairman Gao Weiya has stated that the company’s glass expertise is ideally suited to producing precision V grooves. To manage its risk in this new market, Advanced Opto will be jointly submitting product samples with major shareholder Largan to global data center customers.
The transition of Taiwan’s optical firms into AI hardware will surely draw the attention of financial institutions, as evidenced by strong buy ratings on Largan from Nomura, Citi, and UBS (with a price target of 5325 NT$) ubs sees CPO providing a meaningful earnings boost for Largan even in conservative economic scenarios.
JP morgan has a neutral rating and 3600 NT$ price target on the company, seeing its CPO aspirations as fundamentally sound, yet believing that valuations reflect that position, and real world market integration could be slower than bulls hope. For Genius Electronic Optical, a neutral analyst from Cathay Securities highlighted the increased demand for passive optics generated by AI data infrastructure as a key market driver. While a short term focus on premium smart phone camera updates will support current business results and mid term prospects on smart glasses and long term visibility will depend on data center silicon photonics business, a solid strategy will make GSEO be in a new trajectory.
