The country is increasing its investment in chip research and development to improve the domestication rate of optical devices.

As the core of photonic technology, photonic devices have seen their market scale continuously expand with the rapid development of the industry. The next five years represent a critical period for achieving the goals of Made in China 2025 and a strategic opportunity for the accelerated development of the photonic device industry. To this end, the Electronic Information Department of the Ministry of Industry and Information Technology (MIIT), guided by the China Electronic Components Industry Association, has collaborated with key domestic enterprises, research institutions, universities, and industry experts to jointly compile the China Photonic Device Industry Technology Development Roadmap (2018-2022). This roadmap aims to analyze the current state of the industry, identify key challenges and priorities, and set development goals for the next five years.

Industry Status

According to data from consulting firm Ovum, the global optical communication device market has shown steady growth from 2015 to 2021, with revenue expected to reach $16.6 billion in 2020. Among this, demand from the telecommunications and data communication markets has remained stable, while the access network market has stabilized. Compared to the equipment and fiber optic cable markets, the optical communication device sector remains highly competitive, with low market concentration, numerous manufacturers, and fragmented market shares.

From a product technology perspective, major global photonic device manufacturers have actively deployed active optical chips, devices, and optical module products, achieving speeds of 100Gb/s and above. Domestic Chinese companies have a relatively high market share in passive devices and low-speed optical transceiver modules in the mid-to-low-end market, but there is still significant room for improvement in high-end active devices and optical modules. The expansion of the data center market has become a common focus for many photonic device manufacturers.

In terms of profitability, the optical communication device industry has the lowest profit margin within the entire industry chain. This is especially true for domestic companies, which are concentrated in mid-to-low-end products, resulting in less optimistic profit levels. This makes it difficult for most domestic companies to invest more in R&D for high-end products, hindering the sustainable development of the industry.

From a market share perspective, Chinese companies are relatively weak in the global optical communication device market, with only one Chinese company ranking among the top ten globally. High-end device products are almost entirely dominated by American and Japanese manufacturers, with supply falling short of demand, while domestic companies remain largely in the blank or R&D phase in this field.

In terms of core chip capabilities, domestic companies have only mastered the manufacturing processes for lasers, detectors, and modulator chips at speeds of 10Gb/s and below, as well as PLC/AWG chips and their supporting IC design and packaging/testing capabilities. Overall, there is still a significant gap compared to international leaders, with high-end chip technology lagging behind the U.S. and Japan by 1-2 generations. Additionally, domestic photonic chip processing heavily relies on the U.S., Singapore, Canada, Germany, the Netherlands, and Taiwan, leading to significant losses of key technologies. Due to the lack of a complete and stable photonic chip and device processing platform, as well as a skilled workforce, China has yet to establish a comprehensive standardized R&D system for optical communication devices, resulting in long development cycles and low efficiency.

Development Strategies and Goals

1. Development Strategies

(1) Improve the Business Environment and Foster a Healthy Industry Ecosystem: Optimize the industry environment through policy support and market guidance to promote healthy enterprise development.

(2) Tackle High-End Chips/Devices to Ensure Supply Chain Security: Focus on breaking through technical bottlenecks in high-end chips and devices to secure the industry chain.

(3) Strengthen International Markets and Promote Industry Globalization: Leverage the "Belt and Road" initiative to actively explore emerging markets in Asia and Africa, driving international production and R&D.

2. Structural Adjustment Goals

(1) Transition from Low-End to High-End Products: Market-oriented optimization of product structure, with a focus on strengthening R&D and market breakthroughs in 100Gb/s optical transceiver modules, ROADM products, high-end fiber connectors, 10Gb/s and 25Gb/s lasers, and supporting IC chips. Increased investment in next-generation 400Gb/s optical transceiver modules and silicon photonics integration to keep pace with international leaders.

(2) Shift from Assembly to Core Chip Technology: Address upstream weaknesses and solidify the industry foundation by developing R&D and manufacturing capabilities for photonic chips, including laser chips, photodetector chips, IC chips, and photonic integrated chips. Ensure that by 2022, the localization rate of mid-to-low-end photonic chips exceeds 60%, and high-end photonic chips surpass 20%.

(3) Cultivate Leading Enterprises and Emerging SMEs: Foster leading enterprises to drive core technology development and standard-setting, while supporting the growth of emerging small and medium-sized enterprises to strengthen the industry ecosystem.

(4) Promote Interconnectivity Across the Industry Chain: Standardize the industry environment and build an industrial ecosystem by encouraging domestic system equipment manufacturers to prioritize domestic photonic devices. Promote collaborative innovation across the industry chain, establish testing platforms, and jointly cultivate application ecosystems to enhance international competitiveness.

3. Technological Innovation Goals

(1) Build Industry Collaboration and Innovation Platforms: Accelerate the construction of the National Manufacturing Innovation Center for Information Photonics, integrate domestic and international innovation resources, and drive industrial transformation and upgrading.

(2) Strengthen R&D and Talent Development for Core Active Lasers, Silicon Photonic Chips, and Key Upstream Materials: Address technological gaps by establishing shared R&D platforms, increasing talent reserves, and attracting high-end overseas talent.

(3) Breakthroughs in High-Density, High-Speed Integrated Packaging and Testing Processes: Led by leading enterprises, promote the industrialization of 100Gb/s and 200Gb/s coherent optical transceiver modules, ROADM products, 200Gb/s and 400Gb/s optical transceiver modules for data centers, and 25Gb/s optical transceiver modules for 5G mobile communications, supporting major national projects.

(4) Improve Technical Standards and Intellectual Property Systems: Establish a comprehensive standard system for optical communication systems and devices, encourage enterprises to participate in international and domestic standard-setting, strengthen patent applications, enhance patent quality, and build a domestic patent pool to bolster international competitiveness.

Through these measures, China's photonic device industry is expected to achieve technological breakthroughs and industrial upgrading within the next five years, gradually narrowing the gap with international leaders and promoting healthy and sustainable development of the sector.