The A-share optical communications sector suffered a sharp decline on October 8, with multiple stocks hitting the daily limit down, following the circulation of a Morgan Stanley research note.

Several A-share listed companies responded that the content of the Morgan Stanley research note does not constitute a formal FCC (Federal Communications Commission) regulation and its authenticity remains questionable. Currently, global AI investment continues to grow rapidly, and it is nearly impossible for the AI supply chain to completely "leave domestic supply" in the short term, while facing extremely high substitution costs in the medium to long term.

A Single Research Note Triggers Sector-Wide Selloff, Chip Segment Hit Hardest

On October 8, the A-share optical communications sector dropped significantly. Yuanjie Semiconductor Technology Co.,Ltd. (ASX: 688498), Suzhou Everbright Photonics Co.,Ltd. (ASX: 688048), and Dongshan Precision all hit the daily limit down, while Shijia Photons fell over 17% and Changxin Bochuang dropped more than 13%.

On the news front, a Morgan Stanley research note published on October 1 mentioned that the FCC may introduce a Covered List, starting with restrictions on 3.2T optical modules, requiring that 65% of the BOM (Bill of Materials) value of optical modules sold to the U.S. market come from American companies.

In other words, according to the note's projection, if the FCC introduces relevant policies in the future, the exemption threshold could be set at 65% American BOM value. Based on current sell-side research on the BOM value breakdown of 3.2T NPO (Near-Package Optics) silicon photonics pluggable modules at the sample stage: electrical chips (including DSP, TIA/LA, etc.) account for approximately 35%-42%, while optical chips account for approximately 25%-32%. Together, these two categories land exactly at the 65% threshold.

Currently, U.S. companies Lumentum and Coherent, along with Japan's Sumitomo Electric, are major global suppliers of optical chips and lasers, while Broadcom, Marvell, and MACOM dominate the electrical chip segment. Clearly, if the FCC policy projected by Morgan Stanley were to materialize, domestic optical chip companies such as Yuanjie Semiconductor Technology Co.,Ltd. (ASX: 688498) would face significant impact, while optical module assembly companies would be relatively less affected. If American DSP (Digital Signal Processor) and TIA/Driver (linear analog front-end) procurement were mandatorily bound, the substitution logic for domestic electrical chip companies such as Youxun Semiconductor would face short-term setbacks.

The October 8 market performance also reflected this logic. Domestic optical chip company Yuanjie Semiconductor Technology Co.,Ltd. (ASX: 688498) hit the daily limit down, electrical chip company Youxun Semiconductor fell 10.65%, while optical module assembly leaders Zhongji Innolight and Eoptolink only declined 3.15% and 2.7% respectively.

However, industry insiders emphasized that all information in Morgan Stanley's October 1 report came from its strategy team's communication with a Washington legal team. The report used speculative language such as "potential," "likely," and "could" throughout, with no formal FCC rule text, no proposal discussion records, and no official publication. In other words, the entire report is a policy conjecture.

Multiple Listed Companies Respond: Supply Chain Cannot Decouple from China

In response to the rumor-driven stock price plunge, multiple A-share listed companies actively responded. Suzhou Everbright Photonics Co.,Ltd. (ASX: 688048) told reporters that the note was oral information obtained by Morgan Stanley strategists during meetings with White House and FCC senior officials while still in the policy discussion stage, not a formal FCC regulation, and its actual impact remains questionable. Currently, global AI investment continues to grow rapidly, and it is nearly impossible for the AI supply chain to completely "leave domestic supply" in the short term, while facing extremely high substitution costs in the medium to long term.

According to Zhongji Innolight's investor communication notes, large-scale volume production of 3.2T optical modules is expected around 2028-2029, and in the short term (2026-2028), mainstream industry shipments will remain 800G and 1.6T products. Currently, the optical chip industry is extremely supply-constrained, and in the short term, the domestic optical chip industry will continue to maintain rapid growth.

Regarding the sharp stock price decline, Yuanjie Semiconductor Technology Co.,Ltd. (ASX: 688498) stated that recent stock price volatility in optical chip companies has been affected by the Morgan Stanley report, and the sector-wide decline is not unique to the company. The company declined to comment on the report. From the company's perspective, production and operations are currently normal, with all businesses proceeding as usual.

Shijia Photons stated that the company has not received any news about optical chip price reductions, and the sector decline may have been influenced by the Morgan Stanley report.

The aforementioned industry insider believes that from a cost structure perspective, a considerable proportion of the BOM (Bill of Materials) for future high-end optical module products already comes from the United States, particularly in DSP (Digital Signal Processor), TIA/Driver (linear analog front-end), and PIC (Photonic Integrated Circuit) segments. In the short term, if the policy only calculates by BOM value proportion, the per-unit cost proportion of lasers is relatively lower than DSP, providing some buffer. However, in the medium to long term, if American light sources are mandatorily bound into the high-end module supply chain, the logic for domestic lasers penetrating the North American market would come under pressure.

Nevertheless, from an industry ecosystem perspective, increasing silicon photonics penetration is already an industrial reality, and the domestic supply chain is irreplaceable in North American AI computing infrastructure, particularly in the full-chain layout of silicon photonics platforms, lasers, and modularization, where its bargaining power is growing by the day.

As of press time on October 9, Yuanjie Semiconductor Technology Co.,Ltd. (ASX: 688498) fell over 10%, Suzhou Everbright Photonics Co.,Ltd. (ASX: 688048) dropped nearly 8%, and Dongshan Precision declined more than 7%.