報告_MS_CPO供應鏈_20260705

PDF 原檔：報告_MS_CPO供應鏈_20260705_original.pdf

原始內容

M July 5, 2026 07:18 PM GMT

Greater China Semiconductors | Asia Pacific

CPO Supply Chain Updates; More on GlassBridge

GlassBridge appears to be a strong solution, but remains far from mass production. We see TSMC scaling PIC capacity to 25kwpm in 2028, with Ins2 test efficiency improving. We remain OW on CPO enablers as investor expectations are already low.

Further thoughts on GlassBridge impact on FAU: We do not rule out GlassBridge hampering Fiber Array Units' (FAU) TAM in the long run (link), but we have yet see any projects in TSMC's COUPE platform adopt this technology. On the other hand, GlassBridge mainly serves edge coupling and can currently support only one -dimension fiber layouts. However, TSMC's mainstream COUPE platform and key customer (NVIDIA, AMD, Ayar Labs) solutions for the next few years should still stick to grating coupling, as it is easier to achieve mass production, which we expect to see soon in 2H26. In addition, CPO requires integrated design and discussion across the entire ecosystem-including foundry (OE), chip designer, FAU, laser, and even system integrator-so it is difficult to change a design overnight.

Latest developments on PIC capacity: Although several difficulties remain (link), we continue to see green shoots. TSMC plans to ramp PIC capacity from 10kwpm in 2Q26 to 15kwpm in 4Q26, and to at least 25kwpm in 2028. Reflecting limited resources, we believe key COUPE MP customers in 2026-27 could be NVIDIA, Broadcom, and AMD. With more capacity seen for 2028, other customers such as MediaTek, Marvell, and Ayar Labs could mass produce their CPO projects at TSMC.

What about the progress in CPO insertion tests? CPO insertion tests are one of the key bottlenecks to mass production. However, Insertion 2 EPIC wafer test time has improved from a wafer a day in 2H25 to a wafer in six hours now, making the 34 hour target in the next 6-12 months no longer a distant dream. Many investors ask whether Insertion 2 could be a skipped process, but we regard this as less likely as it is the first stop/time to conduct simultaneous optical -electrical signal testing.

FOCI - CPO mass production to start in 3Q: We expect CPO MP revenue to begin in July and continue scaling to 2027, mainly for the Spectrum CPO switch. Besides NVIDIA, we expect its FAU shipments to AMD's MI500 series to start from 2H27, along with more MP customers in 2028.

Stock implications: We remain optimistic about CPO development in the long run, and think investor expectations are very low for CPO stocks. We are OW on Asia CPO enablers such as TSMC, ASE , FOCI, AllRing, MPI, Winway, and Hon Precision. We think TFC has a competitive edge in high-end FAU, and is less likely to face disruption from GlassBridge as it is more likely to replace low-end FAU at the initial stage. We believe Largan could face more competition if V-Groove is the major product, but if it is making the entire FAU, it needs to show competitiveness vs. existing players. In this report, we revise estimates for FOCI and AllRing.

Idea

Greater China Technology Semiconductors

Asia Pacific

Industry View

Attractive

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.

For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.

+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

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Fiber Array Units

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What Is GlassBridge, and How Does It Differ from Traditional V-Groove FAU? alchip FlexConnecat A7K#А AAU 10 minHMTo o 0)

80ch FAU

40ch FAU (Beam Expanded)

SENKO

64ch FAU

12ch FAU

Traditional FAU is a mature, high-precision fiber-array assembly: fibers are placed into Vgrooves on a glass/silicon/quartz substrate, fixed with a cover and adhesive, polished, and then aligned to a PIC or optical engine. It is proven, customizable, and very low-loss, but assembly becomes more difficult as channel count and density rise. Key FAU suppliers for CPO include vendors such as TFC Communication, FOCI, Senko, Browave and Sumitomo Electric. Corning has also said it is keen to develop several FAU solutions for CPO and NPO. id MPO Hame

Exhibit 1: Corning's FAU/CPO demonstration

Source: Corning, Morgan Stanley Research

to MMC

BROWAME

Mini-MT to ELS

Exhibit 2: FAU demonstration at Computex for Ayar Labs scale-up solution

Source: Wiwynn

Source: TFC

ITUS ThU

Classollege toellute

CORNING

manufacturing, customizable pitches, detachable solutions and passive alignments as the key advantages of GlassBridge

M

MMC-FAU DR Series

Exhibit 3: TFC's FAU

Source: Corning

Source: TFC

Supporting Future-Ready NPO and CPO Architectures

Flexible PIC-level integration enables

GlassBridge" solutions to scale with evolving customer channel-density requirements.

Exhibit 4: FOCI's FAU solution for CPO

Supports customized system architectures and the integration of multiple GlassBridge

elements on a single PIC.

Couran. Morninal

Source: FOCI

Corning GlassBridge is a newer wafer-based glass interposer / connector approach. Instead of directly presenting a fiber array to the PIC edge, it uses glass ion-exchange waveguides and a detachable, passively aligned connector interface to bridge fiber to PIC. Corning positions it for NPO, CPO, and high-density photonic modules where manufacturability, reworkability, and density become major constraints.

Exhibit 5: GlassBridge Fiber-to-PIC Connector

Source: Corning

Exhibit 6: Corning cites wafer-based high-volume manufacturing, customizable pitches, detachable solutions and passive alignments as the key advantages of GlassBridge

Source: Corning

The main difference is not simply 'new FAU vs old FAU.' It is connectorized glass waveguide bridge vs. direct fiber-array attach.

A traditional FAU tries to solve the alignment problem by making the fiber array itself extremely accurate. The fibers are held in V-grooves, polished, and aligned to the optical chip. This is a direct and proven method. FOCI describes the fiber array as a carrier using V-grooves to fix multi-core fiber, with optical-path positioning determined by the precision

FAU

vulmleulul

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V-groove and packaging/polishing process.

GlassBridge inserts a glass waveguide connector layer between the fiber side and the PIC side. That gives Corning more design freedom for pitch conversion, compact connector geometry, passive alignment, and detachability. Corning describes GlassBridge as using wafer-based glass ion-exchange waveguides for passive fiber-to-PIC coupling, and as an alternative that improves scalability and system integration at high fiber counts.

GlassBridge may not automatically be 'lower loss' than a conventional FAU. Corning's brochure cites 1.5 dB O-band fiber-to-PIC coupling for GlassBridge, while traditional FAU component insertion loss can be far lower, although the final fiber-to-PIC coupling loss depends on the full assembly.

For today's conventional transceivers, PLC/PIC coupling, coherent optics, and many datacenter modules, traditional FAU from suppliers such as TFC, FOCI, Senko and others remains the mainstream solution. For next-generation CPO/NPO optical engines, where hundreds of optical lanes, tight PIC shoreline density, reflow-compatible assembly, testability, and field/service rework become critical, GlassBridge is a more system-level, connectorized architecture rather than just another FAU. It seems better viewed as a way to reduce the scaling pain of FAU-style direct attach, not as a universal replacement for every FAU use case.

Exhibit 7: Side-by-side comparison: Corning GlassBridge vs. Traditional FAU

Source: Company data, Morgan Stanley Research

M

Key Charts for CPO Development

For 2026, we expect total CPO switch shipments to be 23k units, mostly 100T switches, with NVIDIA's Spectrum switch taking the lion's share.

Looking to 2027, we expect total CPO switch shipments to reach 59k units, growing further to 200k units in total in 2030; this implies a 144% CAGR over 2024-30.

Our supply chain checks suggest that TSMC currently has ~500 wafers per month of PIC capacity. TSMC plans to ramp PIC capacity from 10kwpm in 2Q26 to 15kwpm in 4Q26 and to at least 25kwpm in 2028. Reflecting limited resources, we believe key COUPE MP customers in 2026-27 could be NVIDIA, Broadcom, and AMD. With more capacity in 2028, other customers such as MediaTek, Marvell, and Ayar Labs should also be able to massproduce their CPO projects at TSMC.

Exhibit 8: TSMC's PIC capacity: likely to reach 25 kwpm in 2027

TSMC PIC Capacity Planning

Source: Company data, Morgan Stanley Research (e) estimates

Exhibit 9: Annual optical engine output from PIC capacity planning; we think this is likely to increase over time as yield rate ramps

Source: Company data, Morgan Stanley Research (e) estimates

crectrical resting

Optical+Electrical T

Conventional Module Design

ASIC

Modules with Silicon Photonics

SiPh Chiplets In Module

M

manufacturing limits to scale to improved scale

Exhibit 10: CPO Insertion Test Flow

Source: Company data, Morgan Stanley Research (e) estimates

Attached to Switch ASIC

CPO for Scale-Out Networking

CPO for Scale-Up Compute

Greater than 6.4Tbps of Optics

Attached to GPU

Exhibit 11: We expect scale-out CPO switch to grow rapidly, from 5k units in 2025 to 200k units in 2030, implying a 144% CAGR over 2023-30

Source: Yole, Morgan Stanley Research (e) estimates

Exhibit 12: CPO helps to reach scale-out networking and scale-up computing goal for AI/HPC applications

Source: Broadcom

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Gen 1 CPO

Gen 2 CPO

3D Optical Engine (OE) for Next-Gen Communication maea око

Built for Reliability and Link Performance

M

Mature Partner Ecosystem

Pluggable (OSFP**)

1.6Tbps OE on Substrate in 2025

Multi-Generational

FAU

Gen 3 CPO: TH6-Davisson

EIC

SiPh

EIC

Substrate

1X

Power:

Latency:

1X

• COUPE: Compact Universal Photonic Engine

• OSFP: Octal Small Form Factor Pluggable

2024 TSMC, Ltd

TH5-Bailly

Gen 4 CPO

Exhibit 13: TSMC's COUPE technology: Across SiPh pluggables to 3DIC

CPO with Switch

6.4Tbps OE on Substrate in 2026

Thn tin

DC EKC

Switch

< 0.5X

< 0.1X

Source: TSMC

Exhibit 14: Broadcom's CPO platform

Source: Broadcom

M

FOCI business - Bottom-up analysis and capacity plan

FOCI's revenue bottom-up plan

For 2026, we expect Spectrum-X to be the mainstream scale-out CPO switch product, with the optical engine production number being 600k-1mn units, and total switch shipments being ~20k units given production lead time. We expect TFC, FOCI and Senko to be the major FAU suppliers, with FOCI taking around 40% of total market share. Thus, we expect NVIDIA's contribution to FOCI's total revenue to be around 18% in 2026.

Looking to 2027, our industry checks suggest that NVIDIA could introduce a CPO version of the Kyber alternative rack, leveraging two NVL72 architecture, with the launch time likely in 2H27. As a result, we assume 5k and 28k units of CPO Rubin Ultra rack shipments in 2027 and 2028, respectively, with FOCI having around 40% market share. Thus, we expect NVIDIA's total revenue to contribute around 42% and 80% of FOCI's total revenue in 2027 and 2028, respectively.

However, there are more than 10 customers that are doing prototypes and could recognize NRE revenue in 2026, with mass production starting in 2027 and 2028, according to our supply chain checks. We have not fully baked this into our model, and view it as only a bull case scenario as we await additional product launch and shipment signs in the supply chain.

Exhibit 15: Upcoming key CPO projects FAU vendors

Source: Company data, Morgan Stanley Research estimates

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2026e

2027e

5

Rubin Ultra rack unit (k units)

M

Other scale-out switch optical engine consumption

Spectrum-X (k units)

Quantum-X (k units)

Market Share Assumptions

VIUWAN *OoaroO

FOCI

Others (TFC, Senko)

FAU ASP Assumptions

FAU ASP (6.4T; US$)

FAU ASP (3.2T; US$)

FAU ASP (1.6T; US$)

FOCI Revenue contribution from NVIDIA

Revenue contribution (US$mn)

Revenue contribution (NT$mn)

FOCI CY Revenue (NT$mn)

% of total revenue

Exhibit 17: Spectrum-X CPO Switch

Source: NVIDIA

800

35%

65%

180

90

45

19

567

1,985

29%

2028e

20

792

648

144

Exhibit 16: Bottom-up analysis: NVIDIA's revenue contribution to FOCI in 2026-28e

Source: Company data, Morgan Stanley Research (e) estimates

Exhibit 18: Quantum-X CPO Switch

Source: NVIDIA

For Optical I/O or optical engine on interposer adoption plans, we see NVIDIA exploring multiple solutions for the next generation Feyman and Feyman Ultra's platform, but whether there would be introduction or not still takes time. For other solutions, we see AMD targeting a scale-up CPO version for its MI550 or MI650 rack system in 2027/2028, based on its development progress. We also see ASIC vendors exploring CPO on GPU.

Our supply chain checks suggest that FOCI could see over 10 customers contributing to its Silicon Photonic/CPO revenue in 2026, besides some mass production revenue starting

SiPh Roadmap

Challenges

• High-bandwidth requirements for high-density fiber

FOCI Advanced Technologies

• Completed 20, 40, and 80 channels FAU

M

•.

from 1Q26.

co-Packaging Optics

What are FOCI's current plans for capacity?

In its recent public offering disclosure for the SEO, FOCI disclosed its projected revenue and profitability for the NT$1.538bn capex spent ( Exhibit 19 ). The company completed its SEO plan in early February, with total acquired capital of NT$3.1bn. It also announced a new private equity plan on Feb 26, with maximum new share issuance of 10mn units. We expect it to utilize all of the capital for R&D purposes (12.8T research) and further building and expanding its FAU capacity.

Exhibit 19: FOCI's projected revenue and profitability from NT$1.538bn capex spent

Source: Company data, Morgan Stanley Research

Exhibit 20: FOCI's SiPh Roadmap

Source: FOCI

Exhibit 21: FOCI's solutions for CPO

Source: FOCI

2026

Mirror ..

2026

beyond

CPO Switch (Scale Out)

FAU

6.4 Tbps OE on Substrate

→ Fiber

V-groove

Si lens

CPO XPU (Scale Up)

12.8 Tbps OE on Interposer

Sourcing : TSMC • Simple Tech Trend

COUPE-GC

Switch

XPU

FOCI

M

Exhibit 22: ReLFACon enables direct transmission of external photonic signals with MCM modules to achieve reliable signal transmission

Source: FOCI

M

AllRing Business - Bottom-up Analysis

We expect CoWoS-related revenue to account for 79% of AllRing's total revenue in 2026, with AllRing focusing on oS equipment supply to TSMC and ASE/SPIL. On the other hand, our checks indicate that TSMC's CoWoS capacity is likely to extend to 130kwpm in 2026 year end, with a view to meet strong customer demand. However, we see more non-TSMC 2.5 packaging solution vendors qualifying more Taiwanese CoWoS equipment vendors, creating a new TAM for AllRing, including FoPLP and Intel's EMIB. We expect AllRing's 2027 CoWoS revenue to rise 53% Y/Y (TSMC's CoWoS seen at 200kwpm for 2027), and see it beginning to prepare equipment for CoPoS (if the trial round goes smoothly in 2026) and its AP fab in Arizona (MP likely starting in 2028).

For CPO, AllRing has penetrated the CPO supply chain of NVIDIA for FAU-optical engine coupling and FAU AOI equipment. Our latest supply chain checks suggest that AllRing may have also won the dispensing step after insertion 3, where the optical engine will be mounted onto the CPO package substrate. We expect more clarity from the company on CPO-related revenue in 2H26, and expect it to account for 11%, 19%, and 26% of AllRing's total revenue in 2026, 2027, and 2028, respectively.

For SoIC, we expect 2026 SoIC capacity to reach 14kwpm. TSMC further expanding its CoWoS capacity in AP7 could cause slightly delays in equipment pull-in. Our latest supply chain checks suggest that TSMC has revised 2027e capacity to 40kwpm (from 45kwpm) and 2028e to 70kwpm (from 75kwpm). AllRing is the sole WoW dispenser supplier for SoIC; we expect the delay in SoIC to be more than offset by the strong build in CoWoS. In the long run, we still expect it to be the key growth driver for AllRing. SoIC is one of the key advanced packaging nodes for TSMC in the coming years, as we see more and more customers adopting this technology to realize chiplet design, including AMD, NVIDIA, Apple, and Broadcom.

Exhibit 23: Bottom-up analysis for AllRing's revenue

Source: Company data, Morgan Stanley Research (e) estimates

M

Exhibit 24: CoWoS supply capacity breakdown (average)

Source: Company data, Morgan Stanley Research (e) estimates. Note: estimates are compiled using our supply chain checks.

Exhibit 26: Detailed CoWoS capacity expansion by year end and

Source: Company data, Morgan Stanley Research (e) estimates. Note: estimates are compiled using our supply chain checks.

Exhibit 28:

TSMC's advanced packaging fab planning

Source: Company data, Morgan Stanley Research

Exhibit 25: CoWoS supply capacity breakdown (by year-end)

Source: Company data, Morgan Stanley Research (e) estimates. Note: estimates are compiled using our supply chain checks.

Exhibit 27: CoWoS demand breakdown by customer

Source: Company data, Morgan Stanley Research (e) estimates. Note: estimates are compiled using our supply chain checks.

M

AllRing: Estimate Revisions

We lift our EPS estimates by 15% for 2026 and 2% for 2027, and fine-tune 2028

forecasts: We lift our 2026 and 2027 revenue estimates to reflect ongoing advanced packaging capacity opportunities, including CoPoS and CoWoS, and also CPO, with CoWoS capacity continue to see upside. We expect AllRing to win more advanced packaging opportunities from the non-TSMC camp. Gross margin is likely to be better than many fear, driven by a better product mix, as CPO equipment's GM is margin accretive at the 5560% level.

Exhibit 29: AllRing: Estimate revisions

Source: Morgan Stanley Research (e) estimates

Exhibit 30: AllRing: Quarterly financials

Source: Company data, Morgan Stanley Research (E) estimates

NTS million

Total Equity

Net Profit

ROAE

Spread

M

22.6%

30.9%

26.9%

26.7%

2027E

11,160

2028E 2029E 2030E

13,584

15,323

17,341

5,816

4,230

27.6%

AllRing: Valuation Methodology

PV of Continuing Value

Equity Value

No. of Shares

Price Target

Exhibit 31: AllRing: RI model

Source: Company data, Morgan Stanley Research (E) estimates

108,054

152,089

96

1,580

2026E

8,539

2031E

19,682

6,746

4,932

28.4%

2032E

22,398

7,825

5,746

29.2%

2033E 2034E

25,548

29,202

9,078

6,689

29.9%

10,530

7,783

30.5%

2035E

33,440

12,215

9,052

31.0%

2037E

44,060

16,436

12,230

31.9%

We keep our RI-based price target (base case scenario value) at NT$1,580, reflecting our minor estimate changes for 2027 and 2028. Our other key assumptions are unchanged, including a cost of equity (CoE) at 8%, derived from a risk-free rate of 2.0%, beta of 1.0 and market risk premium of 6%, intermediate growth rate of 16% and terminal growth rate of 4.5%.

Exhibit 32: AllRing: NTM P/E

Source: Company data, FactSet, Morgan Stanley Research estimates

2036E

38,357

14,169

10,524

31.5%

M

Risk Reward - AllRing Tech Co. (6187.TWO) Risk Reward - AllRing Tech Co. (6187.TWO)

CPO, SoIC, and CoPoS Help to Extend Revenue Momentum; OW

NT$1,580.00 PRICE TARGET

Base case, residual income model. Our key assumptions are:

• Cost of equity (CoE) of 8%, derived from a risk-free rate of 2.0%, beta of 1.0, and a market risk premium of 6.0%.
• Intermediate growth rate of 16%.
• Cash dividend payout of 65%
• Terminal growth rate of 4.5%.

RISK REWARD CHART

Source: Refinitiv, Morgan Stanley Research

BULL CASE

55x 2027e EPS

We assume: 1) 60% revenue CAGR over 2025-28, thanks to stronger-than-expected capacity expansion plans for TSMC's CoWoS, CPO and SoIC; 2) gross margin expands to more than 55% in 2025-28, due to strongerthan-expected operating leverage resulting from the equipment production outsourcing strategy; 3) new product launches exceed expectations and AllRing increases its market share in other processes such as "CoW."

NT$2,200.00

OVERWEIGHT THESIS

• NVIDIA's next-generation GPU Rubin will stick with graphene for heat sink attachment, reducing concerns about competition for Allring.
• We expect AllRing to be a key beneficiary of the multi-year advanced packaging trend, including CoPoS and SoIC, but large-scale revenue contributions will likely take time.
• It is the sole WoW (Wafer-on-Wafer) dispenser supplier for SoIC, which we expect to be the next growth driver, contributing at least 2% of total revenue in 2026 and 4% in 2027.
• Our implied 2027e target P/E is 40x, similar to its SoIC peer and lower than CPO peers. We expect new advanced packaging opportunities including CPO, CoWoP, and CoPoS to benefit the company in the long run.

Consensus Rating Distribution

Source: Refinitiv, Morgan Stanley Research

Risk Reward Themes

Secular Growth:

Positive

Technology Diffusion:

Positive

View descriptions of Risk Rewards Themes here

BEAR CASE

16x 2027e EPS

We assume: 1) -30% revenue CAGR in 202428 due to slower-than-expected CoWoS capacity expansion plans by TSMC; 2) gross margin falls below 40% owing to the high bargaining power of its customers; 3) market share loss in "WoS" process amid rising peer competition.

NT$640.00

BASE CASE

40x 2027e EPS

We expect: 1) 46% revenue CAGR in 202528e after strong CoWoS capacity expansion for TSMC in 2024-25; 2) gross margin to be maintained at 48-53% from 2024-28 thanks to high operating leverage resulting from the equipment production outsourcing strategy; and 3) with new equipment launches, we expect AllRing to expand its market share in other processes. CPO, SoIC and other applications continue to bear fruit.

NT$1,580.00

M

Risk Reward - AllRing Tech Co. (6187.TWO)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• CoWoS capacity expansion from TSMC
• New technology migration such as SoIC and silicon photonics
• Strong operating leverage, given equipment production outsourcing strategy

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

3/5 MOST

3 Month

Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

• Stronger-than-expected CoWoS capacity expansion
• Faster-than-expected adoption of silicon photonics
• Market share gains from peers, led by continuous R&D and China's localization trend

RISKS TO DOWNSIDE

• Slowdown in CoWoS capacity expansion
• Allring's "WoS" market share declining
• Slowdown in technology migration such as SoIC and silicon photonics adoption

OWNERSHIP POSITIONING

Inst. Owners, % Active

76.4%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

Mean

Morgan Stanley Estimates

Source: Refinitiv, Morgan Stanley Research

Income Statement

NTSmn (Years End Dec)

Net sales

COGS

Gross profit

2028E

16,655

2025

5,366

2027E

14,955

M

Non-operating income

Income tax

(176)

(202)

(203)

(191)

(133)

AllRing: Financial Summary

Reported net Income

Adj.wtd.avg.shrs(m)

Reported EPS (NT$)

EPS for consensus (NT$)

Balance Sheet

NT$mn (Years End Dec)

Cash

Mk Securities

ARINR

Inventory

Other

Current Assets

Long-term investments

Fixed assets

1,311

3,831

4,322

2.454

1.485

Deffered assets

Other assets

Total Assets

SIT borrowings

APINP

Other ST liabilities

LT debt

Other LT liabilities

Total Liabilities

Common shares

Additional capital

Retained earning

Other shareholders equity

Total Equity

Total Liab. & Shrhidr's Equity

E = Morgan Stanley Research Estimates

Source: Morgan Stanley Rescarch, Company Data

76

76

76

Cash Flow Statement

NT$mn (Years End Dec)

Cashflow from Operations

Net profits

Depreciation

Working Capital Change

Other adjustments

Cashflox from Investing

Change of LT Investment

2024

1,079

1,311

47

(130)

(157)

(359)

(372)

(36)

Other adjustments

50

Cashflow from financing 1,851

Increase in L/T debt

Increase in S/T debt

Cash Dividend Paid

Net change in cash

Financial Ratios

Growth(%)

Turnover

Operating profits

Pretax profits

Net profits

EPS

Margins (%)

2025

1.958

1,485

59

476

(71)

(666)

(581)

36

(68)

(645)

1,797

2026E

2,454

59

(725)

(98)

(100)

(51)

(1,403)

2027E

2,752

3,831

59

(1,148)

0

(151)

(100)

(51)

(1,227)

-

2028E

4,046

4,322

59

(344)

0

(151)

(100)

(51)

(1,916)

Gross Margin

Operating Margin

Pretax Margin

Net Profit

Return (%)

ROAE

ROAA

Gearing (%)

Net Debt/Equity

Liabilities/Equity

Ratios (X)

Currentratio

Quick ratio

Others

ARINR Turnover (days)

Inventory Turnover (days)

AP Turnover (days)

Cash Conversion (days)

(563)

49.1

25.9

28.3

54.3

30.0

33.8

51.9

29.1

51.9

29.3

52.5

29.7

30.9

30.5

31.2

2024

2026E

M

FOCI: Estimate Revisions and Quarterly Financials

Factoring in actual 1Q26 results, we revise our 2026 EPS estimate to a loss, reduce

2027 by 2%, and cut 2028 fractionally. Weaker -than -expected 1Q26 and 2Q26 results were mainly due to ongoing capacity transition from the Hsinchu fab to the new Thailand fab as the company prioritizes its SiPh/CPO development. The SiPh/CPO new capacity line will also take some time, and pre-mass production preparation such as destructive testing conducted could also affect its gross margin, followed by gradual recovery. We also reflect the one-off expense from new share issuance impact on gross and operating profit in 1H26, as well as the impact on EPS from new share issuance.

We slightly lower our 2027-28 revenue assumptions for the traditional business, as the company will focus on CPO development and let go some low-margin business. However, our supply -chain checks indicate more than 10 customers are currently prototyping, with potential NRE revenue recognition in 2026 and mass production beginning in 2027 and 2028. We have not fully incorporated this upside into our model yet as we look for clearer evidence of product launches and shipment momentum - developments that would push our outlook toward the bull -case scenario.

Exhibit 33: FOCI: Estimate revisions

Source: Company data, Morgan Stanley Research (E) estimates

Exhibit 34: FOCI: Quarterly financials

Source: Company data, Morgan Stanley Research (E) estimates

M

FOCI: Valuation Methodology

Our price target (base case scenario value) remains NT$708 as we essentially maintain our 2028 EPS forecast and RI parameters.

We keep our medium -term growth rate at 16%, in line with Asia optics peers (e.g., Landmark) at 15-16%, to reflect rapid development in CPO and silicon -photonics technology. We maintain our other assumptions: cost of equity of 12.9% (risk -free rate 2.0%, risk premium 6.9%), payout ratio of 61%, and terminal growth rate of 4.0%.

Exhibit 35: FOCI: RI base

Source: Company data, Morgan Stanley Research (E) estimates

Exhibit 37: FOCI: P/S

Source: Company data, Factset, Morgan Stanley Research estimates

Exhibit 36: FOCI: P/B

Source: Company data, Factset, Morgan Stanley Research estimates

M

Risk Reward - FOCI Fiber Optic Communications Inc Risk Reward - FOCI Fiber Optic Communications Inc (3363.TWO)

(3363.TWO) New page for networking market; OW

NT$708.00 PRICE TARGET

Base case, residual income model. Key assumptions: cost of equity of 12.9% (risk-free rate 2.0% and risk premium 6.9%), a payout ratio of 61%, a medium-term growth rate of 16%, and a terminal growth rate of 4.0%.

RISK REWARD CHART

Key:

Source: Refinitiv, Morgan Stanley Research

BULL CASE

56x 2027e EPS

We assume: 1) 200% revenue CAGR, 202327e, from stronger-than-expected CPO development; 2) faster-than-expected CPO introduction; 3) gross margin improving to over 50% in 2027e thanks to scale effects and the company's technology competitiveness; and 4) >400% EPS CAGR, 2023-27e.

NT$920.00

BASE CASE

43x 2027e P/E

We project: 1) 107% revenue CAGR, 202327e, on fast CPO development; 2) gross margin improves to over 37% in 2027e thanks to scale effects and the company's technology competitiveness; 3) 231% EPS CAGR, 2023-27e.

NT$708.00

OVERWEIGHT THESIS

• Co-packaged optics (CPO) is an advanced silicon photonics (SiPh) method that integrates optics and silicon on a single packaged substrate, aiming to reduce signal loss, power consumption, and cost.
• Given geopolitical benefits and close partnership with TSMC, we think FOCI is well positioned to provide CPO's fiber array units (FAU) and related services, leveraging its ReLFACon technology.
• SiPh/CPO technology is expected to be FOCI's main growth driver in the future. We see its sales contribution expanding from 7% in 2024 to 92% in 2028.
• The company is still growing at a fast pace and in transition. Thus, we expect FOCI stock to trade at 43x 2027e P/E vs. an EPS CAGR of 231% over 2023-27e.

Risk Reward Themes

Disruption:

Positive

Secular Growth:

Positive

Technology Diffusion:

Positive

View descriptions of Risk Rewards Themes here

BEAR CASE

20x 2027e P/E

We assume: 1) 50% revenue CAGR, 202327e, given slower-than-expected CPO development; 2) slower-than-expected CPO introduction; and 3) gross margin falling below 10% in 2027 owing to the high bargaining power of customers.

NT$330.00

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Risk Reward - FOCI Fiber Optic Communications Inc (3363.TWO)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• Silicon photonics and CPO

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

RISKS TO PT/RATING

RISKS TO UPSIDE

• Faster-than-expected CPO introduction
• More intense geopolitical tension
• Significant AI/cloud capex increase

RISKS TO DOWNSIDE

• Slower-than-expected CPO introduction slower than expected
• Easing geopolitical tension
• Significant AI/cloud capex cuts

OWNERSHIP POSITIONING

Inst. Owners, % Active

75.6%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

FY Dec 2026e

(0.41)

EPS

(NT$)

Sales /

Revenue

(NT$, mn)

EBITDA

(NT$, mn)

Net income

(NT$, mn)

ROE

(%)

Note: There are not sufficient brokers supplying consensus data for this metric

1,985

Note: There are not sufficient brokers supplying consensus data for this metric

Note: There are not sufficient brokers supplying consensus data for this metric

Note: There are not sufficient brokers supplying consensus data for this metric

(1.8)

Note: There are not sufficient brokers supplying consensus data for this metric

Mean

Morgan Stanley Estimates

Source: Refinitiv, Morgan Stanley Research

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FOCI: Financial Summary

Income Statement

Balance Sheet

E = Morgan Stanley Research Estimates

Source: Morgan Stanley Research, Company Data

Cash Flow Statement

Financial Ratios

M

Risk Reward Reference links

1. View explanation of Options Probabilities methodology -Options_Probabilities_Exhibit_Link.pdf
2. View descriptions of Risk Rewards Themes - RR_Themes_Exhibit_Link.pdf

3. View explanation of regional hierarchies - GEG_Exhibit_Link.pdf

4. View explanation of Theme/Exposure methodology -

5. ESG_Sustainable_Solutions_External_Link.pdf

6. View explanation of HERS methodology - ESG_HERS_External_Link.pdf

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圖片清單（已驗證 2026-07-06）