KENANGA recently attended Asia Photonics Expo 2026 (APE 2026), held on 4–6 February 2026 at the Sands Expo and Convention Centre in Singapore, where the event is positioned as a regional meeting point for the photonics value chain.
Across vendor engagements, the dominant message was that AI networking remains the structural driver, with hyperscale AI datacentres continuing to scale both compute and interconnect for training and inference, and the upgrade cadence shortening as deployments expand.
As optical transceiver technology advances, the industry faces a challenge that has called for a temporary solution.
CPO was the logical next step, integrating optical transceivers directly onto the ASIC to enhance performance and reduce power consumption.
“Our engagement with experts at the expo revealed that end-users remain cautious about adopting CPO technology,” said Kenanga.
Their primary concern is that if an optical component fails, the entire module may need to be replaced, as the optics are directly mounted onto the ASIC.
This design limitation means that if the optics fail, they cannot be replaced independently, which could result in significant costs and disruptions to operations.
This hesitation has allowed pluggable optics to maintain its market dominance, offering the necessary flexibility and reliability while enabling continued industry progress.
For Malaysia, photonics is becoming more “OSAT-like,” with value increasingly tied to high-precision assembly, reliability qualification, and test throughput, rather than component performance alone.
The key factors to monitor are whether photonics packaging flows become repeatable enough to outsource at scale and whether module owners are willing to qualify SEA partners for higher-complexity steps.
For automation, players are directionally leveraged to the industry’s pain points that are increasingly automation-able—micro-alignment, vision/AOI, handling/logistics around burn-in and test integration—supporting a constructive medium-term setup for integrators that can deliver end-to-end cells.
Finally, the AI networking theme is supportive for Malaysia’s broader AI infrastructure adjacency and we expect value capture to skew towards bottlenecks unless specific customers migrate higher-value scope into Malaysia.
Within the optical value chain, Malaysia’s involvement is primarily in contract manufacturing, particularly the final assembly and box build of optical transceivers. The extended lifespan of pluggable optics is expected to benefit local players in the EMS space.
For example, NATIONGATE (NATGATE), which serves a U.S.-based vertically-integrated optics customer, is actively working on qualifications with two major U.S. optical component suppliers, positioning itself to capture this growing demand.
“We observed strong ramp-up and demand from vendors, as seen in the high volume of tester orders received,” said Kenanga.
Additionally, at least three vendors serving a U.S.-based vertically-integrated optics company from China have moved operations to Malaysia, likely to take advantage of the ongoing shift out of China.
For INARI, the group plays a significant role in the final assembly of optical modules, integrating sub-assemblies such as laser diodes, photodiodes, and drivers into fiber receiver form factors.
These completed modules are then shipped back to the component suppliers for further integration or sale. Meanwhile, some of the higher-value processes are being done in-house in Thailand by their customers.
EG’s exposure to transceivers comes through its work with China-based CIG, an approved vendor for major global tech companies.
Currently, EG handles PCBA and box build assembly for 400-800G optical transceivers, and while they’re also exploring CPO products, we believe this will have limited impact as CPO technology is still in its early stages. —Mar 10, 2026
Main image: Smart Data Research UK
