Zhongji Innolight achieves a 46% gross margin from selling pluggable optical modules, holding 35-40% of the global 800G market and over half of the emerging 1.6T segment. The company's market position is threatened by a technology transition to co-packaged optics (CPO), which would shift the optical function inside the switch.
The profit pool for high-speed optical modules is at risk of migrating to a different layer of the networking stack if co-packaged optics scales.