[Edaily KIM YOON-JEONG Reporter] Hana Securities stated that, regarding OE Solutions Co., Ltd.(138080), the shortage of semiconductors and optical components caused by data center expansion is spreading to the telecommunications equipment market, and projected that the company would achieve record-high operating profit margins if domestic spectrum auctions resume next year. The firm maintained its “Buy” investment rating and target price of 60,000 won.

On the 16th, Lee Sang-hoon, an analyst at Hana Securities, noted, “Signs of a shortage of wireless optical transceivers and LD chips surrounding OE Solutions Co., Ltd. are already apparent.” He explained that domestic telecommunications equipment manufacturers have seen rising raw material purchase prices in the first and second quarters of this year, leading to pressure on profit margins.
He noted that while chips and optical modules account for a high proportion of the cost in telecommunications equipment, the global shortage of semiconductors and optical components caused by data center expansion is now affecting the telecommunications equipment market as well. In particular, he highlighted the shortage of indium phosphide (InP) wafers.
OE Solutions Co., Ltd. typically purchases 2- to 3-inch small-diameter InP wafers—commonly used in base stations—from Chinese and Japanese companies specializing in compound wafers, and then produces laser diode (LD) chips for base stations through an epitaxial process. Currently, supply disruptions for large-diameter InP wafers have spread to small-diameter products, causing prices for Chinese-made small-diameter wafers to rise by more than 40–70% compared to the end of last year.
Consequently, prices for LD chips and optical transceivers are also expected to rise in the near future. In particular, OE Solutions Co., Ltd., which has internalized LD chip production, is considered to be in a better position than other optical transceiver manufacturers to pass on the increased costs to product prices. While other companies must bear the dual burden of rising InP wafer prices and higher LD chip procurement costs, OE Solutions Co., Ltd. is said to find it relatively easier to pass on cost increases to product prices thanks to its in-house LD chip production.
The supply shortage is expected to persist until 2027, when the domestic spectrum auction is anticipated to take place. Since InP wafers are used in both base station and server LD chips, but the production capacity of global optical component manufacturers is skewed toward server applications, analysts suggest that once the spectrum auction begins, the supply shortage of base station LD chips and optical transceivers could worsen further.
The analyst stated, “We expect the current shortage to persist at least until 2027, when the domestic auction is expected to take place.” The analyst also predicted that OE Solutions Co., Ltd.’s profitability would improve significantly once the spectrum auction resumes. In 2019, when the domestic spectrum auction took place, OE Solutions Co., Ltd.’s gross profit margin and operating profit margin reached all-time highs in the 40% and 30% ranges, respectively. At that time, even before the company had achieved in-house production of LD chips, profit margins hit record highs solely due to rising sales prices for optical transceivers caused by supply shortages.
Now that the company has achieved in-house production of LD chips, analysts believe it can achieve even higher profit margins than in the past. The analyst predicted, “There is a high probability that OE Solutions Co., Ltd.’s operating profit margin next year will set a new all-time high.” They also anticipated that if the improved profit margin structure—compared to both past performance and competitors—is recognized, an expansion of the valuation multiple is possible.
The analyst noted that with the likelihood of a domestic spectrum auction taking place in 2027—following the U.S. auction—increasing, and considering the global supply and demand situation for raw materials, LD chips, and optical modules, the supply shortage is expected to persist until the domestic auction takes place.