Why is the Chinese Optical Transceiver Cheap?

In the previous article, we listed the top global optical transceiver manufacturers and their market share and revenue. In this list, there are many vendors from China, such as Innolight, Accelink, and Eoptolink. Strong R&D and manufacturing are the keys to making them a leading supplier in the global optical transceiver market. Another possible reason is the cheap and competitive price helps them to gain more market share. In this article, we will try to explore why the optical transceiver made in China is cheaper.

There are not only those top transceiver suppliers but also many other small and medium optical transceiver vendors in China. They all have one thing in mind: a relatively competitive price for their quality products. An optical transceiver is a complex device with many different parts, such as an optical laser, driver, PCB, and Package. The key to making an optical transceiver cheaper is to lower the cost of these materials and parts.

Table of Contents

Reason #1 – Complete Industry Chain
Reason #2 – Lower-cost Labor
Reason #3 – Manufacturing Automation
Reason #4 – Economy of Scale
Reason #5 – Rebate upon Export
Reason #6 – Efficient infrastructure and logistics channels
Reason #7 – Limited Margin
Final Words

Reason #1 – Complete Industry Chain

If you want to manufacture the optical transceiver in China, you may find nearly all the components and materials you need in the East or South China district. You may source the chip, laser, resistor, capacitor, and packaging materials from local suppliers at a relatively low price. Besides, you may also find the machine and tool you need in China to lower the production cost.

An optical transceiver is a combination of electronic and Optical components, so China’s optical transceiver industry chain is complete. According to incomplete statistics from public data on the Internet, there are more than 100 optical transceiver companies in China. More companies in other related fields can provide various products and services for the Optical Transceiver industry.

This complete industry chain helps the factories source all the Optical Transceiver materials and parts at a lower cost and then produce Optical Transceivers at a lower price.

Reason #2 – Lower-cost Labor

In China, the Optical Transceiver industry is mainly located in the Pearl River Delta and Yangtze River Delta. There are many Optical Transceiver manufacturers in these two regions because of the relatively low labor cost. The Optical Transceiver manufacturers can get a lower-cost and skilled labor force in these two regions.

In addition, the Optical Transceiver manufacturers in China also benefit from the lower-cost raw materials. As we mentioned, the Optical Transceiver industry chain is complete, and most of the Optical Transceiver materials can be sourced from China.

Compared with some south Asia countries such as India, Vietnam, and Thailand, the Optical Transceiver manufacturers in China may not have a labor cost advantage. But they still have an advantage in terms of the raw materials cost and supply chain convenience.

Reason #3 – Manufacturing Automation

*Laser automatic coupling welding machine*

In recent years, Optical Transceiver manufacturing in China has become increasingly automated. The Optical Transceiver manufacturers have introduced many new product lines and manufacturing equipment to improve production efficiency and reduce labor costs.

Most optical transceiver suppliers have achieved a high level of manufacturing automation. Take the TOSA, for example; some Optical Transceiver manufacturers have realized a fully automated TOSA production line. The whole process, from chip assembly to optical packaging, can be completed by machines.

The Optical Transceiver manufacturers have also introduced many other new manufacturing technologies to improve production efficiency and lower Optical Transceiver prices. These technologies include:

Chip-on-board (COB) packaging technology
Optical alignment technology
Automatic packaging
Automatic fiber end-face cleaning and inspection
Automatic welding
Automatic optical coupling

Therefore, manufacturing automation improved efficiency and reduced the need for manual labor. It reduces Optical Transceiver production costs, which are ultimately reflected in prices.

Reason #4 – Economy of Scale

With a large domestic market and a complete industry chain, Optical Transceiver manufacturers in China have achieved a particular scale of production. Optical Transceiver suppliers can get more orders and achieve a higher production scale. Optical Transceiver suppliers have achieved more significant economies of scale, which helps Optical Transceiver prices become more competitive.

Economies of scale also mean optimization of unit costs and Optical Transceiver quality. Optical Transceiver manufacturers can invest more in research and development, so they can develop new products and improve product quality. In addition, Optical Transceiver suppliers can also invest more in after-sales service.

Reason #5 – Rebate upon Export

The Chinese Optical Transceiver manufacturers can get a rebate from the government when they export Optical Transceivers. The Optical Transceiver suppliers can use this rebate to offset some Optical Transceiver production costs and ultimately reduce Optical Transceiver prices.

The Optical Transceiver manufacturers in China also benefit from other government policies. For example, the Chinese government has provided Optical Transceiver suppliers with financial subsidies to encourage Optical Transceiver manufacturers to invest in Optical Transceiver production.

Reason #6 – Efficient infrastructure and logistics channels

In China, Optical Transceiver suppliers have access to efficient infrastructure and logistics channels. The Optical Transceiver manufacturers can quickly transport Optical Transceivers from the Optical Transceiver factories to the domestic and worldwide markets. This efficient transportation reduces Optical Transceiver costs and, ultimately, Optical Transceiver prices.

Optical Transceiver suppliers also have access to a wide range of raw materials and components. Optical Transceiver manufacturers can source Optical Transceiver materials and parts at lower prices and achieve a competitive Optical Transceiver cost structure.

Reason #7 – Limited Margin

Compared with some earliest leader on the market, Chinese Optical Transceiver manufacturer always keeps a low Optical Transceiver price and limits Optical Transceiver margin to some extent, which helps Optical Transceiver become more competitive.

Of course, Optical Transceiver quality is also an essential factor that Optical Transceiver suppliers need to focus on. Optical Transceiver manufacturers need to continuously improve Optical Transceiver quality to meet customer needs and ensure Optical Transceiver sales.

Final Words

The Optical Transceiver market is highly competitive, and Optical Transceivers manufacturers must continue improving their quality and pricing to maintain market share. Chinese Optical Transceiver producers have achieved significant cost savings through volume production and industry chain advantage. Optical transceiver suppliers should concentrate on quality and pricing to win market share.

Thank you for taking the time to read this post; I hope it will benefit you. Please do not hesitate to contact me if you have any queries or suggestions.

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