Lithium niobate has long been regarded as a "fundamental functional material platform" in integrated/waveguide optics. With the growth of 5G/6G, AI computing power, data center upgrades, and the rise of AR smart glasses, lithium niobate crystals, leveraging their excellent piezoelectric, ferroelectric, and electro-optic properties, have become a core foundational material for the new generation of photonic chips. AR glasses and optical communication represent potential growth markets. The institution is optimistic that the thin-film lithium niobate industry will benefit from the industrial trends of AR glasses and optical communication, leading to sustained growth, and recommends paying attention to investment opportunities in related companies. The key viewpoints of Huafu Securities are as follows: Lithium Niobate and Thin-Film Lithium Niobate. Lithium niobate is a typical ferroelectric single-crystal functional oxide, long considered a "fundamental functional material platform" in integrated/waveguide optics. Thin-film lithium niobate (TFLN/LNOI) involves fabricating single-crystal LiNbO into sub-micron thin films. Due to the higher refractive index contrast between lithium niobate and SiO, it enables stronger optical field confinement and smaller bending radii, significantly reducing device size and increasing on-chip integration density. Compared to traditional bulk lithium niobate waveguide processes, where structural scale is limited by weak refractive index contrast making high-density integration difficult, LNOI, through "thin-film fabrication + high refractive index contrast," brings the electro-optic/nonlinear advantages of lithium niobate into nanoscale strongly confined photonic structures and aligns more closely with the scalable manufacturing paths of mature semiconductor photonic platforms.

Industrial Trends & Competitive Landscape. Alongside the growth of 5G/6G, AI computing power, data center upgrades, and the emergence of AR smart glasses, lithium niobate crystals, by virtue of their superior piezoelectric, ferroelectric, and electro-optic properties, have emerged as a core foundational material for next-generation photonic chips. With breakthroughs and mass production achievements in large-size preparation and thin-film technology, demand has surged in fields such as optical communications, RF devices, and consumer electronics, leading to a continuously expanding market size. Within the industrial chain, China has become a global hub for lithium niobate manufacturing, accounting for 42% of global capacity (Credence data). Tiantong Advanced Materials has independently achieved mass production of 6-inch lithium niobate/lithium tantalate crystals and blackened polished chips, realizing technological control; furthermore, Jinan Jingzheng accounted for 78% of the global supply of thin-film lithium niobate wafers in 2023, highlighting the leading competitiveness of domestic companies in key segments.

AR Glasses and Optical Communication are Potential Growth Markets. AR Glasses: In AR glasses, thin-film lithium niobate (TFLN/LNOI) primarily brings two key increments: Full-color light control/modulators can achieve ultra-fast electro-optic responses of <100ps, with color switching speeds improved by approximately 10x and already industrially validated; on the optical waveguide end, leveraging high refractive index enables a Field of View (FOV) of >50° with distortion <1.2%, and low loss as minimal as 0.027 dB/cm at 1550nm (significantly lower than glass waveguides), while device thickness can be compressed to <0.3mm, favoring slim designs and high integration. On the demand side, global AR glasses are projected to reach approximately 1.06 million units in 2025 (+41%), with the Asia-Pacific region contributing nearly half and China accounting for about 489,000 units (+83.2%). Coupled with favorable policies, the industry's outlook is promising. Optical Communication: Driven by growing AI computing power, the global optical communication sector is transitioning from traditional telecom cycles to a new growth cycle centered on high-speed data center interconnects. In the evolution from 400G/800G towards 1.6T, electro-optic modulators have become a critical bottleneck. Thin-film lithium niobate (TFLN), with advantages such as high bandwidth (>100 GHz), low drive voltage (Vπ≈1.9 V), high linearity, and strong optical field confinement, has been validated to stably support advanced modulations like 80 Gbaud 16-QAM (320 Gbit/s), establishing itself as a breakthrough material. According to data from Cognitive and LightCounting, the global optical module market reached $9.43 billion in 2024, with high-speed Ethernet module revenue surging 93% year-on-year, and is projected to maintain high growth rates of 48% and 35% in 2025–2026. Furthermore, China's "East Data West Computing" project explicitly promotes the construction of 400G/800G networks and all-optical networks, providing sustained policy and industrial momentum for domestic optical communication demand.

Risk Warning. Risks include technology commercialization, yield rates, demand falling short of expectations, and technological innovation risks.