Greater China Technology Semiconductors: Time to revisit CPO and its testing/packaging supply chain

Following the recent correction in Taiwan's CPO supply chain, we believe expectations have been reset and it is time to revisit the stocks. We reiterate Overweight on ASE, upgrade WIN Semi to Equal-weight and downgrade FOCI to Equal-weight. PIC (photonic IC) and testing are major gating factors for co-packaged optics. CPO is now in production: NVIDIA's Quantum-X Photonics InfiniBand switch began shipping around early 2026, and Spectrum-X Ethernet Photonics entered full production in August 2026. The open question for 2027 is how fast it can scale, and testing is the step that sets that pace. Assuming a 95% yield rate for TSMC EIC/PIC hybrid bonding and 30% yield rate in downstream assembly, the available optical engine shipments could still reach 17-18mn in 2026, enough to cover 5k NVL576 equivalent of scale-up switches and 200-250k of spectrum scale-out. Within Greater China semis coverage, TSMC, ASE, Hon Precision, MPI and Allring should continue to benefit from this secular trend, a