Why You Should Be Watching Optical Test Right Now

Damnang · Damnang’s Substack · May 03, 2026 at 07:39 · ⏱ 16 min read  | Read on Substack ↗
Summary
The article argues that CPO (co-packaged optics) test infrastructure is entering an early-cycle investment phase distinct from CPO volume production, driven by structural changes in test insertions, time, and equipment complexity. This creates dual leverage for test equipment companies, but the opportunity is tied to specific bottlenecks (test platform, optical measurement, wafer-level KGD, packaging yield, reliability/burn-in) that open under different CPO adoption scenarios. The author evaluates 14 stocks across six factors but does not make explicit trade recommendations.
  • •CPO requires Known Good Die (KGD) from PIC before packaging to avoid scrapping expensive ASIC packages — a critical yield bottleneck.
  • •Test insertions increase from pluggable to CPO: PIC wafer test, EIC wafer test, KGD screening, and package-level opto-electric co-test.
  • •Optical probing is slower than electrical due to sub-micron fiber alignment, lengthening test time and requiring more capacity per wafer.
  • •Equipment ASP rises because CPO test integrates laser sources, tunable lasers, optical power meters, and dual-sided probing.
  • •CPO creates dual leverage: per-unit cost-of-test inflation stacked on volume ramp, not just volume growth.
  • •The market is in early infrastructure buildout (TSMC COUPE entering volume production 2026, Samsung target 2029, NVIDIA committing to photonic networking); actual CPO volume is post-2028.
  • •Bottleneck 1 (Test Platform) is dominated by Teradyne (Photon 100, Quantifi), Advantest (V93000 ecosystem), and Cohu (handler/thermal).
  • •Bottleneck 2 (Optical Measurement) is defensive and includes Viavi, Anritsu, Santec, and Keysight; Santec has highest optical purity but valuation risk.
  • •Bottleneck 3 (Wafer-Level KGD) is structurally critical; FormFactor (Pharos probe, Keystone) is ATE-agnostic while Teradyne and Advantest pursue vertical integration.
  • •Bottleneck 4 (Packaging Yield) includes Onto Innovation, Camtek, and Nova — high financial quality but not CPO pure plays.
  • •Bottleneck 5 (Reliability/Burn-in) is the highest-beta, led by Aehr Test Systems (FOX XP wafer-level burn-in).
Read time 16 min
Length 16,959 chars
Category finance
Trade Ideas
Damnang Substack author, Damnang’s Substack
FormFactor's Pharos optical probe, Keystone Photonics acquisition, and ATE-agnostic position in the Triton test cell make it a critical enabler of wafer-level KGD screening for CPO. Recurring revenue
FormFactor's Pharos optical probe, Keystone Photonics acquisition, and ATE-agnostic position in the Triton test cell make it a critical enabler of wafer-level KGD screening for CPO. Recurring revenue potential as wafer volumes grow. Risk: Competition from Teradyne/Advantest vertical integration; CPO volume ramp timing uncertain.
FORM
Damnang Substack author, Damnang’s Substack
Aehr's FOX XP wafer-level burn-in is positioned as the final gate in PIC KGD screening (Bottleneck 5). Author notes it is the most lagging but highest-beta bottleneck; early orders from SiPh WLBI cust
Aehr's FOX XP wafer-level burn-in is positioned as the final gate in PIC KGD screening (Bottleneck 5). Author notes it is the most lagging but highest-beta bottleneck; early orders from SiPh WLBI customers already won. Risk: High timing risk — CPO volume production post-2028; earnings conversion pushed out if ramp delayed.
AEHR
Damnang Substack author, Damnang’s Substack
Viavi is described as the 'most balanced candidate' in Optical Measurement (Bottleneck 2), spanning both pluggable and CPO cycles with optical production test and high-speed Ethernet validation. Defen
Viavi is described as the 'most balanced candidate' in Optical Measurement (Bottleneck 2), spanning both pluggable and CPO cycles with optical production test and high-speed Ethernet validation. Defensive against CPO delay. Risk: Optical exposure diluted within broader test/measurement portfolio; valuation risk if pluggable cycle peaks.
VIAV
Damnang Substack author, Damnang’s Substack
Onto Innovation (DragonFly G5, EchoScan) is a key player in Bottleneck 4 (Packaging Yield) as CPO drives demand for hybrid bonding metrology and advanced packaging inspection. Already strong in HBM/2.
Onto Innovation (DragonFly G5, EchoScan) is a key player in Bottleneck 4 (Packaging Yield) as CPO drives demand for hybrid bonding metrology and advanced packaging inspection. Already strong in HBM/2.5D; CPO adds upside optionality. Risk: Market does not view ONTO as a CPO pure play; earnings tied to broader advanced packaging cycle, not solely CPO.
ONTO
Damnang Substack author, Damnang’s Substack
Author highlights Teradyne's Photon 100 platform, Quantifi Photonics acquisition, and dual-sided probing integration as key to capturing CPO test platform and wafer-level KGD bottlenecks. Direct benef
Author highlights Teradyne's Photon 100 platform, Quantifi Photonics acquisition, and dual-sided probing integration as key to capturing CPO test platform and wafer-level KGD bottlenecks. Direct beneficiary of early CPO infrastructure capex. Risk: CPO-specific revenue not yet broken out; significant existing ATE exposure to memory/SoC cycles may dilute pure-play optics thesis.
TER
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This newsletter, published May 03, 2026, features Damnang discussing FORM, AEHR, VIAV, ONTO, TER. 5 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Damnang  · Tickers: FORM, AEHR, VIAV, ONTO, TER