According to a recent share placement plan, Henan Shijia Photons Technology Co.,Ltd. (688313.SH) aims to raise up to 2.8 billion yuan by issuing no more than 136 million shares to no more than 35 specific investors. The funds will be used for project construction and working capital replenishment. Half of the total, 1.4 billion yuan, is allocated for the CW laser chip project, 750 million yuan for high-speed AWG chips and optical interconnect components, 170 million yuan for high-density connector capacity, and the remaining 480 million yuan for working capital. As one of the few domestic optical chip companies adhering to the IDM model, this represents the company's largest equity financing and capacity expansion since its listing nearly six years ago.
Notably, just two months before announcing the placement, the company terminated its acquisition of MT ferrule leader Foxconnma, a deal that had been in progress for nearly 11 months. The company stated the termination was due to failure to reach an agreement on key terms such as the transaction structure, price, and performance commitments. Foxconnma is not an ordinary company; it is the first domestic company to mass-produce a full range of MT ferrules, which are a crucial supplement to the company's business model. The company had previously stated that the acquisition would ensure stable supply of MT ferrules, build a complete industrial chain, achieve independent control of key raw materials, reduce overall product costs, and ultimately enhance core competitiveness. Two months after the acquisition failed, the company launched this 2.8 billion yuan placement, which appears to be its "Plan B": since it cannot buy, it will build its own capacity to perfect its industrial chain.
With the outbreak of the AI revolution, the optical communication industry's prosperity is increasing, and competition in the optical chip sector is intensifying. The 2.8 billion yuan placement to expand capacity, fully betting on the high-speed optical chip and optical interconnect track, is undoubtedly the company's move to survive to the next round.
Raising 2.8 Billion to Stockpile Chips for the Future
According to the placement plan, the company plans to raise no more than 2.8 billion yuan, which is five times the 500 million yuan raised in its IPO on the Science and Technology Innovation Board in August 2020. This is the largest equity financing since listing. Of the total, 1.4 billion yuan, or half, will fund the Continuous Wave (CW) laser chip and COC industrialization project; 750 million yuan will go to the high-speed AWG chip and optical interconnect component capacity project; 170 million yuan to the high-density optical interconnect device (MPO/MMC) capacity expansion project; and 480 million yuan to replenish working capital.
In the plan's background, the company notes that the production capacity, packaging and testing capabilities, reliability verification, and batch delivery capabilities of some existing products need further improvement. If the company cannot promptly expand the capacity of key products and enhance high-end product manufacturing and delivery capabilities, it may struggle to fully meet growing customer orders and could miss industry development opportunities. This underscores the company's "capacity hunger" and urgency for expansion. In April, the company announced plans to invest 1.265 billion yuan of its own funds to build a high-speed optical chip and device development and industrialization project. Combined with this 2.8 billion yuan placement, some market voices suggest the company is betting nearly 4 billion yuan on the optical track. However, the company has clarified that the 2.8 billion yuan placement includes the April project, so it is not a separate 4 billion yuan expansion. The placement appears to be an "upsizing" of the earlier expansion, with funding shifting from internal resources to market financing.
More importantly, the 2.8 billion yuan placement seems to be the company's advance preparation for the next stage of development in the optical communication industry. The CW laser chip and COC project, with a 1.4 billion yuan investment, has attracted market attention. The plan specifies that this project focuses on 100mW CW DFB laser chips, 400mW CW DFB COC high-power active optical chips, and packaged products. With the AI computing revolution, demand for computing power is growing exponentially, necessitating the evolution of optical modules from 800G to 1.6T. By 2026, 1.6T optical modules will enter a critical window for large-scale commercial use, with a significant increase in demand. Silicon photonic chips themselves do not emit light and require external CW lasers as light sources. As 1.6T silicon photonic module shipments grow, demand for CW DFB lasers will follow. The company's 1.4 billion yuan investment is betting on this direction. According to reports, the company's 70-100mW high-power CW products are currently in small-batch delivery, and 1.6T AWG chips and components are also in small-batch delivery, not yet mass-produced. These high-end optical chip areas have long been monopolized by European and American giants, with low localization rates. Domestic companies are now accelerating, and the opportunity for domestic substitution is significant. Since the company's products are not yet in mass production and are still in customer verification, and market demand has already emerged, with some competitors already positioning themselves, failing to invest in advance could mean missing development opportunities. Therefore, this 2.8 billion yuan placement is the company's advance bet for future growth.
Building In-House After Failed Acquisition to Accelerate the Supply Chain
In addition to the 1.4 billion yuan CW laser chip project, the 170 million yuan investment in the high-density optical interconnect device (MPO/MMC) capacity expansion project has also drawn market attention. Many market participants believe that since the company failed to acquire Foxconnma, this 170 million yuan project may be a substitute plan. The failed acquisition targeted Dongguan Foxconnma, a well-known MT ferrule supplier in the optical communication industry and the first domestic company to mass-produce a full range of MT ferrules. Its downstream customers include large buyers like Zhongji Innolight. MT ferrules are considered the "heart" of MPO/MTP high-density fiber optic connectors. Since the end of 2024, the MT ferrule market has been in short supply, with Japanese Sumitomo and American US Conec previously dominating. Foxconnma's mass production allowed it to quickly gain market share. According to the company's financial reports, its business model is the IDM model, which involves vertically integrating chip design, wafer manufacturing, packaging, testing, and sales. A successful acquisition of Foxconnma would have completed the company's entire industrial chain. In the acquisition plan, the company stated that acquiring the target would provide MT ferrule production process capabilities and build a complete industrial chain. From 2023 to 2024, Foxconnma's net profit was 18.2246 million yuan and 79.9412 million yuan, respectively, with the latter nearly 80 million yuan, growing several times. In the first quarter of 2025, net profit was 30.6865 million yuan. In contrast, the company's net profit at the end of 2024 was only over 64 million yuan, and in 2025, it was 372 million yuan. Foxconnma was not only a piece of the supply chain puzzle but also a profit machine. However, the acquisition dragged on for 11 months. In May 2026, a termination announcement declared the acquisition failed, citing failure to reach an agreement on key terms after multiple rounds of negotiation.
Despite the failure, the company's determination to complete its industrial chain persisted. Just days before the termination announcement, the company's shareholder meeting approved the 1.265 billion yuan self-funded project to build a high-speed optical chip and device industrialization project. This means that since it cannot buy externally, it will invest its own money to build internally. The 170 million yuan project in the current 2.8 billion yuan placement for high-density optical interconnect devices (MPO/MMC) appears to be the subsequent plan. The company has a history of failed external acquisitions. In 2023, it announced a plan to invest 150 million to 200 million yuan to acquire up to 30% of YuHan Optoelectronics, thereby indirectly acquiring the optical module assets of US optical device maker AOI in China, aiming to quickly enter the optical module packaging sector. However, that deal also failed at the end of 2023 due to the inability to sign formal transaction documents. The two failed acquisitions of YuHan Optoelectronics and Foxconnma may have taught the company that building in-house is more reliable. However, self-built capacity takes time. According to the company's announcement, the construction period for the funded projects is three years. Whether the investment will yield the expected results remains uncertain. Faced with failed external acquisitions, the company can only bet heavily on internal capacity. How the company will perform in this major bet on the optical track remains to be seen.
Comments