Both Shanghai Vital Deeptech Co., Ltd. (SH: 600641) and Focuslight Technologies Inc. (SH: 688167) have captured market attention for their long-term value, fueled by strategic mergers and acquisitions that deepen their footholds in the semiconductor and optical communications sectors. With the release of their 2026 interim reports, both companies show pressure on profitability, yet their revenue performances reveal notable bright spots. Shanghai Vital Deeptech posted a 64.06% year-on-year revenue increase in the first half, with its bismuth materials business serving as the core growth engine. Meanwhile, breakthroughs in domestic semiconductor equipment, particularly ion implanters, were achieved, alongside a capital injection in July to expand into four semiconductor materials tracks and a 3.51 billion yuan private placement plan unveiled in March. Focuslight Technologies saw its optical communications business surge 214.89%, with consumer electronics and pan-semiconductor segments also performing well. The company continues to optimize its business mix and pursue cost reductions, with Changjiang Securities forecasting a potential return to full-year profitability in 2026. In August, Focuslight also launched a private placement aimed at the high-speed optical communications supply chain.
Bismuth materials become revenue pillar for Shanghai Vital Deeptech as pan-semiconductor footprint extends to hot materials
In the first half of 2026, Shanghai Vital Deeptech generated operating revenue of 1.147 billion yuan, up 64.06% year-on-year, primarily driven by its wholly-owned subsidiary Anhui Wanda Electronics Technology Co., Ltd., which has seen sales revenue climb 89% since launching its bismuth materials business in 2025, effectively boosting both revenue and profit. By reporting segment, the company's bismuth-related materials business holds assets exceeding 5.8 billion yuan and contributed 996 million yuan in first-half revenue, while the specialized equipment manufacturing segment, with assets over 3.2 billion yuan, brought in 104 million yuan. Originally a real estate enterprise under the name Wanye Enterprise, Shanghai Vital Deeptech has seen its core operations hover near breakeven since the transformation. In the first half of 2025, net profit attributable to shareholders was 40.81 million yuan, with a non-GAAP loss of 1.17 million yuan. For the first half of 2026, net profit attributable to shareholders reached 210 million yuan, but the non-GAAP loss widened to 112 million yuan. The company attributed the decline in non-GAAP net profit to increased fair value gains on financial assets, which are excluded as non-recurring items, as well as higher expenses from expanding semiconductor segment assets, personnel, and R&D investments. Indeed, period expenses surged significantly in the first half of 2026, with R&D expenses hitting 229 million yuan, up 189.37% year-on-year, while selling, administrative, and financial expenses rose 61.08%, 64.76%, and 79.07%, respectively. Inventories also grew rapidly, climbing from 4.528 billion yuan at the start of the year to 5.14 billion yuan by the end of June, representing 40.15% of total assets, with raw materials alone accounting for 3.497 billion yuan, or 68.03% of inventories. In response to concerns over high inventory levels, CFO Ye Mengmeng stated at the August 20 earnings call: "Based on our assessment of sustained downstream demand growth and the scarcity of upstream materials, we have made forward-looking strategic reserves to ensure production continuity and supply chain security. We are closely monitoring inventory devaluation risks by optimizing inventory management, enhancing price sensitivity through raw material market analysis, conducting regular stocktakes and impairment tests, and diversifying sales channels to boost customer loyalty and expand into new consumption areas."
Beyond financials, Shanghai Vital Deeptech has made tangible progress in semiconductor equipment. In the first half of 2026, Kaishitong's domestically developed advanced-process low-energy high-current ion implanter, Hyperion, which offers superior beam transmission efficiency and process capabilities, has been delivered to leading domestic 12-inch logic and memory customers with promising validation results. Additionally, the first medium-current ion implanter for thin-film lithium niobate substrate preparation in optoelectronic chip materials was delivered to a domestic customer, aiding R&D and manufacturing of heterogeneously integrated optoelectronic chips. With the rapid growth of the AI computing industry driving faster iteration of optical interconnect hardware, demand for such equipment is expanding. As AI computing power drives data center optical interconnects toward higher speeds, thin-film lithium niobate photonic chips and their heterogeneous integration technologies are accelerating into large-scale applications, boosting demand for domestic key equipment. Huaxi Securities, in its review of the company's half-year report, raised its 2026 revenue forecast to 2.562 billion yuan, citing steady deliveries of existing and advanced-process models, improved market competitiveness, and better-than-expected progress in ion implanters. In parallel, Shanghai Vital Deeptech is rapidly building out its semiconductor materials portfolio through capital moves. In July 2026, the company decided to inject 2 billion yuan to acquire a 50.63% stake in Vital Microelectronics, adding a semiconductor materials business focused on four core tracks: compound semiconductor substrates (including 2-8 inch gallium arsenide, 4-8 inch germanium), electronic-grade high-purity metals (including 7N-grade gallium, antimony, arsenic, aluminum, with mass production capability for ultra-high-purity 8N gallium), semiconductor precursor materials (including 6N-grade hafnium tetrachloride, molybdenum dioxide dichloride, and MO source precursors), and electronic specialty gases (germane, arsine). This creates a closed-loop supply chain from scattered metal raw materials to semiconductor materials, with some precursors directly applicable to core memory chip processes. Hafnium tetrachloride is used in high-k dielectric film deposition, while molybdenum-based precursors like molybdenum dioxide dichloride meet electrode and filling material needs in memory devices—both are key components of next-generation memory capacitor systems. The market reaction to these moves has been pronounced. Following the July 2 announcement of the asset acquisition, the company's stock, which had rallied over 170% from April 3 to July 2, ended its uptrend on July 3, hitting a phase bottom on August 3 with a cumulative decline of 51.47%. On July 31, the company announced plans by its actual controller and executives to increase their shareholdings, with aggregate purchases of at least 16 million yuan over six months. Since then, the stock resumed its upward trajectory from August 4, gaining 40.28% through the August 20 close.
Focuslight Technologies sees asset impairments drag profits despite 214.89% optical communications growth
Focuslight Technologies operates across the upstream of the photonics industry chain, including laser light sources, raw materials, and optical components, as well as midstream photonic application modules, modules, and subsystems. The company is actively expanding its global photonics process and manufacturing services, with a focus on optical communications, consumer electronics, and pan-semiconductor processes. Despite broadening its business scope, the company posted a loss in the first half of 2026. The half-year report shows revenue of 419 million yuan, up 6.57% year-on-year, but net profit attributable to shareholders was -67.23 million yuan, with losses widening. The company attributed the larger loss to increased asset impairment losses, financial expenses, and share-based payment expenses. In the first half, asset impairment losses reached 66.38 million yuan, up 49.82 million yuan year-on-year, including a 31 million yuan goodwill impairment for the automotive application solutions business line, along with 35.38 million yuan in inventory write-downs, up 18.81 million yuan year-on-year. At its August 12 earnings call, Focuslight Technologies said the goodwill impairment relates to changes in automotive market demand and adjustments to business expectations. Automotive revenue declined due to shifts in overseas customers' procurement strategies and commercial terms, while some headlamp projects entered late-lifecycle stages with slower delivery. Based on actual operating conditions and future expectations, the company conducted impairment tests and recognized provisions accordingly. The company emphasized that this impairment reflects current conditions and expectations for that business line, not its overall trajectory, as it continues to optimize its business structure, reallocating R&D, capacity, and resources toward high-growth areas like optical communications, consumer electronics, and pan-semiconductor processes, while focusing on high-margin, high-barrier businesses in traditional segments. Financial expenses for the period were 8.4564 million yuan, an increase of 24.1411 million yuan year-on-year, while share-based payment expenses totaled 37.0824 million yuan, up 18.8574 million yuan. The company's losses are not new; they began in 2024 following two strategic acquisitions: the purchase of Swiss Focuslight and Heptagon assets. The 456 million yuan acquisition of Swiss Focuslight, specializing in precision micro-nano optics, generated 300 million yuan in goodwill. After the acquisition, the company integrated operations, transferring production of imprint optical devices from Neuchâtel, Switzerland, to Shaoguan, China, with shipments starting in January 2025. The acquired assets' losses contributed to a -174.91 million yuan net profit attributable to shareholders in 2024, which narrowed to -38.41 million yuan in 2025. Despite ongoing losses, growth potential has won capital market recognition. Changjiang Securities noted in a November 2024 report that the Swiss automotive business had negative gross margins, dragging overall profitability, but that transferring production to Shaoguan could significantly cut operating costs and improve margins. The brokerage remains optimistic about the integration of acquired assets and midstream market expansion. In its review of the 2026 interim results, Changjiang Securities continues to favor the company's direction, citing benefits from AI infrastructure construction and high-speed optical module iteration, with customer adoption and product validation advancing in consumer electronics and pan-semiconductor fields. While traditional businesses like automotive face near-term pressure, the brokerage expects revenue mix and profitability to improve as resources shift toward growth areas, projecting a full-year breakeven in 2026 as R&D outcomes commercialize. The company's business data clearly shows structural divergence, with pan-semiconductor and industrial markets as pillars and optical communications showing strong growth. Operating costs fell 10.69% year-on-year despite 6.57% revenue growth, driven by three factors: lower production costs from transferring automotive products to Shaoguan, improved automation and processes in industrial and optical communications products, and a higher share of low-cost products in pan-semiconductor applications. This divergence reflects the inherent technical barriers of the photonics industry, where custom solutions for specific application challenges create high barriers to entry, requiring deep understanding of optoelectronic technologies and rapid response capabilities. New entrants find it difficult to quickly develop competitive advantages, creating significant technical and market hurdles. Leveraging the 2024 acquisition of Swiss Focuslight, Focuslight Technologies has rapidly built a global optical communications business footprint, integrating strengths in micro-nano optics wafer-level manufacturing and global market access. In classic pluggable optical communication modules, some customers completed sample validation and entered mass production in Q3 2025. For NPO/CPO-related micro-optics and high-channel V-groove products, several new customers completed batch validation in the first half of 2026, with order backlogs growing. In silicon photonics CW light sources and CPO external laser applications, the company is collaborating with multiple leading customers on aluminum nitride substrate materials for lasers, with sample submissions and validation progressing, providing a solid market foundation for capacity expansion. The secondary market's enthusiasm for photonics has been intense amid the AI infrastructure boom. According to Wind data, from an April 9, 2025 low to a June 16, 2026 peak, the stock surged 892.56%. After a pullback to a July 30 low, the stock has rebounded over 60% from August through the August 20 close.
Private placements bolster capital to fuel new productivity initiatives
In recent years, the A-share market has seen a wave of financing for new productivity expansions, and both Shanghai Vital Deeptech and Focuslight Technologies have seized the opportunity, announcing private placement plans in March and August 2026, respectively. Shanghai Vital Deeptech aims to raise up to 3.51 billion yuan, with 1.538 billion yuan for semiconductor optical components R&D and industrialization, 978 million yuan for semiconductor precision components and subsystems R&D and industrialization, 890 million yuan for high-end measurement equipment and life sciences instruments R&D and industrialization, and 105 million yuan for bismuth materials business upgrades, all with 36-month construction periods. Focuslight Technologies plans to raise up to 1.021 billion yuan, primarily for key links in the high-speed optical communications supply chain: approximately 391 million yuan for high-end optical interconnect core optical components R&D and industrialization, 303 million yuan for high-performance substrate materials for high-speed optical communication lasers, 27 million yuan for high-end equipment industrialization for optical interconnect core devices, and about 300 million yuan for working capital. At its August 12 earnings call, Focuslight Technologies stated that these projects cover core optical components, high-performance materials, and high-end equipment, aligning well with its existing micro-nano optics and photonics manufacturing platforms. The company aims to build industrialization capabilities across materials, components, and equipment, enhance R&D, manufacturing, and delivery capabilities for high-speed optical communications core devices, strengthen global R&D and manufacturing network synergies, and evolve from a core component supplier to an advanced manufacturing platform for high-speed optical communications. While financing expansions bring opportunities, they also carry operational risks. After the private placements are completed, both companies' overall capital strength will improve, but since the projects require time to implement and generate returns, net profit may not grow in lockstep with share capital and net assets in the short term, potentially leading to diluted earnings per share and lower return on equity compared to previous years.
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