The rapid advancement of AI large-scale models has reshaped the development logic of numerous industries. Optical chips represent one of the most prominent examples. Recently, NVIDIA made substantial investments, announcing $2 billion injections each into photonics giants Lumentum and Coherent, while securing long-term procurement commitments and future production capacity rights worth billions of dollars.
Amid this push from industry giants, capital market enthusiasm for optical technology has reached near-feverish levels. Taking Yuanjie Technology as an example, despite generating only approximately 600 million yuan in revenue for 2025, the company has forcefully entered the "thousand-yuan stock" club, with its trailing twelve-month price-to-earnings ratio reaching a staggering 473 times as of April 2.
It is within this nearly boiling industry fervor that domestic optical chip unicorns are beginning to charge toward capital markets. Shanghai Xizhi Technology Co., Ltd. recently submitted its listing application to the Hong Kong Stock Exchange.
Xizhi Technology primarily provides optical interconnect and optical computing solutions. As China's leading independent Scale-up optical interconnect solutions provider, the company captured the top market position domestically by 2025 revenue, securing a dominant 88.3% market share. Its investor roster includes prominent institutions such as Tencent and Baidu.
For its IPO, Xizhi Technology plans to use raised capital to continue expanding its optical interconnect hardware and solutions while increasing investment in cutting-edge fields like optical computing products. However, behind the glitter of heavyweight backing and its "number one market share" status, Xizhi's operational scale remains relatively limited. Full-year 2025 revenue stood at just 106 million yuan, while net losses for the same period reached a substantial 1.342 billion yuan.
Furthermore, nearly 80% of this revenue came from its top five customers. As the light of computing power illuminates practical realities, Xizhi Technology's commercialization test has only just begun.
**Accumulation and Industry Explosion**
For years, the spotlight in the computing world has been on microelectronic chips. These chips use electrical current signals as information carriers for transmission. However, as chip manufacturing processes continue to shrink, issues like heat generation and power consumption have become bottlenecks restricting the development of microelectronic chips.
In contrast, optical chips can use higher-frequency light waves as information carriers for photoelectric signal conversion, offering advantages such as lower transmission loss and shorter latency, which has drawn market attention to this field. Yet, the application scenarios for optical chips were once largely confined to areas like consumer electronics VCSE sensing and communications EML, resulting in a limited market space.
At that time, investment institutions also viewed optical chips with some hesitation. "Globally, there are currently no behemoth companies in optical chips like those in integrated circuits. Even the leading company Lumentum reported revenue of only about $1.5 billion in its 2019 fiscal year. For startups, it is extremely difficult to achieve the cross-domain presence of Lumentum spanning high-power, communications, and sensing sectors—Lumentum itself achieved this gradually through acquisitions over its long development history. This is precisely the dilemma of investing in optical chips: extremely high technical barriers coupled with relatively limited individual market spaces," Delian Capital partner Fang Hong stated publicly in 2020.
But the arrival of AI altered the development trajectory of the optical chip industry chain. The exponential global demand for computing power driven by AI large models has highlighted the shortcomings of traditional electrical chips in power consumption and latency when handling massive parallel computing, creating an opportunity for the optical chip industry chain.
Against this backdrop, the performance of companies like Xizhi Technology within the optical chip ecosystem has surged dramatically. In 2025, Xizhi Technology's revenue reached 106 million yuan, representing year-on-year growth exceeding 70%.
In terms of products, the main driver behind Xizhi's revenue surge is its Scale-up solution, primarily deployed in AI infrastructure, especially data centers, to build high-performance "super nodes." A super node refers to a large, tightly interconnected cluster comprising dozens to hundreds of GPUs configured as a single computing unit, specifically designed for cutting-edge AI tasks like large model training and inference.
According to Xizhi Technology, because these AI tasks require thousands of devices to achieve synchronous communication while processing massive data, the Scale-up product effectively overcomes the physical limitations of traditional electrical interconnects in transmission distance, bandwidth, and power consumption through optical interconnect technology. In 2025, Scale-up generated revenue of 76 million yuan, a year-on-year increase of over 60%.
Despite impressive revenue performance, Xizhi Technology's growth momentum on the new optical chip track still faces challenges. On one hand, Xizhi's growth rate is not particularly fast within the industry. For instance, Yuanjie Technology, another company in the optical chip chain, achieved a year-on-year revenue increase of 138.5% in 2025 and is now charging towards a Hong Kong listing, aiming for a dual "A+H" share listing.
On the other hand, as product volumes increased, Xizhi Technology's gross margin actually decreased instead of rising. The gross margin for optical interconnect products, including Scale-up, was 35.1% in 2025, down 14 percentage points year-on-year. Xizhi attributed this primarily to increased product integration, higher testing and verification costs, and rising outsourced processing fees, all of which pushed up costs.
Compared to the previous generation product, the Scale-up EPS not only requires the same optical interconnect modules but also must undergo testing and verification using software independently developed by Xizhi Technology related to the super node solution before delivery, adding further cost pressures.
**Reliance on Major Clients**
Xizhi Technology's current client base mainly includes research institutions, internet companies, GPU and server manufacturers, system integrators, and computing power infrastructure builders and operators. As commercialization progresses, the number of clients has increased, with 11, 10, and 22 new clients added in 2023, 2024, and 2025 respectively.
However, behind this thriving growth in client numbers lies extremely high customer concentration. From 2023 to 2025, revenue from the top five clients consistently accounted for approximately 80% of Xizhi Technology's total revenue.
Objectively speaking, reliance on major clients is not a phenomenon unique to Xizhi Technology. Looking at the industry, global optical technology leader Lumentum also faces a similar issue, with its revenue highly dependent on a few clients like NVIDIA.
Nevertheless, this strong customer stickiness and high concentration conceal significant commercial risks. Should key major clients reduce purchases due to their own strategic adjustments or the conclusion of project cycles, Xizhi Technology's revenue would face direct volatility risks.
Over-reliance on major clients can also weaken Xizhi's position in price negotiations, further squeezing the already pressured gross margin. Taking top-five client G as an example, the gross margin in 2025 was only 23.4%, down 13 percentage points year-on-year.
Caught between declining gross margins and high costs, Xizhi Technology's cumulative net losses from 2023 to 2025 have approached 2.5 billion yuan.
On the flip side of these substantial losses, the IPO timetable now hangs like a sword over Xizhi Technology. Between 2018 and 2025, the company completed multiple pre-IPO financing rounds from Series A to C4, entering into agreements with investors that included redemption rights based on meeting certain listing timelines.
To advance the Hong Kong listing process, Xizhi Technology and its investors amended the investment agreement in September 2025, agreeing to temporarily suspend the triggering of redemption rights and other valuation adjustment mechanism clauses. However, this is merely a "time-limited waiver."
According to the agreement, if Xizhi Technology fails to obtain listing approval within 24 months of submitting its application to the Hong Kong Stock Exchange, the previously suspended valuation adjustment mechanism terms will automatically reactivate with retroactive effect. By the end of 2025, the amount of financial instruments issued to investors by Xizhi Technology had already reached 4.924 billion yuan.
With no room to retreat, this Hong Kong IPO is destined to be a race against time.
Comments