Market share leader, 100 million in revenue: Optical chip unicorn Xizhi Technology submits Hong Kong listing with "ice and fire"
The surge of large AI models has changed the development logic of many industries.
Optical chips are the most typical example. Recently, NVIDIA spent billions, announcing an investment of $2 billion each in photonic technology giants Lumentum and Coherent, and securing billions in long-term procurement commitments and future production rights in advance.
With the boost from industry giants, the capital market’s enthusiasm for optical technology is nearly feverish. Take Sourcechip Technology as an example: although its 2025 revenue is only around 600 million yuan, it has forcefully joined the “thousand yuan stock” club, and its price-earnings ratio (TTM) reached a staggering 473 times on April 2.
It is amid this almost boiling industrial craze that domestic optical chip unicorns are sprinting towards the capital market.
Recently, Shanghai Xizhi Technology Co., Ltd. (“Xizhi Technology”) submitted its prospectus to the Hong Kong Stock Exchange.
Xizhi Technology mainly provides optical interconnect and optical computing solutions.
As an independent Chinese scale-up optical interconnect solution provider, Xizhi Technology ranked first in the domestic market by 2025 revenue, capturing an overwhelming 88.3% market share. Backing it are star investment institutions including Tencent and Baidu.
Through this IPO, Xizhi Technology plans to continue expanding its optical interconnect hardware and solutions and increase investment in frontier areas like optical computing products.
But behind the dazzling aura of industry giants and “number one market share,” Xizhi Technology’s business scale is still relatively limited, with full-year 2025 revenue at only 106 million yuan, while its net loss during the same period reached as high as 1.342 billion yuan.
Furthermore, nearly 80% of its revenue comes from its top five customers.
As the light of computing power shines into reality, Xizhi Technology’s major commercialization test has only just begun.
Accumulation and Industry Explosion
For many years, the spotlight in the world of computing power has been focused on microelectronic chips.
Microelectronic chips use electrical signals as information carriers for signal transmission. However, as chip manufacturing processes continue to shrink, problems like heat generation and power consumption have become bottlenecks limiting their development.
In contrast, optical chips can use higher-frequency light waves as information carriers to convert optoelectronic signals, offering advantages like lower transmission loss and shorter time delay. These factors are prompting the market to shift its attention to this field.
But optical chips were once mainly applied in consumer electronics sensing (VCSE), and optical communication (EML), with limited market space.
At that time, investment institutions were somewhat hesitant about optical chips.
“Looking globally, companies working on optical chips haven’t reached the scale of integrated circuits—industry leader Lumentum’s revenue in fiscal year 2019 was only about $1.5 billion. For startups, it’s extremely difficult to span high power, communications, and sensing like Lumentum has done—after all, Lumentum achieved this through long-term development and mergers and acquisitions. This is the awkwardness of investing in optical chips: the technology threshold is extremely high, but each individual market is relatively limited.” Fang Hong, partner at Delian Capital, publicly stated in 2020.
But the arrival of AI changed the development trajectory of the optical chip industry chain.
AI large models’ exponential demand for global computing power amplifies the weaknesses of traditional electronic chips in handling large-scale parallel computations regarding power consumption and latency. This creates opportunities for the optical chip industry chain.
Against this backdrop, Xizhi Technology and other optical chip industry chain companies have witnessed explosive performance growth.
In 2025, Xizhi Technology’s revenue was 106 million yuan, up over 70% year-on-year.
From the product side, the main driver of Xizhi Technology’s revenue surge is Scale-up, mainly deployed in AI infrastructure (especially data centers) for building high-performance “super nodes.”
Super nodes refer to large, densely interconnected clusters composed of dozens to hundreds of GPUs, configured as a single computing unit, specifically used for frontier AI tasks like large model training and inference.
According to Xizhi Technology, since these AI tasks need thousands of devices to synchronize communication when processing massive amounts of data, Scale-up products leverage optical interconnect technology to effectively break through the physical limitations of traditional electrical interconnection regarding transmission distance, bandwidth, and power consumption.
In 2025, Scale-up generated 76 million yuan in revenue, up more than 60% year-on-year.
Despite impressive revenue performance, Xizhi Technology’s growth momentum still faces challenges in the new optical chip track.
On the one hand, Xizhi Technology’s growth rate is not fast within the industry. For example, Sourcechip Technology, another optical chip industry chain company, saw a 138.5% increase in 2025 revenue and is now sprinting toward a dual “A+H” listing in both mainland and Hong Kong exchanges.
On the other hand, as products scale, Xizhi Technology’s gross margin is actually “falling rather than rising.” In 2025, gross margin for optical interconnect products including Scale-up was 35.1%, down 14 percentage points year-on-year.
Xizhi Technology explained that the main reasons are increased product integration, testing and verification, and outsourced processing costs, all pushing up costs.
Compared to previous generation products, Scale-up EPS not only requires identical optical interconnect modules, but must be tested and validated using Xizhi Technology’s independently developed software related to super node solutions prior to delivery, adding more cost pressure.
Dependence on Large Customers
Currently, Xizhi Technology’s customers mainly include research institutions, internet companies, GPU and server manufacturers, system integrators, and computing power infrastructure construction and operators.
With the advancement of commercialization, Xizhi Technology’s customer count has increased: 11, 10, and 22 new customers in 2023, 2024, and 2025, respectively.
But behind the thriving incremental growth is extremely high customer concentration.
From 2023 to 2025, the total income from the top five customers accounted for about 80% of Xizhi Technology’s revenue.
Objectively, dependence on major customers isn’t unique to Xizhi Technology.
Industry-wise, the global leader Lumentum faces a similar issue, with income also highly dependent on a few customers like NVIDIA.
However, this strong customer stickiness and high concentration carries significant business risk.
If top-tier customers reduce purchases due to strategic shifts or project cycles ending, Xizhi Technology’s revenue will face direct volatility risk.
Over reliance on major customers also puts Xizhi Technology at a disadvantage in price negotiations, further squeezing its already pressured gross margins. For example, for top five customer G, gross margin in 2025 was only 23.4%, down 13 percentage points year-on-year.
Under the dual pressure of declining gross margin and rising costs, from 2023 to 2025, Xizhi Technology’s cumulative net loss has nearly reached 2.5 billion yuan.
The underside of huge losses: the IPO timetable is becoming a sword hanging over Xizhi Technology.
From 2018 to 2025, Xizhi Technology completed multiple pre-IPO financing rounds from Series A to C4, signing agreements with investors on listing time and buyback rights.
To push forward to listing on the Hong Kong Stock Exchange, Xizhi Technology revised its investment agreements in September 2025, agreeing not to trigger buyback rights and similar terms for the time being.
But this is only a “limited-time exemption.”
According to the agreement, if Xizhi Technology fails to be approved for listing within 24 months of submitting its application to the Hong Kong Stock Exchange, the previously suspended buyback clauses and related arrangements will automatically regain effect and are retroactive.
By the end of 2025, the value of financial instruments issued to investors had reached 4.924 billion yuan.
With no way out, this Hong Kong IPO is destined to be a race against time.
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