From a Rmb2.8bn takeover to a Rmb1.2tn market cap — and then a twist

Valuation and the 2017 bet

Zhongji Xuchuang (中际旭创, SZ:300308) closed at Rmb1,103 per share on May 26, giving it a market value above Rmb1.2 trillion (roughly $165–170 billion). The firm's transformation traces back to one move: in 2017 Zhongji Equipment bought 100% of Suzhou Xuchuang (苏州旭创) for Rmb2.8 billion and pivoted from motor-winding equipment into high-speed optical communication modules. At the time many thought the sellers had been short‑changed. But the numbers tell a different story now.

AI surge, product mix and explosive growth

Optical modules—small but critical components that link data‑center switches and GPUs—became Zhongji Xuchuang's core business after the deal, accounting for more than 90% of sales. The company reported Rmb19.5 billion in revenue in Q1 2026, up 192% year‑on‑year (with roughly 98% derived from optical modules). The AI compute boom since 2023 pushed demand and upgrade cycles from 400G to 800G and beyond; average selling prices rose to about Rmb1,780 in 2025 with gross margins around 42.6%. Suzhou Xuchuang’s historical profitability and heavy R&D spending — it supplied the bulk of the group’s R&D and revenues in recent years — largely powered the “Davis double‑play” of higher volumes and better margins.

Supply chain, geopolitics and a late twist

But Zhongji Xuchuang sits mid‑stream and still depends on a concentrated set of upstream chip suppliers — notably Lumentum (NASDAQ: LITE), Coherent (NASDAQ: COHR) and Japan’s Sumitomo — for key optical chips. It has been reported that Nvidia invested $2 billion each in Lumentum and Coherent in March 2026. Is that a gesture to shore up supply for hyperscalers and their vendors, or a move that shifts bargaining power upstream? Context matters: Suzhou Xuchuang reportedly had a failed US IPO attempt in 2016, rejected on grounds of “customer concentration” at a time when US‑China tech tensions were already hardening; many industry observers saw policy motives behind the decision. Trade policy and export controls remain material risks even as demand soars.

The human element mattered too. Zhongji’s owner ceded operating autonomy to Suzhou’s management team, with Liu Sheng taking the helm in 2023; the team parlayed engineering depth, large‑scale manufacturing and long‑standing relationships with international cloud players into market share. The 2017 Rmb2.8bn deal that once looked like a bargain sale has become one of China’s most dramatic corporate turnarounds — but the story is not over. Continued growth now depends as much on upstream supply dynamics and geopolitics as it does on product and execution.