Huawei-Backed Yuanjie Semiconductor: AI Data Center Photonic Chips

Shaanxi Yuanjie Semiconductor Technology Co., Ltd. Is poised to enter China’s Science and Technology Innovation Board, seeking 980 million yuan to expand production of optical chips, a move that underscores the growing domestic capacity in a sector previously reliant on imports. The company’s high-speed laser chips have already been adopted by Huawei, entering the telecommunications giant’s supply chain for mass production, according to multiple reports.

Yuanjie Semiconductor specializes in the research, development, design, and production of high-speed semiconductor chips, operating as an Integrated Device Manufacturer (IDM). This means the company controls all aspects of production, from wafer epitaxy – a core link in optical chip manufacturing – to chip testing and packaging. The company states it has established industrial-scale production capabilities, complying with international standards including FDA, RoHS, and REACH.

The company’s products, including 2.5G, 10G, and 25G laser chips, are designed for use in optical fiber access, 4G/5G mobile communication networks, and data centers. China’s optical communication industry currently mass produces and applies chips of 10G and below, with higher-speed chips still largely imported, creating a significant market opportunity for Yuanjie.

Yuanjie’s relationship with Huawei dates back to at least 2020, when the company reportedly secured a significant order, contributing to a nearly six-fold increase in net profit that year compared to 2019. Revenue jumped from over 8,000 yuan to more than 230 million yuan over the same period. Huawei’s Harbour Investment also holds a stake in Yuanjie Semiconductor.

Still, growth has not been without challenges. A slowdown in domestic 5G base station construction beginning in 2021 reportedly reduced Yuanjie’s comprehensive gross profit margin by nearly 10% in the first half of that year. Analysts suggest sustained performance growth remains uncertain.

Huawei has also been making advancements in semiconductor technology, including a patent for Extreme Ultra Violet (EUV) lithography and the development of photonic chips. The production of photonic chips does not require lithography machines, potentially reducing reliance on equipment from US and European companies. These developments could challenge the dominance of established players in the semiconductor market.