Economic Observer reporter Zheng Chenye

At around 8am on June 2nd, Yuan Yonggang, Chairman of Dongshan Precision (002384. SZ), appeared at an online investor exchange event. The participants of this investor exchange activity include top public funds such as E Fund, Huaxia, and Jiashi, as well as top securities firms such as CITIC, Huatai, Changjiang, and China Merchants.

The day before that, Dongshan Precision experienced the biggest one-day decline since this year: in the morning of June 1, a "essay" about Dongshan Precision began to circulate in the market, with three core "accusations": the controller was suspected of offering bribes to relevant departments in Taiwan, China to promote the acquisition of Sols Optronics; Due to the sale of Sols by Wuxi State owned Assets, the stock price of Dongshan Precision has skyrocketed, and the actual controller is facing accountability; The acquisition is stuck in the approval stage in Taiwan, resulting in a delay in the approval for the Hong Kong stock market listing; In the afternoon of that day, the stock price of Dongshan Precision was locked at the limit down board, closing at 191.75 yuan per share, with the full day trading volume amplified to 26.7 billion yuan.

On June 2nd, Yuan Yonggang refuted rumors one by one during the aforementioned exchange activities. He stated that the company does not engage in government business, all operations are legal and compliant, and there are no bribery issues; The company has applied to relevant departments in an attempt to trace the source of the rumor through legal means.

Regarding the acquisition of Sols Optoelectronics, he stated that the project does not require ODI (outward direct investment) approval, only a large amount of non sensitive registration with the National Development and Reform Commission, and has already received approval; All transaction consideration has been paid in full; Sols has been included in the consolidated financial statements since October 2025, and personnel and business integration have been completed.

Regarding the background of this acquisition, Yuan Yonggang mentioned in the communication that the merger negotiations were "very difficult" at the beginning. Sols had previously had other potential buyers but could not close the deal. Dongshan Precision's pricing was increased based on the previous basis, and after multiple bidding, it ultimately won with the certainty of the plan.

A person who participated in the communication on that day told reporters that Yuan Yonggang was on an overseas business trip at the time, and because of this short essay that began circulating on June 1st, he had to adjust his schedule and urgently respond.

According to the share pledge announcement released by Dongshan Precision on June 4th, Yuan Yonggang currently holds approximately 303 million shares of Dongshan Precision (accounting for 16.53% of the total share capital), of which approximately 105 million shares are pledged, accounting for 34.62% of his personal shareholding.

The effect of debunking rumors is very significant: on June 2nd, Dongshan Precision rose to the limit up; Subsequently, the market continued to rise for the next two trading days, reaching a historic high of 237.8 yuan on June 4th, with a total market value of 435.6 billion yuan.

It is worth noting that Yuan Yonggang mentioned towards the end of the aforementioned exchange activities that he is currently focusing mainly on connecting with overseas customers. The company is fully integrating its existing businesses such as optical modules, PCBs (printed circuit boards), liquid cooling, and cabinets with the AI industry chain. This may be the biggest opportunity I've ever seen in my life, "he said.

Yuan Yonggang also stated that the current prosperity of AI related PCBs is "extremely rare" in the history of the industry.

The biggest opportunity of my life

There is a concept in the mobile phone industry called "bucket machine", which refers to products with no obvious shortcomings in any parameter.

Dongshan Precision's role in the A-share AI industry chain is somewhat similar - it simultaneously owns PCB (printed circuit board), optical chips, optical modules, and consumer electronics outsourcing businesses. While none of them rank first in the industry, the combination of several businesses covers multiple core links of AI servers from circuit boards to optical interconnects.

In the first quarter of 2026, Dongshan Precision delivered a remarkable growth report: revenue for the quarter was 13.138 billion yuan, a year-on-year increase of 52.72%; The net profit attributable to the parent company was 1.11 billion yuan, a year-on-year increase of 143.47%. By comparison, the company's net profit attributable to shareholders for the full year of 2025 is 1.386 billion yuan. That is to say, in the first quarter of 2026 alone, its profit will be close to 80% of the full year profit of 2025.

In the first quarter report, Dongshan Precision attributed its core growth to its optical module business, which "seized the opportunity of industry explosion and urgent customer orders, and doubled its revenue compared to the same period last year".

The profit growth rate is much faster than the revenue growth rate, which means that the proportion of more profitable products in the revenue structure has increased. The driving force behind this change is a subsidiary, Sols Optoelectronics, which will only be included in the consolidated financial statements in October 2025.

According to the stock price fluctuation announcement released by Dongshan Precision on June 4th, in 2025, Sols' consolidated revenue accounted for 3.58% of Dongshan Precision's consolidated revenue and profit accounted for 22.69% of the consolidated profit; By the first quarter of 2026, these two numbers will rise to 16.02% and 52.92% respectively. That is to say, in less than a year, Sols has already contributed more than half of Dongshan Precision's profits.

According to the 2025 annual report of Dongshan Precision, the gross profit margin of its optical module business is 36.74%, the gross profit margin of electronic circuits (including PCB and FPC products) is 17.59%, the gross profit margin of precision components is 9.22%, and the gross profit margin of optoelectronic display modules is 5.18%. The gross profit margin of optical modules is twice that of electronic circuits and four times that of precision components.

Sols Optoelectronics operates in IDM mode, which means that the entire process from the design of optical chips, wafer manufacturing, to the assembly and testing of optical modules is completed internally within the company.

The servers in the data center need to transmit data at high speed, and the optical module is the core component responsible for this. It converts the electrical signals generated by the server into optical signals, transmits them to another server through optical fibers, and then restores them to electrical signals. The optical chip is the most core component in the optical module, responsible for completing the process of electro-optical conversion, directly determining the transmission rate and power consumption.

Sols' main product is EML optical chip, also known as electroabsorption modulated laser, which is one of the most mainstream types of light-emitting chips in high-speed optical communication. According to the annual report of Dongshan Precision, Sols is one of the few domestic enterprises with the ability to mass produce 100G and 200G EML optical chips. The self-developed 100G PAM4 EML chip has been used in over ten million 400G and 800G optical modules, and the 200G PAM4 EML chip has also entered the mass production stage.

According to Lightcounting, a market research firm, the global market size of digital optical modules is expected to reach 22.8 billion US dollars by 2026. The combined market size of 800G and 1.6T optical modules is expected to reach 14.6 billion US dollars, accounting for approximately 64% of the digital optical module market that year.

For Sols, using self-developed chips in their own optical modules eliminates the need for external procurement costs. More importantly, the current shortage of high-end optical chips in the entire industry has made it a prerequisite for obtaining orders from overseas major customers to be able to supply their own chips.

Yuan Yonggang stated during an investor exchange event on June 2nd that the company has a first mover advantage in customer expansion and has a demand for additional orders every month. He mentioned that some overseas customers already have Chinese suppliers and do not want to add new suppliers to the list, but because Dongshan Precision has the ability to supply chips on its own, it still gives opportunities.

In terms of expanding production, Yuan Yonggang stated in the above communication that based on the mid to long term demand guidance from downstream customers, the company has significantly raised its production capacity target for optical chips. He also believes that all-optical interconnection inside the cabinet is a clear trend direction.

The so-called all-optical interconnection inside the cabinet refers to using optical signals instead of traditional copper wire connections to transmit data inside the AI server cabinet. At present, optical interconnection is mainly used between cabinets in data centers, while copper cables are still mainly used inside the cabinets. If the next generation solution extends optical interconnection to the interior of the cabinet, each CPU, GPU, and acceleration chip will require optical chips to complete signal conversion, and the demand will increase significantly compared to now.

Yuan Yonggang stated that customer guidance shows that the demand for optical chips will double annually from 2027 to 2029. In addition, in terms of optical modules, the first phase of Dongshan Precision's overseas production base in Thailand has been put into construction, with the goal of achieving large-scale production in the fourth quarter of this year. The production capacity plan for next year is also being continuously revised.

It is worth noting that Yuan Yonggang mentioned towards the end of the aforementioned exchange activities that the company is currently integrating optical modules PCB、 The comprehensive integration of existing businesses such as liquid cooling and cabinets with the AI industry chain may be the biggest opportunity I have ever seen in my life.

Combination without obvious shortcomings

Optical modules are currently the fastest-growing business of Dongshan Precision, but in terms of revenue structure, it is far from being the entirety of the company.

According to its 2025 annual report, the electronic circuit sector contributed 25.62 billion yuan in revenue, accounting for 63.85% of the total revenue, and remains the largest source of income; The precision component sector contributed 5.93 billion yuan in revenue, accounting for 14.78%; The optoelectronic display module contributed 5.986 billion yuan in revenue, accounting for 14.92%; The company's annual revenue for 2025 is 40.125 billion yuan, with an overseas market share of 81.41%, and 100% adopting a direct sales model.

In these businesses, PCB has a high level of prosperity because all electronic devices require PCBs to connect various components internally. AI servers also have much higher requirements for PCBs than ordinary products: more layers (mainstream AI servers use circuit boards with 20 or even 30 layers or more), higher wiring density, lower signal transmission loss, and need to withstand greater current and heat dissipation pressure.

According to market research firm Prismark, the global PCB market output value is expected to reach 85.2 billion US dollars in 2025, a year-on-year increase of approximately 16%; Among them, the output value of server and storage related PCBs is about 16 billion US dollars, a year-on-year increase of 46%, making it the fastest-growing sub sector.

Yuan Yonggang stated in a communication on June 2nd that the current prosperity of AI related PCBs is extremely rare in the history of the industry. He stated that the PCB expansion cycle is long, equipment delivery takes 12 months, upstream materials are scarce, and the supply-demand gap is difficult to bridge in the short term. On the price side, the company's PCB products have completed the price increase for all customers.

He mentioned a detail: a customer voluntarily proposed that if Dongshan Precision can increase the production capacity and supply of PCBs, they are willing to raise the price increase from 25% to 35%. In the past, the company may not have been able to meet customers who visited them proactively, but now they are also actively sending emails to inquire about production capacity.

According to the annual report of Dongshan Precision, its subsidiary Multek has the manufacturing capability of over 78 layers of ultra-high multi-layer and 7th order thick plate HDI PCBs. HDI stands for High Density Interconnect Board, which achieves high-density wiring through laser micro holes and fine lines. It is one of the mainstream solutions for AI servers and high-end switch motherboards. The company has invested over 1 billion US dollars to expand its high-end PCB production capacity.

There is another layer of correlation between PCB and optical module: the optical module itself also requires high-end PCB as the substrate.

At present, the PCBs required for Dongshan Precision's optical modules are mainly purchased externally. Yuan Yonggang mentioned in the communication that the suppliers mainly include Shennan Circuit and Fangzheng PCB, but the company has already prepared materials and reserved its own PCB production capacity to prevent the delivery of optical modules from being affected by upstream supply shortages next year.

Consumer electronics is the largest and oldest business of Dongshan Precision. The company's FPC (Flexible Circuit Board, a thin and flexible circuit board widely used for internal connections in smartphones) business is mainly operated through its subsidiary MFLEX, which is the world's second-largest FPC supplier.

According to the 2025 annual report, Dongshan Precision's largest customer contributed a total revenue of 18.643 billion yuan, accounting for 46.46% of the total revenue.

Yuan Yonggang emphasized in the above-mentioned exchange activities that despite the sluggish domestic Android phone market, Apple's related businesses have hardly declined in the first and second quarters of this year, but have shown slight growth. "Apple's resilience is very strong".

The FPC business profit margin of the consumer electronics sector is about 8%, the lowest among several sectors, but it has a large volume and stable cash flow. Yuan Yonggang mentioned that there are two noteworthy changes for Apple next year: first, the launch of foldable screen phones may drive the demand for replacement, and second, the comprehensive price increase of AI servers and storage chips will also lead to a tight supply of PCBs for Apple. Dongshan Precision, as its core supplier, is expected to have improved bargaining power next year.

Yuan Yonggang's plan is to gradually shift low profit consumer electronics production capacity towards AI and other directions.

The global manufacturing network accumulated by Dongshan Precision over the years supports the simultaneous operation of multiple business lines. According to the 2025 annual report, Dongshan Precision has established production bases in 15 countries and regions including China, the United States, France, Singapore, Thailand, and Mexico, with overseas employees accounting for over 20%.

In 2025, Dongshan Precision also completed the acquisition of French GMD Group, a manufacturer that provides white body, chassis structural components, and thermal management systems to European car companies. This acquisition fills Dongshan Precision's production capacity in the European market. This cross regional production capacity enables the company to deliver to end customers in different regions, and also to some extent disperses the regional risks of the supply chain.

In a more cutting-edge direction, Dongshan Precision has also begun to lay out CPO (co packaged optics), which is a technical solution that encapsulates optical engines and switching chips together, which can significantly shorten the signal transmission distance between chips and reduce power consumption. The current mainstream optical module is a pluggable independent module installed on the panel interface of the switch; CPO integrates optical components directly into chip packaging, representing the evolution direction of next-generation data center optical interconnection.

Yuan Yonggang stated in the above-mentioned exchange activities that Dongshan Precision has obtained the optical engine business from top overseas customers, and the cooperation with Nvidia is also being promoted. It is expected to deliver samples in the fourth quarter of this year. Sols' optical chips are currently mainly used in their own optical module products, and once the CPO solution is implemented on a large scale, the optical chips will enter a new application scenario: directly integrated into the optical engine, installed next to the switching chip, and complete high-speed optical interconnection inside the cabinet. Yuan Yonggang stated in the communication that the value of an optical engine in a single cabinet can reach hundreds of thousands of dollars.

Dongshan Precision seems to be able to do everything, from circuit boards to optical chips to consumer electronics outsourcing, with every business capable, just like the "bucket machine" in the mobile phone industry. But there is also an experience in the mobile phone industry: bucket phones can play everything, but they rarely become popular. Because on the other side without obvious weaknesses, there is a lack of a sufficiently prominent long board, and on each track, Dongshan Precision faces a more focused opponent than it.

In the communication activity on June 2nd mentioned above, Yuan Yonggang said that when he talks about optical modules with overseas customers, he will also include PCB, liquid cooling, and cabinet businesses. "The company has too many products that can be integrated with AI.

He said he will travel to the United States again at the end of June to have a new round of communication with core clients.