As hyperscalers turn to light to transmit high volumes of data, optical testing firm Santec Holdings, led by president and CEO Mototaka Tei, is reaping a windfall.
This story is part of Forbes Asia’s coverage of Best Under A Billion list, which highlights 200 Asia-Pacific public companies with less than $1 billion in revenue and consistent top- and bottom-line growth. See the full list, sorted alphabetically, here.
Five years ago, Mototaka Tei was poised to make a leap. The president and CEO of Santec Holdings, a Japanese maker of optical testing equipment used in industries as varied as AI data centers and medical imaging, had agreed to pay ¥1.9 billion (equivalent to $17 million at the time) to acquire two North American companies specializing in testing fiber-optic cables. Due to Covid-19 lockdowns, Tei couldn’t travel to seal the deals in person. “That was the biggest risk I’ve taken,” says the 62-year-old, recalling his nervousness about conducting due diligence remotely for Santec’s first-ever acquisitions in its more-than-40-year history.
In today’s AI era, Tei’s somewhat blind bet is paying off. To handle massive AI workloads, hyperscalers such as Amazon, Google, Meta and Microsoft are connecting multiple racks of servers inside data centers. They are also linking data centers together across vast distances that make it impossible to transmit information over copper cables without overheating, signal loss and data corruption. To ensure seamless transmission, the tech giants are leaning increasingly on optical communications, tapping fiber-optic cables that use light pulses to transmit data. As a result, Tei’s 2021 acquisitions have become growth engines for Santec, with sales growing substantially under the company’s fold, he says.
The pandemic-era deals fit squarely into Santec’s playbook of exploiting niche markets. Operating from Komaki, an industrial hub 350 kilometers west of Tokyo, the company has built a successful business supplying critical testing equipment and certain key components for optical communications. “We don’t make hundreds of products,” Tei discloses. “We try to be very good at the few products we make and become a champion in those fields.”
LASER SHARPSantec’s revenue and net profit more than tripled between 2022 and 2026.
*Forecast; For fiscal years ending Mar. 31
Source: Santec
Investors, in turn, are championing the stock, which has tripled over the past year, boosting Santec’s market cap to ¥221 billion ($1.4 billion) as of late July. That’s an 11-fold jump from its market value of about ¥21 billion in 2021. For the year ended Mar. 31, the company posted a 31% jump in revenue to ¥31.5 billion on a 51% surge in net profit to ¥7.7 billion, securing a spot on the Forbes Asia Best Under A Billion list for the third year in a row.
Santec’s star product, which has earned it industry recognition and a 50% global market share, according to Tei, is tunable lasers, shoebox-sized devices that evaluate how well light travels across hardware such as optical transceivers. The transceivers are gadgets roughly the size of a USB stick that are plugged into servers to convert electrical signals to light pulses and back again. Such devices are vital in AI data centers because while data can be transmitted by light, most AI chips can only send and receive information via electrical signals. Santec’s chief rivals in this segment are U.S.-based Keysight Technologies and EXFO of Canada. Taipei-based technology research firm TrendForce predicts that the market for optical transceivers used in AI data centers will almost triple to $65 billion by 2030 from $26 billion in 2026.
Santec’s tunable laser.
Courtesy of santec
In fiscal 2026, optical testing tools accounted for 71% of Santec’s revenue while optical components generated 20% and the rest came from its cyber-security software. The company, with over 400 employees across eight countries, has six factories: one each in Australia, Canada, Japan and the U.S., and two in Vietnam. “We have built a strong reputation for premium, ‘made in Japan’ quality with minimum technical issues,” says Tei, who declines to name customers other than Nvidia.
While Santec has found success by staying niche, its American rivals, California-headquartered Keysight (market cap $54 billion) and Arizona-based Viavi Solutions (market cap $10 billion), offer a much wider range of test and measurement products. Keysight offers “expertise not just on a narrow solution, but rather on broader problems that [hyperscalers] might have,” says senior marketing director Brig Asay.
Matthew Adams, Viavi’s director of product line management, says in an email that with the optical technology ecosystem moving toward “functional integration rather than isolated parametric measurement,” customers want the flexibility of an “integrated platform.”
Santec’s fiber-optic cable assembly testing tool.
Courtesy of santec
Tei acknowledges that Santec is not “a one-stop-shop for optical testing products.” But, he says, “We always aim to be the top player in a niche market. The market doesn’t have to be big as long as we command an over 50% share and remain the leader.”
Mark Vena, CEO and principal analyst of U.S.-based SmartTech Research, agrees that Santec’s edge comes from specialization. “Santec’s focused play offers better agility,” he asserts. “In a rapidly changing market for optical technologies, the pace of innovation in a niche segment can at times create more customer value than the slower product roadmaps of much larger test-and-measurement companies.”
“We try to be very good at the few products we make and become a champion in those fields.”
Mototaka Tei, president and CEO of Santec
Now Tei is targeting another micro market, developing what he says is a first-of-its-kind testing tool for the next generation of AI networking infrastructure: co-packaged optics (CPO), which represent a significant advance over optical transceivers.
Traditionally, data in the form of electrical signals has to travel over tens of centimeters of copper wires from AI chips to optical transceivers before being changed to light. With CPO, optical chips are placed adjacent to the AI chips, so the data only has to traverse a few millimeters of copper pathway before it gets converted. This can significantly reduce power consumption while minimizing delays in transmission.
TEST MARKETSSantec’s revenue is concentrated in the U.S., driven by robust demand for generative AI and the resulting expansion in data center capacity.
*For the year ended Mar. 31, 2026
Source: Santec
The technology is nascent—adoption is largely limited to Nvidia-backed AI data centers—partly because of its highly complex manufacturing process. Placing optical chips on the same substrate as AI chips poses an engineering challenge as multiple hair-thin optical fibers have to be aligned with extreme precision. To address the problem, Santec in January launched an automated alignment system in collaboration with Japanese optical communications company Senko Advanced Components and U.S. automation firm Aerotech, as well as a new tunable laser specifically for CPO.
The company is also developing another testing tool for CPO, says Tei, but he declines to give details, citing commercial sensitivity. “We aim to be the world’s first to provide such an instrument,” he says. For now, he’s signed off on a 16% increase in R&D spending to ¥2.5 billion and an 89% boost in capex to ¥1.2 billion in the year ended Mar. 31.
High-volume manufacturing of CPO systems isn’t likely until 2028, with near-packaged optics (NPO), which shorten copper pathways to a few centimeters, being the intermediate solution, according to TrendForce. But it projects that the value of the combined CPO-NPO market will skyrocket to more than $39 billion by 2030 from $100 million in 2025, with CPO accounting for about 35% of optical transceiver volumes.
Roger Chu, research vice president of TrendForce, says in an email that tunable laser suppliers who also provide CPO alignment systems, such as Santec, are “well-positioned to play an essential enabling role” in CPO high-volume manufacturing. This type of equipment addresses “the most frequently underestimated bottleneck” in CPO, he says, specifically, “the ability to achieve high-efficiency, repeatable alignment and inspection under mass-production conditions.”
“Once a market became too competitive, it often turned into a price war, where we didn’t excel.”
Mototaka Tei, president and CEO of Santec.
Tei’s obsession with market niches was forged early in his 37-year tenure at Santec, which his father, Masao Sadamura, founded in 1979 as an importer of ceramic materials used in the making of optical fibers and semiconductors. After business management studies in the U.S., Tei, who changed his surname to reflect his Korean roots, joined Santec as a junior salesperson in 1989. At the time, the first wave of the fiber-optic telecoms boom was underway, with companies racing to build infrastructure for long-distance phone calls. By then, Santec had already pivoted to optical testing, claiming to be the first company to shrink tunable lasers to desktop size, replacing previously bulky equipment.
Santec’s optical biometer for cataract surgeries.
Courtesy of santec
As Tei climbed the ranks, he witnessed the perils of diversifying into other products. In an effort to grow, Santec had expanded into various segments, such as medical devices for ophthalmology and testing equipment for circuit boards. The former, which includes a U.S. Food & Drug Administration-approved biometer with the capability of mapping the eye for cataract surgeries, now accounts for about one-fifth of optical testing equipment revenue. Others failed to take off as Santec struggled to hold its ground against Chinese companies with their low-cost products. “Once a market became too competitive, it often turned into a price war, where we didn’t excel,” he acknowledges.
Learning from that misstep, Tei prioritized niche markets when he became CEO in 2020, taking charge from his older cousin Daikou, who had been at the helm since Tei’s father stepped down in 2001. Today, Tei runs the company with his younger brother Masataka, executive vice president and chief technology officer, as well as with Daikou, who is now an executive vice president and chief strategy officer.
Tei retains an appetite for inorganic expansion. Last year, Santec moved into quantum computing testing by acquiring Australia’s MOG Laboratories for ¥869 million. It’s a small venture but in sync with the CEO’s vision. “A niche market is one that people don’t often see, with products that generate perhaps only $10 million each, something big corporations aren’t interested in,” says Tei. “But for us, that’s big enough.”
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