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. <\/p>\n
This story is part of Forbes Asia\u2019s 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<\/a>.<\/p>\n Five years ago, Mototaka Tei was poised to make a leap. The president and CEO of Santec Holdings<\/a>, a Japanese maker of optical testing equipment used in industries as varied as AI data centers and medical imaging, had agreed to pay \u00a51.9 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\u2019t travel to seal the deals in person. \u201cThat was the biggest risk I\u2019ve taken,\u201d says the 62-year-old, recalling his nervousness about conducting due diligence remotely for Santec\u2019s first-ever acquisitions in its more-than-40-year history.<\/p>\n In today\u2019s AI era, Tei\u2019s 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\u2019s 2021 acquisitions have become growth engines for Santec, with sales growing substantially under the company\u2019s fold, he says.<\/p>\n The pandemic-era deals fit squarely into Santec\u2019s 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. \u201cWe don\u2019t make hundreds of products,\u201d Tei discloses. \u201cWe try to be very good at the few products we make and become a champion in those fields.\u201d<\/p>\n LASER SHARPSantec\u2019s revenue and net profit more than tripled between 2022 and 2026. <\/p>\n *Forecast; For fiscal years ending Mar. 31<\/p>\n Source: Santec<\/p>\n Investors, in turn, are championing the stock, which has tripled over the past year, boosting Santec\u2019s market cap to \u00a5221 billion ($1.4 billion) as of late July. That\u2019s an 11-fold jump from its market value of about \u00a521 billion in 2021. For the year ended Mar. 31, the company posted a 31% jump in revenue to \u00a531.5 billion on a 51% surge in net profit to \u00a57.7 billion, securing a spot on the Forbes Asia Best Under A Billion list for the third year in a row. <\/p>\n Santec\u2019s 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\u2019s 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. <\/p>\n Santec\u2019s tunable laser.<\/p>\n Courtesy of santec<\/p>\n In fiscal 2026, optical testing tools accounted for 71% of Santec\u2019s 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. \u201cWe have built a strong reputation for premium, \u2018made in Japan\u2019 quality with minimum technical issues,\u201d says Tei, who declines to name customers other than Nvidia.<\/p>\n 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 \u201cexpertise not just on a narrow solution, but rather on broader problems that [hyperscalers] might have,\u201d says senior marketing director Brig Asay. <\/p>\n Matthew Adams, Viavi\u2019s director of product line management, says in an email that with the optical technology ecosystem moving toward \u201cfunctional integration rather than isolated parametric measurement,\u201d customers want the flexibility of an \u201cintegrated platform.\u201d<\/p>\n Santec’s fiber-optic cable assembly testing tool.<\/p>\n Courtesy of santec<\/p>\n Tei acknowledges that Santec is not \u201ca one-stop-shop for optical testing products.\u201d But, he says, \u201cWe always aim to be the top player in a niche market. The market doesn\u2019t have to be big as long as we command an over 50% share and remain the leader.\u201d<\/p>\n Mark Vena, CEO and principal analyst of U.S.-based SmartTech Research, agrees that Santec\u2019s edge comes from specialization. \u201cSantec\u2019s focused play offers better agility,\u201d he asserts. \u201cIn 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.\u201d<\/p>\n \u201cWe try to be very good at the few products we make and become a champion in those fields.\u201d\n<\/p>\n Mototaka Tei, president and CEO of Santec<\/p>\n 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. <\/p>\n 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.<\/p>\n TEST MARKETSSantec\u2019s revenue is concentrated in the U.S., driven by robust demand for generative AI and the resulting expansion in data center capacity.<\/p>\n *For the year ended Mar. 31, 2026<\/p>\n Source: Santec<\/p>\n The technology is nascent\u2014adoption is largely limited to Nvidia-backed AI data centers\u2014partly 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. <\/p>\n The company is also developing another testing tool for CPO, says Tei, but he declines to give details, citing commercial sensitivity. \u201cWe aim to be the world\u2019s first to provide such an instrument,\u201d he says. For now, he\u2019s signed off on a 16% increase in R&D spending to \u00a52.5 billion and an 89% boost in capex to \u00a51.2 billion in the year ended Mar. 31.<\/p>\n High-volume manufacturing of CPO systems isn\u2019t 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.<\/p>\n 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 \u201cwell-positioned to play an essential enabling role\u201d in CPO high-volume manufacturing. This type of equipment addresses \u201cthe most frequently underestimated bottleneck\u201d in CPO, he says, specifically, \u201cthe ability to achieve high-efficiency, repeatable alignment and inspection under mass-production conditions.\u201d<\/p>\n \u201cOnce a market became too competitive, it often turned into a price war, where we didn\u2019t excel.\u201d\n<\/p>\n Mototaka Tei, president and CEO of Santec.<\/p>\n Tei\u2019s 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. <\/p>\n Santec\u2019s optical biometer for cataract surgeries.<\/p>\n Courtesy of santec<\/p>\n 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. \u201cOnce a market became too competitive, it often turned into a price war, where we didn\u2019t excel,\u201d he acknowledges. <\/p>\n 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\u2019s 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. <\/p>\n Tei retains an appetite for inorganic expansion. Last year, Santec moved into quantum computing testing by acquiring Australia\u2019s MOG Laboratories for \u00a5869 million. It\u2019s a small venture but in sync with the CEO\u2019s vision. \u201cA niche market is one that people don\u2019t often see, with products that generate perhaps only $10 million each, something big corporations aren\u2019t interested in,\u201d says Tei. \u201cBut for us, that\u2019s big enough.\u201d<\/p>\n MORE FROM FORBESForbesBest Under A Billion 2026By Ardian Wibisono and Yessar Rosendar<\/a>ForbesHow Singapore Fintech iFAST Became A Regional Wealth EngineBy Cris Prystay<\/a>ForbesNikhil Sawhney Turbocharges India\u2019s Triveni Turbine Into A Global ChampionBy Anu Raghunathan<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"As hyperscalers turn to light to transmit high volumes of data, optical testing firm Santec Holdings, led by…\n","protected":false},"author":2,"featured_media":128785,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[24,86,25,64469,703,64465,21804,64468,64467,45009,64466],"class_list":["post-128784","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ai","tag-ai","tag-ai-data-center","tag-artificial-intelligence","tag-best-under-a-billion","tag-japan","tag-mototaka-tei","tag-optical-communications","tag-optical-interconnects","tag-optical-testing","tag-photonics","tag-santec"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/128784","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=128784"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/128784\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/128785"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=128784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=128784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=128784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}