Lingyi Itech (Guangdong) Company has officially dropped its planned $40 billion yuan (approximately $5.48 billion) investment into the optical communications sector, abruptly ending a deal that was announced less than a month ago. The consumer electronics giant has terminated its participation in the restructuring investment of Futong Group (Jiashan) Communication Technology Co., Ltd. (hereafter "Futong Jiashan").
Just weeks earlier, the company had announced plans to acquire control and operational rights over Futong Jiashan's restructuring assets for up to $40 billion yuan, aiming to enter the optical fibre communications materials application field. In its latest filing, Lingyi Itech stated that due to "limited due diligence time, relevant intermediary agencies were unable to issue reports in time, and the company could not make a reasonable value judgment on the underlying assets," leading to the decision to terminate the deal.
Where the plan came undone
Lingyi Itech's "pursuit of light" began on July 10 when it announced plans to participate in the restructuring of Futong Jiashan through a controlled subsidiary. The company intended to acquire control and operational rights for a total restructuring cost not exceeding $40 billion yuan. Originally focused on precision components for consumer electronics, Lingyi Itech has been pivoting towards AI infrastructure and high-end manufacturing, covering end-side AI terminals, AI computing servers, humanoid robots, and new energy vehicles.
The target, Futong Jiashan, is the core platform of veteran optical fibre company Futong Group. It engages in R&D, production, and sales of optical fibre preforms, fibres, and cables, and boasts a complete production chain that aligns with the high-speed optical interconnection needs of AI computing centres. When Futong Jiashan's full optical fibre chain project came online in January 2020, with a total investment of about $59 billion yuan, it was hailed as a significant boost to China's optical communications industry. Upon full production, annual sales were projected to exceed $100 billion yuan.
Lingyi Itech had stated that the strategic logic of the investment was to enter the optical fibre communications materials field, creating synergies with its existing AI server liquid cooling and computing hardware businesses to complete its AI infrastructure layout. This would have put the company's AI computing industry expansion on a fast track. However, on July 31, just 21 days after the announcement, Lingyi Itech issued a new notice terminating the investment. The company explained that it had paid a registration deposit of $5 million yuan, submitted materials, and commissioned law firms, auditors, and appraisers for due diligence, but the limited time prevented completion of a reasonable value assessment.
Massive financial black hole
According to the national enterprise bankruptcy restructuring information network, the deadline for submitting a restructuring plan was July 29, with due diligence required to be completed beforehand. This gave Lingyi Itech only 13 working days to conduct due diligence. Xiangsong Capital Director Shen Meng noted that due diligence typically spans at least three months and covers financial, legal, team, and product dimensions. Inadequate due diligence can lead to inaccurate information, resulting in poor outcomes.
Furthermore, Futong Group, the parent company of Futong Jiashan, has been deeply mired in losses. According to financial filings, the group incurred cumulative losses of $110.68 billion yuan from 2023 to the first half of 2025. As of mid-2025, its debt-to-asset ratio was 83.76%, with $16.91 billion yuan in overdue long-term and short-term borrowings and lease payments. The restructuring assets included about 620 acres of land in Jiashan and nearly 500,000 square metres of buildings, primarily industrial facilities for fibre and cable production, along with related machinery. Intangible assets like patents and customer agreements required separate negotiation.
AI computing story continues
In the first quarter of this year, Lingyi Itech reported revenue of $126.43 billion yuan, up 9.99% year-on-year, but net profit attributable to shareholders fell sharply to $3.92 billion yuan, down 30.7%. The company attributed the decline to external factors like exchange rate fluctuations and rising commodity prices. R&D expenses rose 33.09% to $6.89 billion yuan, focusing on AI terminal projects and new businesses like thermal management, robotics, and AI glasses. Cash and cash equivalents stood at $46.58 billion yuan, down 12.1% from the end of the previous year.
Industry insiders suggest that Lingyi Itech's push into optical communications was driven by a need for a new growth story to boost market confidence. After the initial investment announcement, the company's A-shares fell by the daily limit on July 13 and continued to drop over the next four days, accumulating a nearly 25% decline. Its H-shares also saw volatility. In the view of Huisheng International Capital President Huang Lichong, the market was highly divided. The stock's reaction reflected a fierce contest between the potential for industrial synergy and the pressures of capital commitment, asset quality, industry cycles, and integration risk.
Huang believes that terminating the restructuring investment, while compressing some growth expectations, also removes a significant capital commitment and integration risk. With Lingyi Itech's 2025 net profit attributable to shareholders at $22.88 billion yuan and operating cash flow at $44.33 billion yuan, the planned investment of up to $40 billion yuan was equivalent to 1.75 times its annual net profit and 90% of its operating cash flow. "This is not a negligible trial amount," Huang said. The abandonment eliminates the risk of high capital consumption and integration challenges, though it also means losing a high-growth option.
Notably, terminating the restructuring investment does not affect Lingyi Itech's strategy of shifting from consumer electronics precision manufacturing to AI computing infrastructure. In January, the company gained control of Readore (Liminda), quickly acquiring technical reserves and customer certification for server liquid cooling from a top North American AI computing customer. According to investor relations records, Liminda has entered the customer's AVL (Approved Vendor List)/RVL (Recommended Vendor List) for liquid cooling products, achieving full coverage of in-cabinet liquid cooling. The optical module liquid cooling module project is progressing well, with mass production planned for the third and fourth quarters of 2026, and AMD series graphics card cooling modules are also shipping.
Huang Lichong noted that the path to quickly filling the optical communications gap through a major restructuring is now closed. The previous optimistic logic was that Liminda would solve the "heat" problem while Futong Jiashan would provide the "light," transforming the company from a server cooling component maker into a comprehensive computing infrastructure platform. However, liquid cooling and optical fibre serving the same sector does not automatically create financial synergy. With the project terminated, the market will now refocus on whether Liminda's customer certification can translate into sustained orders and revenue, whether the optical module liquid cooling module can enter mass production on schedule, and whether new orders can generate operating cash flow without a significant rise in accounts receivable, inventory, and capital expenditure.