Huashengchang, a domestic leader in measurement instruments (SZ:002980), said on February 27 that it will acquire Shenzhen-based Galante Technology for 460 million yuan in cash, a move that pushes the firm from traditional surveying and environmental instruments into optical-chip and optical-module test equipment. The target, Galante, specialises in test solutions for optical chips and communication modules—segments increasingly critical to datacentres, telecom networks and China’s semiconductor supply chain. Huashengchang’s shares jumped to limit-up on the announcement and closed up for a second straight day as investors priced in the strategic pivot.
The deal includes a linked share transfer: Huashengchang’s controlling shareholder, Yuan Jianmin, has agreed to transfer 5% of the listed company’s stock (9.47 million shares) to Galante’s founder, YU Xinwen, contingent on completion of the acquisition. The buyers and sellers have also agreed a three-year performance commitment for Galante: cumulative net profit from 2026–28 must reach at least 115 million yuan (about 38.3 million yuan per year on average), a metric that will be used to staggerably unlock the transferred shares.
Huashengchang positions the acquisition as a horizontal extension of its industrial footprint, intended to create a new revenue stream in a field adjacent to its core competence in precision instruments such as infrared cameras, laser rangefinders and environmental sensors. The valuation of Galante—set at 460 million yuan—was derived from its projected average net profit over the coming three years. Management frames the move as a way to offset a recent downturn in the company’s core business and to tap faster-growing segments tied to optical communications.
The timing is notable. After three years of growth through 2022–24, Huashengchang encountered a profitability inflection in 2025: by the third quarter its year-to-date revenue had fallen 5.5% to 530 million yuan, third-quarter revenue was down 20.7% year-on-year, and net profit attributable to shareholders dropped roughly 41% year-on-year. Management cited higher U.S.–China tariffs that dented overseas shipments and rising R&D spending as contributors to the decline—pressures that likely helped motivate management to pursue an acquisitive growth strategy.
Strategically, the deal taps into a larger trend. Chinese policymakers and companies are accelerating efforts to build domestic capability in photonics and optical components, driven by demand from cloud computing, AI infrastructure and next‑generation telecoms. Test equipment for optical chips and modules is a specialised niche that remains critical to upstream domesticisation: if Galante can scale and meet its profit targets, Huashengchang could capture higher-margin business and reduce exposure to cyclical end markets.
But the acquisition carries risks. Financing a 460 million yuan cash purchase will strain liquidity compared with Huashengchang’s recent revenue scale, and the deal’s success depends on integrating a small, specialised testing business into a larger industrial group. The performance-based earnout aligns incentives but also embeds execution risk—should Galante underperform, Huashengchang will have paid a price for which it may need to provide compensation. There are also governance questions around a controlling-shareholder share transfer tied to the transaction, which investors will watch closely.
For global audiences, this transaction signals how even specialist industrial companies in China are reshaping themselves around the priorities of digital infrastructure and domestic supply-chain resilience. The move is pragmatic: acquire expertise downstream in a higher-growth vertical rather than attempt to build it organically, while using earnouts to bridge valuation gaps. Whether it delivers sustainable growth will depend on execution, the evolution of demand for optical test equipment, and the macro trade environment that has recently weighed on the firm's core exports.