How a Japanese optics specialist is turning AI data-centre boom into a niche-market advantage

For Santec Holdings, the opportunity created by the artificial intelligence boom is not necessarily about becoming the biggest player in the market. It is about finding the small, technically demanding corners of the AI infrastructure ecosystem where a specialist can become indispensable.

This strategy is now putting the Japanese optical technology company to bring in some of the infrastructure challenges created by the expansion of AI data centres.

Santec, which has more than 400 employees across eight countries, makes optical testing equipment and components used to measure and manage the transmission of data through fibre-optic systems. Its products have become increasingly relevant as hyperscalers such as Amazon, Google, Meta and Microsoft build increasingly dense networks of servers to support massive AI workloads.

According to Forbes, the company’s revenue and net profit more than tripled between 2022 and 2026. For the year ended March 31, 2026, revenue rose 31% to ¥31.5 billion, while net profit jumped 51% to ¥7.7 billion. Its market value had reached ¥221 billion, or about $1.4 billion, by late July, compared with roughly ¥21 billion in 2021.

Finding value where giants see a niche

Santec’s approach is deliberately different from that of larger testing and measurement companies.Its chief executive, Mototaka Tei, has built the company around the idea that a market does not have to be enormous if a specialist can dominate it. “We don’t make hundreds of products,” Tei told Forbes. “We try to be very good at the few products we make and become a champion in those fields.”

This philosophy has helped Santec establish a particularly strong position in tunable lasers, one of its best-known products. The shoebox-sized devices are used to assess how efficiently light travels through optical hardware, including optical transceivers. Tei says Santec has around a 50% global market share in tunable lasers.

Optical testing equipment accounted for 71% of the company’s revenue in fiscal 2026, while optical components contributed another 20%. The remaining revenue came from its cybersecurity software business.

The market around these products is expanding alongside AI. TrendForce expects the optical transceiver market for AI data centres to nearly triple from $26 billion in 2026 to $65 billion by 2030.

The next bet is closer to the AI chip

The company is now moving into an even newer area called co-packaged optics, or CPO. In conventional AI data-centre systems, electrical signals can travel tens of centimetres between AI chips and optical transceivers before being converted into light. CPO changes that architecture by placing optical chips much closer to the AI chips, reducing the copper pathway to only a few millimetres.

The result could be lower power consumption and reduced transmission delays. However,making CPO systems at scale is far from straightforward. Optical components and multiple hair-thin fibres need to be aligned with extremely high precision, creating a significant manufacturing and inspection challenge.

A pandemic acquisition became a growth engine

Santec’s current position in the AI infrastructure chain owes part of its momentum to decisions made during the Covid-19 pandemic.

In 2021, Tei agreed to spend ¥1.9 billion, equivalent to $17 million at the time, on two North American companies specialising in fibre-optic cable testing. Because pandemic restrictions prevented him from travelling, much of the due diligence had to be carried out remotely.

For a company that had never made an acquisition in more than four decades, it was a significant gamble. The gamble has since begun to pay off. The acquisitions have become important growth engines as demand for optical infrastructure has accelerated with the expansion of AI data centres.

Santec acquired JGR Optics in Canada and OptoTest in the US in 2021. The companies were subsequently brought into Santec’s corporate structure, becoming Santec Canada Corporation and Santec California Corporation in 2023, according to the company’s website.

The company has continued to use acquisitions to enter specialised markets. In 2025, its subsidiary Santec LIS acquired Australian quantum technology company MOG Laboratories for ¥869 million, bringing the business into Santec’s portfolio as it expanded into quantum computing testing.

Staying small enough to move quickly

The strategy has its limits. Santec’s American competitors, including Keysight Technologies and Viavi Solutions, operate across a much bigger range of test and measurement products. That scale allows them to offer customers more comprehensive platforms rather than individual specialised instruments.

As the optical technology ecosystem becomes more integrated, customers may increasingly want those broader solutions.

Santec’s answer is not to imitate them. Tei acknowledges that the company is not “a one-stop-shop for optical testing products.” But he remains convinced that specialisation can be an advantage.

“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,” he told Forbes. “Once a market became too competitive, it often turned into a price war, where we didn’t excel”

This lesson became particularly important after Santec ventured into several businesses beyond its core optical communications expertise. The company expanded into areas including ophthalmology and circuit-board testing. Its medical business survived and now contributes roughly one-fifth of optical testing equipment revenue, while some other products struggled against lower-cost Chinese competitors. Tei made niche markets a greater priority after becoming CEO in 2020.

A company built around optics

Santec’s roots go back to 1979, when it was established as Kyodo Shoji Corporation, initially importing and developing fine ceramic materials used in glass fibre, ceramic fibre and IC packages.

The company moved towards optical communications in the early 1980s and adopted the Santec name in 1983. Its first optical communications product, the FTS-2000 optical fibre mode field parameter test system, arrived in 1984.

It began exporting products soon afterwards and established Santec USA in New Jersey in 1985 to expand sales in North America. The company went on to develop increasingly sophisticated optical testing systems and tunable light sources through the 1980s and 1990s.

By the 2000s, its product portfolio had expanded into optical components, swept-source technology and optical coherence tomography. Santec later received US FDA approval for its ARGOS optical biometer, used for intraocular measurements in cataract surgery, and established a photonics laboratory in Silicon Valley in 2013.

The company’s corporate structure also evolved. In 2022, it moved from the JASDAQ market to the Standard market of the Tokyo Stock Exchange, before transitioning to a holding-company structure in 2023 and becoming Santec Holdings Corporation.

Its expansion continued into 2026, with new operations in the Czech Republic and Austria and the renaming of MOG Laboratories as Santec Australia. The company says it now has 47 years of experience in optics and focuses on manufacturing lasers, instruments and components for new optical applications.