In spring 2026, the consumer electronics supply chain remains in a prolonged slump.

Shortly after the Chinese New Year, the hashtag ‘smartphone prices set to rise across the board’ trended on social media, with OPPO, vivo, and Xiaomi successively announcing price adjustments.

In this wave of price hikes, the fortunes of upstream and downstream supply chain players diverged sharply. Upstream, storage chip giants are thriving. Samsung and SK Hynix are redirecting 30% to 40% of their consumer-grade DRAM capacity toward higher-margin HBM to meet the insatiable demand from AI servers. Downstream, terminal manufacturers are forced to absorb soaring costs.

Caught in the middle, supply chain players like Sunny Optical Technology have become collateral damage in this ‘upstream feast, downstream squeeze’ dynamic.

Over the past six months, Sunny Optical Technology’s stock price has declined by over 30%. The market’s simplistic explanation: if smartphones aren’t selling, lens maker Sunny will inevitably suffer.

But the days of evaluating the consumer electronics sector solely through the lens of ‘smartphone shipments’ may be numbered. At this optical giant’s quietest moment, a subtle yet profound restructuring of valuation logic is underway.

By spinning off its automotive business, targeting AI glasses, and deploying humanoid robots, Sunny Optical Technology is wielding capital as a scalpel to attempt a daring leap from ‘smartphone lens dominator’ to ‘AI vision infrastructure builder.’

Amid the Retreat, the Market Recalibrates Its Valuation Yardstick

The market widely pigeonholes Sunny Optical Technology as a victim of ‘declining smartphone sales’—a narrative that seems plausible at first glance but requires deeper scrutiny. A closer look reveals a more nuanced reality.

Measuring Sunny with the outdated yardstick of ‘smartphone sales’ reflects cognitive path dependency. While the smartphone business still accounts for roughly half of Sunny’s revenue, a critical detail is often overlooked: in the first half of 2025, shipments of smartphone lenses and camera modules declined year-on-year, yet revenue achieved positive growth. The positive earnings preview for 2025 further disclosed a net profit increase of 70.0% to 75.0% year-on-year.

Why?

Data from the first half shows that average selling prices rose by around 20%. This indicates that Sunny is no longer relying solely on volume in its smartphone business but has carved out profit margins through product mix upgrades in a mature market.

This suggests that Sunny’s real pain point has never been the cyclical fluctuations of smartphone sales but rather the ‘timing gap’ in its business mix transformation.

The smartphone business is shifting from a past ‘growth engine’ to a ‘cash cow.’ Its mission is no longer to provide high-growth narratives but to fund new businesses like automotive, XR, and robotics.

However, before these new businesses mature, the smartphone business’s revenue share only dipped from about 70% in 2024 to 67.4% in the first half of 2025. Transitioning the revenue mix requires time and patience.

But the capital markets may not have that patience.

The direct trigger for this round of stock price pressure is rising storage chip prices. On the surface, upstream players are eating into midstream profits, but the deeper logic is that AI is restructuring profit allocation across the entire consumer electronics supply chain.

Thus, the 30% stock price retreat is less a denial of Sunny’s fundamentals and more a market eager to settle accounts with the ‘old era.’

Going forward, don’t expect smartphone business growth to trigger a V-shaped stock price recovery. What matters now is understanding a trend:

This adjustment is not a cyclical trough but a necessary transition between old and new growth drivers. Only when the old shell is fully priced in can new value be re-evaluated.

Accelerating Change: Wielding the Scalpel of Capital

When the new era’s horn sounds, companies must adapt or perish.

Sunny Optical Technology is accelerating its transformation, with a key signal being the spin-off of its automotive business for independent listing.

On January 5, 2026, Sunny Optical Technology announced insider information: the company is considering spinning off its automotive-related optical business for independent listing on the Main Board of the Stock Exchange of Hong Kong Limited (SEHK). Three weeks later, the spun-off entity formally submitted its listing application to the SEHK.

The news prompted Citigroup, Bank of America, CMB International, and other investment banks to swiftly issue research reports, with target prices universally exceeding HKD 100 and ‘buy’ ratings.

Behind this optimism lies a meticulously designed ‘valuation separation surgery.’

The spun-off entity is Sunny Intelligence, focusing on automotive camera solutions, including two major segments: intelligent perception and intelligent cockpit. This essentially剥离s (a more natural English term meaning ‘separates’) high-growth, high-valuation growth assets from the low-valuation, cyclical ‘smartphone’ quagmire.

Within the parent company, the automotive business was folded into the broader narrative of ‘Sunny Optical Technology,’ and the market priced it using a manufacturing cyclical stock valuation model, with the overall price-to-earnings ratio constantly dragged down by low expectations for the smartphone business.

After independent listing, it can finally tell growth stock stories like ‘rising autonomous driving penetration’ and ‘ADAS specification upgrades.’ This represents an identity leap from ‘manufacturing cyclical stock’ to ‘high-tech growth stock.’

What merits consideration is that beyond valuation factors, Sunny Optical Technology’s spin-off may have deeper intentions—namely, to equip the automotive business with an independent capital engine and accelerate the company’s business mix transformation for the next era.

The intended use of proceeds from this funding round explicitly states: for research and development of automotive camera solutions and other automotive optical solutions, establishing a comprehensive testing system to enhance technical capabilities, expanding the product matrix, upgrading production capacity, and optimizing supply chain management.

From 2023 to the first three quarters of 2025, Sunny’s cumulative R&D investment exceeded RMB 1.4 billion. In the past, this relied on cash flow from the smartphone business. But with smartphone profit margins squeezed by rising storage chip prices and brand price pressure, continued reliance on it for funding would inevitably impose constraints.

After the spin-off, Sunny Intelligence can directly raise capital from the market, no longer constrained by the parent company’s cash flow fluctuations. On the eve of widespread adoption of autonomous driving Levels 3/4, having an independent capital platform means accelerated R&D and production capacity.

From this perspective, spinning off the automotive business not only sheds the valuation burden of the old shell for Sunny but also reserves more strength for the upcoming AI wars, giving the company greater confidence to fight a breakthrough battle.

Awakening the Market with the Ambition to Be the ‘Eye of All Things’?

Sunny Optical Technology is recalibrating its course.

Spinning off the automotive business is just the first step. Sunny’s true ambition lies in its positioning as ‘the eye of Physical AI.’

The company is pursuing two strategic directions: first, holding its ground in the smart automotive sector; second, setting its sights on the vast oceans of AI glasses and robotics.

Let’s start with AI glasses, undoubtedly the most critical moment in consumer electronics since the ‘Apple supply chain’ era.

In August 2025, Sunny Optical Technology and Goertek both announced a cooperation agreement: Goertek incorporated the 12-inch transparent substrate wafer AR glasses micro-nano optical product project, launched by Sunny Shanghai Aolai in Lingang, into its supply chain, while Sunny quietly entered the AI glasses supply chain of leading clients through Goertek.

In the AI glasses track (which translates to ‘field’ or ‘sector’), Sunny Optical Technology holds a full deck of cards: from diffractive waveguides and micro-nano optics to complete ODM solutions for end devices, it can provide turnkey solutions for terminal brands.

Today, following Meta, Chinese manufacturers are accelerating their pursuit in the AI glasses field. At the Mobile World Congress (MWC) in early March, Chinese tech giants like Alibaba and Baidu began marching toward AI terminals. For Sunny, as AI glasses scale up, new customer sources beyond traditional hardware manufacturers are emerging.

Additionally, opportunities arise from the robotics vision business, still in its infancy.

In March 2026, the China Securities Index Company released the Hong Kong Stock Connect Robotics Theme Index, with Sunny Optical Technology included.

This seemingly minor announcement actually reveals a crucial signal: the capital markets have begun measuring Sunny with a robotics yardstick.

While this business segment’s revenue remains quite limited—not even worth a separate line item in financial reports—it represents future possibilities. For robots to truly enter factories and households, vision modules will be indispensable, and Sunny aims to secure this ecological niche in advance.

Figure: Sunny’s binocular depth vision solution for humanoid robots

If these strategies materialize, Sunny Optical Technology will no longer be a company merely selling smartphone lenses but a platform-type giant controlling the digital entry points to the physical world.

However, returning to the present, the real opportunity does not lie in the company immediately generating substantial profits from these businesses but in the fact that extreme pessimistic expectations have already been priced into the stock.

The worst is over; positive developments lie ahead.

When can Sunny Optical Technology expect re-evaluation? The key lies in the moment when three signals resonate: the smartphone business stabilizes and no longer drags down the overall narrative; the automotive spin-off successfully lands, allowing the market to calculate its asset value separately; and true blockbuster AI terminals emerge, opening up new imaginative spaces.

After squatting low, Sunny Optical Technology may find itself in a ‘golden pit.’

Source: Hong Kong Stocks Research Society