Honghe Technology said it will terminate its approximately 600 million yuan electronic-grade fiberglass cloth project in Cangxi, Sichuan, and return the related state-owned land-use rights, while injecting 680 million yuan into wholly owned unit Huangshi Honghe Electronic Materials Technology Co., Ltd. through a debt-to-equity swap. The company framed the move as a strategic optimization to concentrate resources in Huangshi, which it said is closer to customers and the parent company and better suited for centralized management and high-end production. The shift came alongside a sharp earnings surge in the 2026 first half. Revenue rose 90.39% year-on-year to 1.048 billion yuan, net profit attributable to shareholders climbed 334.32% to 379 million yuan, and non-GAAP net profit increased 350.88% to 373 million yuan. Gross margin reached 59.34% and net margin 36.22%. Honghe attributed the gains to stronger demand and higher prices for standard E-glass electronic-grade fiberglass cloth, as well as rapid growth in specialty electronic cloth including low-dielectric-constant and low-thermal-expansion-coefficient products. The company is increasingly shifting its mix toward higher-value products. Specialty electronic cloth contributed 357 million yuan of revenue, or 34.02% of the total, up from 15.24% at the end of 2025, with a gross margin of 67.49%. Operating data showed the average selling price of electronic-grade fiberglass cloth rose to 11.91 yuan per meter from 4.81 yuan a year earlier, a 147.61% increase. Honghe's abandoned Sichuan plan had been announced in November 2023 and covered annual capacity of 72 million meters. The Cangxi land transfer contract was signed in April 2024 for 32,300 square meters at 3.11 million yuan, with the real estate title certificate obtained in May 2024. The project had not started production and remained at the planning stage, while local authorities said the formal termination process had not yet been completed. Expansion is now centered on Huangshi, Hubei, where Honghe announced in March 2026 an approximately 8 billion yuan High-Performance Electronic Materials Industrial Park Project designed to produce 150 million meters of high-performance electronic cloth annually. After the planned capital increase, Huangshi Honghe's registered capital will rise from 1.72 billion yuan to 2.4 billion yuan. The company and market sources said the move is not a capacity retreat but a pivot away from more standard capacity toward an industrial cluster better aligned with ultra-thin and super-thin electronic cloth demand. The strategy comes as AI server and high-speed switch demand supports the electronic cloth market, a key input for copper-clad laminates (CCL, PCB base material) and printed circuit boards. Frost & Sullivan data cited in the report showed the global electronic cloth market grew from $2.14 billion in 2021 to $2.943 billion in 2025 and is projected to reach $6.012 billion by 2030. Honghe said it has already signed orders with many customers, while market sources said orders are booked through 2027. The company also warned that expansion at Huangshi Honghe will take time, require substantial capital, and remains subject to uncertainty over the pace of capacity buildout and final implementation.