Summary of Conference Call on Greater China Semiconductors Industry Overview - **Industry**: Greater China Semiconductors - **Focus**: CoWoS (Chip on Wafer on Substrate) technology and its expansion in response to TSMC's capacity increase Key Points 1. **Capacity Expansion**: CoWoS capacity is expected to expand by over 20% by 2026, reaching at least 120-130 kilowafers per month (kwpm) due to TSMC's 3nm capacity increase [1][2][4] 2. **TSMC's Strategy**: TSMC plans to add 20 kwpm of 3nm front-end wafer capacity, which is a significant driver for the CoWoS capacity expansion [2][4] 3. **Service and Equipment Vendors**: - Positive outlook for CoWoS equipment vendors such as AllRing and ASMPT, as well as service vendors ASE and KYEC [1][4][8] - AllRing is noted as the main supplier for TSMC, with a stock trading at 19x 2026 estimated EPS, considered undemanding [8] - ASMPT is the sole supplier of TSMC's CoWoS-L on substrate TCB, trading at 21x 2026 estimated EPS, below its historical average of 27x [8] 4. **Customer Base**: Continued support for CoWoS customers, particularly AI ASIC customers requiring 3nm capacity through Alchip and GUC's design services [8] 5. **Construction and Installation Timeline**: The new capacity will be added in AP8 P1 and P2, contingent on the timelines for fab construction and equipment installation [2][3] Additional Insights - **Market Dynamics**: The expansion is seen as a positive development for the CoWoS supply chain and AI semiconductor customers, indicating a robust demand for advanced packaging solutions [4][8] - **Valuation Methodology**: The report includes a residual income model for valuation, with key assumptions such as a cost of equity of 9.2% for ASMPT and 9.8% for ASE, indicating a cautious but optimistic outlook for these companies [9][10][11] - **Risks**: Potential risks include slower-than-expected global economic growth, weaker demand from Chinese OSAT companies, and competition in the advanced packaging tools market [13][16] Conclusion The conference call highlights a significant opportunity for growth in the CoWoS segment driven by TSMC's capacity expansion. The positive outlook for equipment and service vendors, along with a strong customer base in AI, positions the industry favorably for the coming years. However, attention must be paid to potential risks that could impact this growth trajectory.

Summary of Conference Call on Greater China Semiconductors Industry Overview - The semiconductor industry in Greater China is experiencing a price hike due to strong demand for AI semiconductors and some recovery in general servers and niche memory [2][12] - The overall industry view has been upgraded to "attractive" due to robust AI demand [2][12] Key Companies Discussed - **ASE Technology Holding Co. Ltd. (ASE)**: Price target raised to NT$228, reflecting strong demand for CoWoS (Chip on Wafer on Substrate) and better pricing power [4][34] - **King Yuan Electronics Co. Ltd. (KYEC)**: Price target raised to NT$218, benefiting from AI GPU demand and share gains in chip probing and ASIC testing [4][22] - **MediaTek**: Mentioned as a potential victim of the price hikes in the semiconductor supply chain [1] Core Insights - **Price Increases**: - Advanced packaging prices are expected to rise by 5-10% in 2026, marking the first price upcycle since the COVID-19 chip shortage [3][12] - TSMC has finalized a wafer price hike of 3-5% for 2026, indicating improved pricing power among leading-edge foundry and memory vendors [2][12] - **Capacity Constraints**: - ASE and KYEC are facing tight capacity, leading to a shift from lower-margin products to AI-related products [3][15] - ASE's CoWoS capacity is nearly fully utilized, with expectations to double by 2026 due to overflow demand from TSMC [20][34] - **Material Cost Inflation**: Rising costs for materials such as gold, copper, and BT substrate are contributing to the price hikes [3] Financial Performance and Projections - **ASE's 3Q25 Results**: Preliminary revenue is expected to be up 12% Q/Q, driven by better FX and higher utilization rates [34] - **KYEC's Revenue Expectations**: Anticipated revenue growth in low-teens Q/Q for 4Q25, supported by strong AI demand [27][35] - **Earnings Estimates**: - EPS estimates for ASE have been raised to NT$2.46 for 3Q25, higher than consensus estimates [34] - EPS for KYEC is expected to maintain flattish capex for 2026, reflecting strong demand [27] Market Dynamics - **Competitive Landscape**: - JCET is underperforming due to lower fab utilization and intense competition in the China market [5][22] - ASE and KYEC are recommended for investment ahead of earnings due to their strong market positions and upcoming price hikes [4][16] Additional Insights - **Capex Trends**: KYEC's capex for 2026 has been raised from NT$15 billion to NT$37 billion to reflect strong demand [26] - **Testing Revenue**: KYEC is rejecting some lower-margin memory testing orders due to supply tightness, focusing instead on higher-margin AI-related testing [27][31] This summary encapsulates the key points from the conference call regarding the Greater China semiconductor industry, highlighting the significant trends, company performances, and market dynamics.

Core Insights - The 3D IC market is projected to grow from USD 16.85 billion in 2025 to USD 50.19 billion by 2033, with a CAGR of 14.64% from 2026 to 2033 [1][7] - The market is driven by the increasing demand for high-performance and energy-efficient chips across various applications, including AI, 5G, HPC, and smartphones [1] Market Size and Growth - The U.S. 3D IC market is estimated at USD 4.75 billion in 2025 and is expected to grow at a CAGR of 14.33%, reaching USD 13.86 billion by 2033 [2] Key Segmentation By 3D Technology - Wafer-level packaging is expected to hold the largest market share at 68.23% in 2025, driven by trends in miniaturization and cost savings [8] - System integration is projected to be the fastest-growing technology with a CAGR of 14.79% due to rising demand for heterogeneous integration [8] By Product - Sensors are anticipated to lead the market with a 33.14% share in 2025, crucial for real-time data processing in various applications [9] - The memories segment is expected to grow the fastest, with a CAGR of 15.33%, driven by the needs of cloud computing and AI [9] By Application - The ICT/Telecommunication segment is expected to dominate with a 34.65% share in 2025, fueled by high-speed networking and 5G adoption [10] - Consumer electronics are projected to witness the fastest growth at a CAGR of 15.92%, driven by advanced smartphones and gaming systems [10] By Component - The Through Silicon Vias (TSVs) segment is projected to hold the largest share at 46.32% in 2025, known for better interconnections and lower power consumption [11] - The Through Glass Vias (TGVs) segment is expected to grow at the fastest CAGR of 15.16% due to superior electrical properties [12] Regional Insights - North America is expected to dominate the 3D IC market in 2025, accounting for 39.12% of revenue, driven by R&D in AI and cloud computing [13] - The Asia Pacific region is projected to experience the fastest growth from 2026 to 2033, with a CAGR of 15.45%, supported by a strong semiconductor manufacturing base [13] Leading Market Players - Key players in the 3D IC market include IBM, ASE Technology Holding Co. Ltd., STMicroelectronics, SAMSUNG, Taiwan Semiconductor Co. Ltd., TOSHIBA CORPORATION, Micron Technology Inc., MonolithIC 3D Inc., Intel Corporation, TEZZARON, Amkor Technology, Jiangsu Changdian Technology Co. Ltd., and United Microelectronics Corporation [5]

Investment Rating - The industry investment rating is classified as In-Line [8]. Core Insights - The report addresses the mismatch in AWS Trainium2/2.5 chip shipments attributed to unstable PCB yield rates, with an expectation of approximately 1.1 million chip shipments in 2025 [1][3]. - Supply chain checks estimate total shipments for the Trainium2/2.5 life cycle (2H24 to 1H26) at 1.9 million units, with a focus on production and consumption in 2025 [2][11]. - The report highlights a significant gap between upstream chip production and downstream consumption, suggesting improvements in yield rates may reduce this gap by 2H25 [6][11]. Upstream - Chip Output Perspective - As of late 2024, 0.3 million units of Trainium2 chips were produced, with a projected total of 1.1 million shipments in 2025, primarily packaged by TSMC (70%) and ASE (30%) [3][11]. - An additional 0.5 million Trainium2.5 chips are expected to be produced in 1H26, bringing the total life cycle shipments to 1.9 million units [3]. Midstream - PCB Perspective - Downstream checks indicate potential shipments exceeding 1.8 million units of Trainium chips, averaging around 200K per month since April [4][11]. - Key suppliers for PCB boards include Gold Circuit and King Slide, which provide essential components for Trainium computing trays [4]. Downstream - Server Rack System Perspective - Wiwynn is identified as a key supplier for server rack assembly, with revenue from AWS Trainium2 servers increasing in 1Q25, aligning with the upstream chip production estimates [5][11]. - The report notes that each server rack can accommodate 32 chips, supporting the projected consumption figures [5]. Component Suppliers - Major suppliers for Trainium2 AI ASIC servers include AVC for thermal solutions, Lite-On Tech for power supply, and Samsung for memory components [10][18]. - Other notable suppliers include King Slide for rail kits and Bizlink for interconnect solutions [10][18]. Future Projections - For Trainium3, shipments are estimated at 650K for 2026, with production managed by Alchip [12][13]. - The report anticipates that Trainium4 will enter small production by late 2027, with a rapid ramp-up expected in 2028 [14].