Summary of Hon Hai (2317.TW) Conference Call Company Overview - **Company**: Hon Hai Precision Industry Co., Ltd. (2317.TW) - **Industry**: Electronics Manufacturing Services (EMS), AI Servers, Electric Vehicles (EVs), Smartphones Key Points 1. Long-term Business Strategy - Hon Hai is expanding its business from ICT (EMS for consumer electronics) to Cloud & Networking, EVs, Humanoid robotics, and Space technologies - Cloud & Networking is projected to be the major growth contributor through 2030, driven by rising AI capital expenditures - The company covers 50% of components for modular data centers, enhancing AI deployment capabilities [2][3] 2. AI Servers Global Presence - Hon Hai has a global footprint in AI server production, with major sites in the US, Mexico, Vietnam, and Taiwan - The company is positioned to capture rising AI infrastructure demand through continuous capacity expansion [3][4] 3. Strong R&D in AI Servers - Hon Hai has been involved in AI server development for over a decade, including building supercomputers for cancer research - The company emphasizes its role beyond assembly, engaging in product design and prototype development [4] 4. Electric Vehicles (EVs) Outlook - Management is optimistic about the outsourcing trend among car OEMs, which supports Hon Hai's growth from startups to established OEMs - Partnerships, such as with Mitsubishi Motors, are expected to provide incremental growth opportunities for Foxtron [8] 5. Smartphone Outlook - Hon Hai maintains a leading market position and is well-positioned to benefit from new smartphone form factors, such as foldable phones - The company anticipates that these changes will attract more consumers and increase dollar content for the supply chain [9] 6. Financial Projections - The 12-month target price for Hon Hai is NT$400, representing a 72.4% upside from the current price of NT$232 - Revenue projections for 2025 are NT$8.1 billion, with expected growth to NT$13.7 billion by 2027 [10][12] 7. Key Risks - Potential risks include slower-than-expected ramp-up of AI server business, weaker EV performance, and increased competition in the consumer electronics EMS sector [11] Additional Insights - The company is leveraging its R&D capabilities and global production to secure a leading market position in AI servers and smartphones - The shift towards EVs and new smartphone technologies presents significant growth opportunities for Hon Hai in the coming years [1][2][8][9]

22 February 2026 | 6:49PM HKT Equity Research Foxconn Industrial Internet (601138.SS): Chairman Fireside Chat: AI servers in expansion; leading position with enhancing margins; Buy We hosted FII's Chairman for a fireside chat on Jan 14 in Hong Kong. Management remains positive on AI servers ramp-up with enhancing profitability via improving yield rate, efficiency, and focusing on CSPs (cloud services providers) clients. As we highlighted in our Hon Hai deep-dive report, we are positive on Hon Hai / FII on ( ...

Hon Hai's revenue rose 35.5% in January, suggesting demand for Nvidia servers remains resilient https://t.co/Kjm9SHJ7gj ...

Summary of Hon Hai Management Call Company Overview - **Company**: Hon Hai Precision Industry Co., Ltd. (2317.TW) - **Industry**: Technology, specifically focusing on AI servers and computing power Key Points AI Server Business Outlook - Management is optimistic about the AI server business, projecting a production capacity increase of 1.5x to 2x by 2026 [2] - Solid demand is anticipated from Cloud Service Providers (CSPs), Neocloud, and sovereign customers [2] - Hon Hai plans to add two more CSP customers for AI server racks in 2026 and is diversifying into ASIC servers [2] Profitability and Operating Profit Margin (OPM) - The company aims to maintain stable OPM despite potential fluctuations in gross margin (GM) due to the increasing revenue mix from GPU server racks, which are margin dilutive [3] - Management is implementing design standardization, modulation, and greater integration of in-house components to enhance profitability [3] Impact of Rising Memory Prices - Management believes the impact of rising memory prices on end demand will be manageable, as the company's clients are industry leaders with strong bargaining power [4] - Concerns regarding memory price increases are acknowledged, but the company expects limited effects on working capital due to its procurement strategies [4] Financial Projections - The target price for Hon Hai is set at NT$400, reflecting a 70.6% upside from the current price of NT$234.50 [17] - Revenue projections for 2026 are estimated at NT$13.7 billion, with EBITDA expected to reach NT$521.5 million [17] Risks - Key risks include slower-than-expected ramp-up of the AI server business, weaker performance in electric vehicle (EV) solutions, and increased competition in the consumer electronics EMS sector [16] Additional Insights - The increasing computing power of AI chips is expected to benefit Hon Hai, necessitating stronger server design capabilities [8] - The company's in-house cooling components provide a competitive edge in enhancing profitability [10] Conclusion Hon Hai is positioned to capitalize on the growing demand for AI servers, with a focus on maintaining profitability amidst challenges such as rising memory prices and market competition. The company's strategic initiatives and strong client relationships are expected to support its growth trajectory through 2026 and beyond.

Summary of Key Points from the Conference Call Industry Overview - Focus on the Asia technology (hardware) sector, particularly the AI supply chain, as a priority investment area for 1H26 due to its significant influence on earnings growth amid concerns over smartphone/PC demand and auto production recovery [2][12] Core Themes and Stock Recommendations 1. **AI Supply Chain Investment**: - Emphasis on investing in the AI supply chain, which is expected to drive earnings growth despite potential slowdowns in other sectors [2][12] - Anticipation of clearer benefits from AI for earnings in 2026, with no signs of slowdown heading into 2027 [12] 2. **Under-the-Radar AI Themes**: - Five notable themes identified: 1. **Power Consumption**: Opportunities in power supply, power rack products, capacitors, and power semiconductors. Companies to watch include Delta Electronics, Panasonic HD, Murata Mfg., Taiyo Yuden, and Renesas Electronics [6][25] 2. **Data Transmission**: Advancements in large-scale data transmission technologies, with companies like Fujikura and Mitsubishi Electric highlighted [6][25] 3. **Niche Components**: Price stabilization and increases in demand for components like MLCCs and substrates, with key players including Murata Mfg. and SEMCO [6][25] 4. **Physical AI Integration**: Companies like Hitachi and Mitsubishi Electric are leading in embedding AI into industrial applications [6][27] 5. **Software/Services Disruption**: Generative AI's potential to improve productivity in Japan's software industry, with Fujitsu and NEC as key players [6][27] 3. **High-Profile Sub-Sectors**: - Continued growth in foundry, memory, semiconductor production equipment, AI servers, and edge AI, with recommended stocks including TSMC, Samsung Electronics, and Hon Hai [30][31] Market Dynamics and Risks - **Top-Down Risks**: - Concerns regarding valuations, implementation risks, over-investment, monetization challenges, and funding sources, particularly with emerging players in the market [13] - **Bottom-Up Perspective**: - Fundamentals differ from the IT bubble of 2000, with a larger scale and longer timeline for AI infrastructure development, and sound supply chain management in Asian hardware [14][16] Technological Advancements - **Power Consumption Trends**: - Significant rise in power consumption for AI servers, with expectations for voltage increases to 800V and beyond, creating business opportunities for power-related products [33][38] - **Data Transmission Innovations**: - Transition to higher communication speeds (800-1.6Tbps) and co-packaged optics (CPO) expected to enhance industry value [58][59] Conclusion - The Asia technology sector, particularly the AI supply chain, presents substantial investment opportunities driven by technological advancements and evolving market dynamics. Key players and themes are positioned to benefit from these trends, while investors should remain cautious of potential risks associated with rapid market changes.

Summary of Datacenter Market Insights – Overall Servers Industry Overview - The report focuses on the **datacenter market**, specifically the **server segment** within the **Asia Pacific** region, highlighting trends and insights for the third quarter of 2025 (3Q25) [1][8]. Key Insights - **Total Server Shipments**: There was a **14% year-over-year (y/y)** growth in total server shipments in 3Q25, primarily driven by demand from the **cloud sector** for both **AI** and general servers [1][2]. - **Global Shipments**: Global server shipments reached **4.2 million units** in 3Q25, remaining flat quarter-over-quarter (q/q) but showing a **14% y/y** increase. The growth was largely attributed to cloud demand, despite some impacts from tariff pull-ins [2][11]. - **AI Server Demand**: AI servers continue to be a strong growth area, with expectations for robust demand throughout 2026. The report notes that AI server yields are improving as original design manufacturers (ODMs) and original equipment manufacturers (OEMs) enhance testing capacities [3][5][15]. Vendor Performance - **Dell**: Experienced a **1% decline** in total server shipments q/q, but its average selling price (ASP) increased by **11%** [3]. - **Lenovo**: Reported a **14% increase** in total server shipments, attributed to strong performance from Microsoft's general servers, although its ASP declined by **17%** [3]. - **Super Micro**: Saw a **20% decline** in total server shipments q/q, but its ASP increased by **9%** [3]. - **Aggregate ODM Shipments**: Totaled **1,827k units**, down **4% q/q** but up **37% y/y**. The market share for ODMs decreased by **1.8 percentage points** to **43.5%** [4][15]. Segment Performance - **High-End Servers**: Shipments grew **384% y/y** and **3% q/q** in 3Q25, indicating strong demand for AI servers [12]. - **Mid-Range Servers**: Increased by **32% y/y** and **6% q/q** [12]. - **Entry-Level Servers**: Grew by **10% y/y** but saw a **1% decline** q/q [12]. Regional Insights - The **US** market outperformed others with a **18% y/y** increase in shipments, followed by **APxJ** at **17%**. Other regions like **Western Europe**, **Japan**, and **Rest of World (RoW)** experienced declines [11]. Future Outlook - The report anticipates continued growth in AI server shipments through 2026, with general compute servers expected to grow in the **5-10% range** [15]. - **Preferred Picks**: The report highlights several companies as preferred investment picks, including **Wistron**, **Hon Hai**, **FII**, **Wiwynn**, and **Quanta** [6]. Additional Notes - The report emphasizes the ongoing transition in server technology, particularly the shift from traditional GPU servers to more advanced rack-scale systems [3]. - The ASP for ODM direct servers increased by **7% q/q** to approximately **US$36.5k**, reflecting a higher contribution from AI servers [14]. This summary encapsulates the key findings and insights from the datacenter market report, providing a comprehensive overview of the current state and future expectations within the server segment.

Summary of Key Points from Morgan Stanley Research - Global Tech Outlook 2026 Industry Overview - **Focus**: The report primarily discusses the technology sector, with a specific emphasis on semiconductors and hardware within the Asia Pacific and European markets [20][40]. Core Insights and Arguments - **Semiconductor Demand**: The demand for AI hardware, particularly Nvidia GPU server racks, is expected to double year-over-year in 2026, with data center-related revenue projected to exceed 40% of overall revenue in 2025 and at least 50% in 2026 [20][21]. - **Substrate Demand**: Demand for ABF substrates has bottomed, driven by AI GPU/Accelerators, while BT substrates benefit from a memory super-cycle and rising raw material prices, leading to upward revisions in demand volumes and average selling prices (ASPs) [20][21]. - **Smartphone Market**: The smartphone industry is anticipated to face component cost increases in 2026, putting downward pressure on margins, particularly for mid-to-low-end products. High-end products are expected to perform better [20][21]. - **PC OEMs/ODMs**: Margin headwinds are expected for PC OEMs/ODMs due to rising memory prices, leading to multiple quarters of margin compression [20][21]. - **TV Panel Pricing**: TV panel prices are showing signs of bottoming out, but rising memory costs may pressure pricing in the near term [20][21]. Preferred and Least Preferred Companies - **Most Preferred**: - **AI Hardware**: Wiwynn, Accton, Kingslide, BizLink, Delta, Wistron - **Substrates**: Unimicron, SEMCO - **MLCC**: SEMCO - **Smartphones**: Xiaomi - **Display/TV**: BOE - **PC OEMs**: Lenovo [20][21]. - **Least Preferred**: - **AI Hardware**: Giga-Byte - **Substrates**: NYPCB - **Smartphones**: Mid-to-low-end products - **Display/TV**: Sanan - **PC OEMs**: Acer [20][21]. Market Dynamics - **DRAM Pricing**: DRAM pricing is expected to move higher into the first half of 2026, with inventory levels normalizing [27][30]. - **Automotive Semiconductors**: The automotive semiconductor market is experiencing a decline, with significant de-stocking challenges, but there are long-term tailwinds in data centers and grid optimization [50][53]. Company-Specific Insights - **ASML**: Positive momentum for lithography demand is expected, with strong DRAM spending and advanced logic speed. ASML is rated as a top pick with a price target of €1,000 [41][42]. - **ASM International**: Expected to benefit from leading-edge logic and advanced DRAM, with a price target of €625 [44]. - **Besi**: Anticipated strong growth across its portfolio, driven by AI [46]. - **Infineon**: Facing near-term de-stocking challenges but expected to benefit from long-term data center spending [53]. Additional Considerations - **Market Sentiment**: Investors are advised to monitor the cyclical and secular drivers affecting the semiconductor market, particularly in light of the ongoing AI infrastructure roll-out [53]. - **Valuation Methodology**: The report includes various price targets and valuation scenarios for the companies discussed, indicating a range of potential outcomes based on market conditions [41][44][46][53]. This summary encapsulates the critical insights and projections from the Morgan Stanley Research report, providing a comprehensive overview of the current state and future outlook of the technology sector, particularly in semiconductors and hardware.

Summary of Global Server and AI Server Market Insights Industry Overview - The report focuses on the global server market, particularly AI training servers, AI inferencing servers, general servers, and high-performance computing (HPC) servers. It also discusses the capital expenditure (capex) trends of leading cloud service providers (CSPs) in the US and China. Key Insights Market Estimates and Growth Projections - The total addressable market (TAM) for global servers is projected to grow significantly, with estimates of **US$433 billion**, **US$606 billion**, and **US$764 billion** for the years 2025, 2026, and 2027 respectively, reflecting year-over-year growth rates of **71%**, **40%**, and **26%** [18][27]. - AI server shipments are expected to increase to **2,605k units** by 2027, with a notable rise in high-power AI servers, which are projected to grow by **56%**, **67%**, and **34%** YoY from 2025 to 2027 [14][12]. AI Server Segment Insights - The report anticipates a total of **19k**, **55k**, and **80k** full rack AI servers to be shipped in 2025, 2026, and 2027 respectively, with a TAM size of **US$55 billion**, **US$165 billion**, and **US$255 billion** for the same years [12][9]. - ASIC adoption in AI chips is expected to rise, accounting for **38%**, **40%**, and **50%** of AI chips in 2025, 2026, and 2027 respectively, up from previous estimates [1][3]. Capital Expenditure Trends - Leading US CSPs are forecasted to increase their capex budgets by **78%**, **37%**, and **15%** YoY from 2025 to 2027, an increase from previous estimates of **67%**, **23%**, and **15%** [10][27]. - Chinese CSPs are also expected to grow their capex by **62%**, **17%**, and **9%** YoY during the same period, up from **55%**, **8%**, and **6%** [30][31]. AI Chip Demand - The demand for AI chips is projected to reach **11 million**, **16 million**, and **21 million** units in 2025, 2026, and 2027 respectively, driven by the increasing volume of AI servers [1][9]. - The implied number of AI chips for training and inferencing is expected to be **20,838k units** by 2027, with a mix of **50%** GPU and **50%** ASIC chips [22][23]. Additional Insights - The growth in AI server shipments is supported by the increasing applications of AI technologies and the introduction of new chip platforms, including AMD's "Helios" AI server rack [1][9]. - The report highlights the importance of baseboard-based AI servers, which offer greater customization and lower costs for clients, contributing to a more positive demand outlook [12]. Conclusion - The global server market, particularly in the AI segment, is poised for substantial growth driven by increased demand for AI infrastructure and significant capital investments from leading cloud service providers. The shift towards ASIC chips and diversified chip platforms is expected to further enhance market dynamics in the coming years.

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the Greater China Technology sector, focusing on trends and projections for 2026, particularly in AI and related technologies, as well as the smartphone supply chain influenced by Apple’s form factor changes [2][3]. Key Trends Identified for 2026 1. **AI Servers**: Anticipated growth in rack-level AI servers, with shipments expected to rise to 50,000 racks in 2026 from 19,000 in 2025. Major suppliers include Hon Hai and FII, with a projected ASIC penetration rate of 40% in 2026 and 45% in 2027 [1][13]. 2. **Optical Transceivers**: Growth in optical module shipments, with a forecasted increase of 253% year-over-year in 2026, driven by the demand for high-speed connections in AI data centers [1][13]. 3. **Cooling Solutions**: A shift towards liquid cooling in AI servers is expected, reflecting the rising complexity and computing power requirements [1][13]. 4. **Original Design Manufacturers (ODMs)**: Companies with strong commitments and capacity plans in the US, such as Hon Hai, Wistron, and Wiwynn, are expected to outperform in the market [1][13]. 5. **Smartphones**: Apple suppliers are projected to excel in 2026, while Android smartphone demand remains muted. The introduction of foldable iPhones may drive demand [1][2]. 6. **Printed Circuit Boards (PCBs)**: Demand is expected to remain solid despite ongoing debates about long-term supply and demand dynamics [1]. 7. **Semiconductors**: Local leaders in advanced nodes, such as SMIC and Hua Hong, are expected to drive industry growth, supported by rising local GPU suppliers [1]. 8. **L4 Chips & Robotaxi**: Continued upgrades and expansions in this area are anticipated, contributing to growth for chipset, software, and sensor suppliers [1]. 9. **LEO Satellites**: Accelerating satellite launches and reduced launch costs are expected to drive the development of constellation networking infrastructure [1]. Financial Projections - AI and AI-related technologies are expected to deliver mid-double-digit year-over-year revenue growth in 2026 [2]. - The total addressable market (TAM) for global smartphones is raised by 1% to 2% for 2026 and 2027 due to higher average selling prices (ASP) [3]. - The TAM for global PCs is projected to increase by 3% year-over-year for 2025 and 2026, with gaming PCs expected to reach a penetration rate of 11% to 13% by 2025 and 2028 [3]. Investment Recommendations - The report highlights several companies as "Buy" recommendations based on their expected performance in the evolving technology landscape, particularly in AI servers and components [14]. - Specific companies mentioned include Hon Hai, FII, Wistron, and various optical component manufacturers like Innolight and Eoptolink [14]. Additional Insights - The complexity of AI servers is expected to lead to a reliance on leading suppliers with strong designs and manufacturing capabilities, creating a stable competitive landscape [14]. - The report emphasizes the importance of R&D, vertical integration, and comprehensive chipset platform exposure for companies to succeed in the market [14]. This summary encapsulates the critical insights and projections from the conference call, providing a comprehensive overview of the anticipated trends and investment opportunities within the Greater China Technology sector for 2026.

Group 1 - Nvidia shares dropped more than 1% on Monday, reversing some of the previous week's over 5% gain, alongside losses for Palantir Technologies, Meta Platforms, and Oracle [1] - SoftBank Group Corp's shares slipped over 2% after announcing a $4 billion acquisition of DigitalBridge to enhance its AI capabilities, although shares of DigitalBridge rose about 10% following the announcement [2][3] - South Korea's Kospi index gained 0.1% while the small-cap Kosdaq declined by 1.02%, indicating mixed performance in the region [3] Group 2 - Investors are closely monitoring China's military exercises around Taiwan, which have impacted the Taiwan Weighted Index, down 0.66%, with major tech companies like Taiwan Semiconductor Manufacturing Company and Hon Hai experiencing declines [4] - Australia's S&P/ASX 200 index remained flat after earlier gains, reflecting a cautious market sentiment [4]