Summary of Conference Call Records Industry Overview - **Industry**: Taiwan PCB & Laminates, specifically focusing on the ABF/BT sector - **Key Companies**: Unimicron Technology (3037.TW), NYPCB (8046.TW) Core Insights and Arguments Unimicron Technology - **December EPS**: Reported unaudited EPS of NT$0.78, lower than the expected NT$1.05 (Citi) and NT$1.44 (consensus) for 4Q25E [2] - **Gross Margin (GM) Impact**: GM profile in 4Q25E was negatively affected by the HDI segment due to a late ramp-up in the HDI Taiwan plant. Anticipated recovery from 2Q26E onwards [2] - **Market Position**: Unimicron is a major supplier for ASICs, including AWS' Trainium and Google's TPU, with increasing market share in Nvidia's AI GPU [2] - **Future Outlook**: Expected continuous expansion of ABF GM driven by high-end applications [2] NYPCB - **December EPS**: Reported unaudited EPS of NT$0.84, below the expected NT$1.27 (Citi) and NT$1.36 (consensus) for 4Q25E [3] - **GM Challenges**: The PCB segment negatively impacted GM in 4Q25E, but management's effective strategies in product mix and price hikes mitigated the negative effects [3] - **Material Support**: Nanya Plastics' support with T glass is expected to help NYPCB secure more orders and potential price hikes [3] - **Demand Forecast**: Anticipated strong demand from 800G switch and ASIC orders in 2026E [3] Sector Performance - **Earnings Revisions**: - Unimicron's 2026/27E earnings raised by 38%/81% due to better-than-expected GM recovery, with a new target price of NT$400 [11] - NYPCB's 2026/27E earnings raised by 12%/41%, with a new target price of NT$450 [11] - **Market Sentiment**: Both companies are viewed positively, with a bullish outlook on the ABF/BT substrate sector as the cycle is expected to begin [1] Additional Important Information - **Price Hikes**: Price hikes for ABF/BT products are noted, although not uniformly across the board [1] - **FX Impact**: Some earnings upside attributed to foreign exchange gains from NT$ depreciation in December [1] - **Sector View**: The overall sector view on ABF/BT substrate remains unchanged, with expectations of continued growth from October 2025 [1] Financial Metrics - **Unimicron's Financial Estimates**: - EPS for 2026E revised to NT$4.02 from NT$3.08, reflecting a 30% increase [13] - Gross margin expected to improve to 31.3% in 2027E from 22.8% [13] - **NYPCB's Financial Estimates**: - EPS for 2026E revised to NT$3.05 from NT$2.30, reflecting a 32% increase [17] - Gross margin expected to improve to 28.4% in 2027E from 23.0% [17] This summary encapsulates the key points from the conference call records, highlighting the performance and outlook of the Taiwan PCB & Laminates industry, particularly focusing on Unimicron and NYPCB.

Summary of Key Points from the Conference Call Industry Overview - **AI Hardware Market**: The AI hardware market is expected to grow significantly, with GPU AI server shipments projected to increase at a 31% CAGR from 2025 to 2027, leading to a total server market value of approximately US$650 billion by 2027 [1][17][20]. - **Data Center Investments**: Over US$800 billion in data center investments are planned, but potential delays may arise due to infrastructure readiness, policy changes, and labor shortages, which could impact AI capital expenditures in 2027 [1][20]. Company-Specific Insights Delta Electronics - **Rating**: Outperform with a price target of NT$1,300. - **Growth**: Expected EPS CAGR of 34% from 2025 to 2027, driven by a broad power portfolio and increased in-house liquid cooling production [5][8]. Luxshare - **Rating**: Outperform with a price target of RMB 74. - **Market Position**: Anticipated to ramp up server component shipments to U.S. customers, benefiting from strong sentiment in the Apple supply chain [5][12]. Chroma ATE - **Rating**: Outperform with a price target of NT$970. - **Long-term Outlook**: Positive long-term prospects due to the ability to capitalize on global tech trends, with EPS estimates raised for 2026-27 [5][9]. Unimicron Technology - **Rating**: Outperform with a price target of NT$270. - **Market Momentum**: Expected strong stock performance in the near term due to favorable substrate pricing and improving HDI yield [5][10]. Quanta Computer - **Rating**: Underperform with a price target of NT$250. - **Challenges**: Anticipated margin pressures due to the buy-sell model for AI servers, with AI server mix expected to represent 60%-65% of total revenue in 2026-27 [5][11]. Sunny Optical - **Rating**: Outperform with a price target of HK$88. - **Revenue Mix**: Growth in non-smartphone revenue is expected to support margins, despite concerns over memory pricing impacts [5][13]. Largan Precision - **Rating**: Market-Perform with a price target of NT$2,600. - **Short-term Opportunity**: Tactical long opportunity ahead of the iPhone 18 launch, but long-term caution due to limited diversification beyond smartphones [5][14]. Market Dynamics - **Power Components**: The total addressable market (TAM) for NVIDIA server power components is expected to grow by 70-85% year-over-year in 2026-27, with strong demand for liquid cooling and HDI providing margin support for leading suppliers [2][31]. - **Competition**: Rising competition in cooling components is expected to pressure pricing in the second half of 2026, particularly if NVIDIA standardizes the L10 board for Vera Rubin [2][32]. Consumer Electronics Insights - **Apple vs. Android**: The Apple supply chain is viewed as more attractive than Android's, with iPhone shipments expected to grow at a low-to-mid-single digit rate in 2026-2027, driven by new product launches and enhanced AI features [3][39]. - **AI Glasses Market**: The market for AI glasses is projected to grow significantly, with shipments expected to reach approximately 10 million units in 2025 and close to 20 million by 2029 [41][50]. Investment Implications - **Overall Sentiment**: The investment sentiment remains positive for companies like Delta, Luxshare, and Chroma, while caution is advised for Quanta due to margin pressures. The overall outlook for the AI hardware market is robust, with significant growth expected in the coming years [5][8][12][11].

Summary of Key Points from the Conference Call Industry Overview - The conference call focused on the **Asia Tech Hardware** industry, highlighting trends and insights relevant for 2026 based on observations from 2025 [1] Core Insights and Arguments 1. **Investment Ratings**: - **Delta Electronics**: Rated Outperform with a price target (PT) of NT$1190, indicating strong growth potential [3] - **Chroma ATE**: Rated Outperform with a PT of NT$830, reflecting positive market sentiment [4] - **Quanta Computer**: Rated Underperform with a PT of NT$250, suggesting challenges ahead [5] - **Unimicron Technology**: Rated Outperform with a PT of NT$220, indicating favorable prospects [6] - **Luxshare Precision**: Rated Outperform with a PT of RMB74, highlighting its competitive position [7] - **Sunny Optical**: Rated Outperform with a PT of HK$110, suggesting strong market performance [8] - **Largan Precision**: Rated Market-Perform with a PT of NT$2,400, indicating stable performance [9] 2. **Market Trends**: - The **AI server market** is a significant focus, with discussions on how companies are adapting to AI advancements [2] - Insights from a **15-year balance sheet and cash flow analysis** in the AI server and Apple supply chain were shared, emphasizing the importance of financial health in tech hardware companies [2] 3. **Pricing Dynamics**: - Historical analysis of **memory pricing** impacts on the smartphone sector was discussed, indicating potential volatility in pricing strategies [2] 4. **Technological Innovations**: - The potential for a **foldable iPhone** was explored, drawing lessons from the Android foldable phone market, which could influence future product designs [2] 5. **Sector Performance**: - The **semiconductor sector** remains a driving force in the Asia Tech Hardware industry, with Taiwan's semiconductor industry highlighted for its critical role [2] Additional Important Information - The conference call included a review of **2025 performance**, summarizing hits, misses, and lessons learned, which are expected to inform strategies for 2026 [2] - The **investment implications** for various companies were discussed, providing a comprehensive outlook for investors [2] This summary encapsulates the key points discussed during the conference call, focusing on the Asia Tech Hardware industry and its major players, along with insights into market trends and investment opportunities.

Summary of Asia Tech Hardware Conference Call Industry Overview - The report focuses on the Asia Tech Hardware industry, particularly in the context of AI server growth and supply chain dynamics related to major players like Nvidia and Apple. Key Points and Arguments 1. **GB200 Rack Performance**: The ramp-up of the GB200 rack was slower than Nvidia's initial expectations, raising concerns about AI sentiment in the second half of 2025. The sentiment shift occurred earlier than anticipated due to factors like Deepseek and tariff concerns, which reversed in subsequent months. CSPs (Cloud Service Providers) are increasing capital expenditures (capex) each quarter, indicating strong growth potential for AI servers in 2026 [1][2][3]. 2. **AI Sentiment Fluctuations**: Since 2023, AI sentiment has experienced corrections one to two times per year. Concerns about an AI bubble, capex adjustments, and delayed product launches have pressured stock prices. However, the ongoing penetration of AI into daily life supports multi-year growth in the AI server and edge AI supply chain [2][3]. 3. **Thermal and Power Management**: The importance of thermal and power management in the AI value chain was validated, leading to strong performance from companies like Delta and Chroma. In contrast, Quanta underperformed due to a less attractive business model and intense competition [3][4]. 4. **Challenges for New Racks**: The deployment of new racks like Vera Rubin and Rubin Ultra may face challenges similar to those encountered with the GB200 in early 2025. The cyclical nature of AI sentiment corrections may create better entry points for select stocks [2][4]. 5. **Chip Demand and Hardware Components**: The demand for increasingly powerful chips necessitates advanced hardware components. Companies that provide limited integration windows for suppliers, like Nvidia, highlight the value of R&D and product reliability over cost for critical components [4][5]. 6. **Unimicron's Market Position**: Unimicron's market share trajectory in Nvidia's ABF was in line with projections, but challenges in its HDI business, including yield issues and competition from VGT, delayed margin recovery by about a year [5][6]. 7. **Apple's Supply Chain Movement**: Apple's supply chain shift to India has progressed faster than expected, negatively impacting Luxshare. However, Luxshare's AI narratives have been favorable. On the Android side, Sunny's margin recovery is on track, aided by smartphone camera upgrades and ADAS penetration in China [8][9]. 8. **China's Component Supply**: The trade war has not hindered China's ability to supply components for AI servers, particularly in areas where it excels technologically. The saturated smartphone market favors consumer electronics companies that diversify into new growth areas [9][10]. Additional Important Insights - **Stock Ratings and Price Targets**: - Delta Electronics: Outperform, PT = NT$1190 - Chroma ATE: Outperform, PT = NT$830 - Quanta Computer: Underperform, PT = NT$250 - Unimicron Technology: Outperform, PT = NT$220 - Luxshare Precision: Outperform, PT = RMB74 - Sunny Optical: Outperform, PT = HK$110 - Largan Precision: Market-Perform, PT = NT$2400 [10][11][12][13][14][15][16][17]. - **Market Performance**: Stocks rated as Outperform have generally outperformed the Taiwan Index in 2025, while Quanta and Largan have underperformed [20][24]. - **Investment Implications**: The report emphasizes the importance of selecting stocks based on their ability to navigate the cyclical nature of AI sentiment and the ongoing demand for advanced hardware components [11][12][13][14][15][16][17]. This summary encapsulates the critical insights and trends discussed in the conference call, providing a comprehensive overview of the Asia Tech Hardware industry and its key players.

Summary of Conference Call Notes Industry Overview - **Industry**: Taiwan PCB & Laminates, specifically focusing on the ABF/BT sector - **Key Companies Mentioned**: Nittobo, Ajinomoto, NYPCB, Unimicron, Kinsus, MGC, Nan Ya Plastics Core Insights and Arguments 1. **Positive Outlook for ABF/BT Sector**: - Nittobo and Ajinomoto's results indicate strong demand for T-glass and ABF, respectively, suggesting a favorable environment for the ABF/BT sector through 2026E [1][2][10] - Nittobo raised its guidance due to robust T-glass demand and ongoing supply shortages [1] 2. **Price Hikes and Capacity Expansion**: - Nittobo is negotiating price hikes of 20%-30% due to strong AI demand, with T-glass capacity expected to increase by 10%-20% in 2026 and double by 2027 [2] - New T-glass vendors, including Taiwan Glass Industry and Nanya Plastics, are expected to start production in 1Q26E [2] 3. **Robust Demand for ABF**: - Ajinomoto reported a 21% YoY increase in revenue from electronic materials, driven by AI server demand, with expectations for continued growth in the second half of FY25 [9] 4. **Investment Recommendations**: - Citi recommends buying shares of NYPCB and Unimicron in Taiwan, and MGC and Ajinomoto in Japan, based on their strong market positions and expected recovery in demand [1][10] Additional Important Insights 1. **T-glass Shortage**: - The T-glass shortage is anticipated to become more widespread, impacting the ABF/BT sector and downstream production [10] - The ongoing price increases in the sector are expected to benefit companies like NYPCB and Unimicron [10] 2. **Earnings Estimates**: - Kinsus, Nan Ya PCB, and Unimicron have varying earnings projections, with Kinsus expected to recover gradually from current challenges [19][20][28] - Unimicron is positioned to benefit from ABF tightness and potential demand recovery in the latter half of 2023 [28] 3. **Risks**: - Key risks for Kinsus include weaker smartphone demand and potential oversupply in the ABF market [21] - For NYPCB, risks include weaker-than-expected demand from key customers and severe T-glass shortages [26] - Unimicron faces risks from HDI business weakness and increased ABF supply [31] 4. **Valuation Metrics**: - Target prices for Kinsus, NYPCB, and Unimicron are set at NT$160, NT$360, and NT$220, respectively, based on DCF models reflecting their growth potential and market conditions [20][25][29] This summary encapsulates the key points from the conference call, highlighting the positive outlook for the ABF/BT sector, the implications of T-glass demand and supply dynamics, and the investment strategies recommended by Citi Research.

Summary of Conference Call on Taiwan PCB & Laminates Industry Industry Overview - The focus is on the ABF (Ajinomoto Build-up Film) and BT (Bismaleimide Triazine) sectors, which are currently experiencing an upcycle driven by AI demand and T-glass shortages [2][3][12]. Key Points ABF and BT Sector Dynamics - **ABF Consumption and Pricing**: There is an expected increase in ABF consumption driven by AI chips, with a projected growth of +75% year-over-year in 2026E. This is supported by ABF specification migration and CoWoS (Chip-on-Wafer-on-Substrate) capacity ramp-up [4][29]. - **Price Hikes**: Anticipated price hikes for ABF starting in 4Q25E due to T-glass shortages and rising material costs. BT prices are also expected to rise, influenced by memory demand and copper/gold price increases [3][41][42]. T-glass Shortage - **Impact on ABF/BT Sector**: T-glass shortages are expected to intensify in 2H25, affecting both ABF and BT sectors. New suppliers from Taiwan, such as Taiwan Glass Industry and Nan Ya Plastics, are expected to join the supply chain, but significant relief is not anticipated until 2H26E [3][17][25]. - **Supply Chain Challenges**: Current T-glass suppliers are unable to meet demand, leading to tight supply conditions for BT substrates. This situation is exacerbated by rising AI demand, which is consuming T-glass resources [17][24]. Company-Specific Insights - **Investment Recommendations**: - NYPCB has been upgraded to "Buy" with a target price raised to NT$360 from NT$175, driven by demand for high-speed switches and potential ASIC project wins [5][6]. - Unimicron is also favored, with a target price increase to NT$220 from NT$165, supported by improving yields in compute boards [5][6]. - Kinsus remains a "Buy" with a target price raised to NT$160 from NT$115, benefiting from BT price hikes and potential orders from tier-1 ABF players [5][6]. Financial Projections - **Earnings Estimates**: - Kinsus: EPS projected to increase from 3.69 to 5.98 in the next fiscal year. - Nan Ya PCB: EPS expected to rise from 1.89 to 2.30. - Unimicron: EPS forecasted to grow from 2.09 to 3.11 [6][9]. Risks and Considerations - **Market Risks**: Potential FX headwinds could dampen profitability in 2H25E. The balance of supply and demand for ABF is uncertain, with several conditions needing to be met for improvement in 2H26E [5][44]. - **Supply Chain Vulnerabilities**: Companies like AMD and AWS may face challenges if T-glass shortages persist, as they have lower bargaining power compared to larger players like Nvidia and Broadcom [53][56]. Conclusion - The ABF and BT sectors are poised for growth driven by AI demand and T-glass shortages, with significant price hikes expected. Companies like NYPCB, Unimicron, and Kinsus are well-positioned to benefit from these trends, although risks related to supply chain dynamics and market conditions remain [2][5][12].

Summary of Key Points from the Conference Call Industry Overview - The analysis focuses on the **Asia Tech Hardware** sector, particularly the **AI server** and **Apple supply chain** industries, over a 15-year horizon, examining business models, profitability, solvency, and operational efficiency [1] Core Insights Profitability Metrics - **Return on Equity (ROE)** for ODMs and equipment suppliers is projected to be between **20-30%** in 2024, with **Chroma** and **Delta** expected to show significant increases [2] - **Chroma's ROE** has improved from **12% in 2010 to 25% in 2024**, with expectations to reach **31% in 1H25** due to its focus on niche markets and divestment from low-margin segments [15] - **Largan** and **Sunny Optical** have shown fluctuating ROE due to market conditions, with signs of recovery noted since last year [15] Operational Efficiency - **Chroma** has the longest cash conversion cycle at **209 days** due to its industry characteristics, yet maintains a strong free cash flow margin [77] - **Luxshare** has achieved an almost zero cash conversion cycle, indicating high operational efficiency [78] - **Quanta's** cash conversion cycle is longer due to logistical complexities in its supply chain [78] Debt and Solvency - Most companies maintain healthy debt levels, with **Quanta's** net debt-to-equity ratio expected to rise significantly from **15% in 2024 to over 60% in 2025-26** due to AI server business expansion [4][69] - **Largan** has a notably low net debt-to-equity ratio, reflecting its strong cash position [69] Capital Expenditure and Free Cash Flow - **Unimicron** is identified as the most capex-intensive company with a capex-to-revenue ratio averaging **21%** over the past five years [5] - **Chroma** and **Largan** exhibit free cash flow margins between **20-40%**, indicating strong cash generation capabilities [5] Investment Ratings and Price Targets - **Delta Electronics**: Rated Outperform, Price Target (PT) of **NT$630** [8] - **Chroma ATE**: Rated Outperform, PT of **NT$570** [9] - **Quanta Computer**: Rated Underperform, PT of **NT$240** [10] - **Unimicron Technology**: Rated Outperform, PT of **NT$170** [11] - **Luxshare Precision**: Rated Outperform, PT of **RMB47** [12] - **Sunny Optical**: Rated Outperform, PT of **HK$97** [13] - **Largan Precision**: Rated Market-Perform, PT of **NT$2,400** [14] Additional Observations - The **camera and PCB sectors** show that CIS and lens suppliers achieve higher ROIC compared to module players, with higher technological barriers enhancing supplier concentration [3] - **Quanta's** financial performance is heavily reliant on the PC market, which has seen fluctuations impacting its ROE [15] - The **PCB market** is characterized by cyclical demand, with companies needing substantial capital investments to expand capacities [54] This comprehensive analysis highlights the competitive landscape and financial health of key players in the Asia Tech Hardware sector, providing insights into potential investment opportunities and risks.

Investment Rating - The report maintains a "Buy" rating on ZDT and raises the target price (TP) to NT$140 from NT$130, maintains a "Neutral" rating on Unimicron and NYPCB with TP raised to NT$97 and NT$110 respectively, and maintains a "Sell" rating on Kinsus with a new TP of NT$70 from NT$63 [8][21][31]. Core Insights - The increase in BT substrate prices in early Q3 2025, driven by T-glass and gold price hikes, is expected to improve revenue trends for substrate makers, particularly Kinsus and NYPCB, with BT revenue exposure projected to exceed 25% of total revenue in 2025 [2][3]. - The report anticipates a potential further pricing hike for high layer count ABF substrates in the coming months, which could enhance revenue and profitability outlook for substrate suppliers in the second half of 2025 [3][7]. - The T-glass shortage is expected to ease by the first half of 2026, which may stabilize pricing levels despite the current supply constraints [4][7]. Summary by Sections Pricing and Revenue Outlook - BT substrate prices have increased by 5%-20% in early Q3 2025 due to T-glass supply tightness and rising gold prices, which account for 30-40% of BT cost of goods sold (COGS) [1][2]. - The report expects improved profitability for BT substrates in the second half of 2025 compared to the first half, despite potential unfavorable gross margin and operating profit margin conditions due to material cost hikes and currency appreciation [2][3]. Company-Specific Earnings Revisions - Unimicron's 2025 earnings estimate has been cut by 25% due to unfavorable foreign exchange conditions, while revenue is expected to increase by 1% [17][19]. - NYPCB's earnings estimates for 2025, 2026, and 2027 have been revised up by 3%, 11%, and 7% respectively, reflecting a positive outlook on substrate pricing [23][25]. - Kinsus's 2025 earnings estimate has been reduced by 16% due to unfavorable FX conditions, but 2026 and 2027 estimates have been increased by 10% and 11% respectively [28][30]. - ZDT's earnings estimates for 2025, 2026, and 2027 have been revised down by 17%, 1%, and 1% respectively, primarily due to unfavorable FX conditions [33][35].

Summary of Conference Call Notes Company and Industry Involved - **Company**: Asia AI Server - **Industry**: Technology, specifically focusing on AI server hardware Core Points and Arguments 1. **Design Change in GB300 Compute Tray**: The design of the GB300 compute tray is likely to revert to the GB200's Bianca architecture, which features a more integrated setup with GPUs and CPUs mounted directly on an HDI board [1][2] 2. **Technical Issues**: The current design of the GB300 compute tray has faced transmission issues related to the GPU OAM connection to the PCB, prompting discussions about the design change [2] 3. **Uncertainty of Changes**: There is uncertainty regarding whether the design change will be implemented, the timeline for such changes, and potential delays in the delivery of the GB300 [2] 4. **Impact on Suppliers**: The shift back to the Bianca architecture is expected to be positive for HDI suppliers like Unimicron, while it may negatively affect socket suppliers like Lotes, who are not currently providing GPU sockets for Nvidia [3] 5. **Inventory Management**: A potential delay in the GB300's rollout could help in managing the existing inventory of the GB200 [3] Additional Important Content 1. **Market Sentiment**: The anticipated design change could influence market sentiment, particularly for companies involved in the supply chain of these technologies [3] 2. **Ongoing Modifications**: There are ongoing modifications to sockets and cold plates to maintain the OAM-HLC structure, but the success of these modifications remains uncertain [2] 3. **Analyst Ratings**: Unimicron Technology (Ticker: 3037 TT) is rated as "Buy" with a target price of TWD 198, while Lotes (Ticker: 3533 TT) is also rated "Buy" with a target price of TWD 2,021 [7][9] 4. **Risks**: Risks that may impede the achievement of target prices include market demand fluctuations, unexpected market share losses, and raw material price hikes [10][9]