Summary of Key Points from the Conference Call Industry Overview - **Industry**: Greater China Technology Hardware - **Region**: Asia Pacific - **Industry View**: In-Line [4][6] Core Insights - **Voltronics**: - Plans to extend EV charging facilities expertise to offer HVDC (800V) power solutions for data centers [6] - Anticipates strong demand for HVDC power architecture to support AI computing, particularly for NVDA Rubin Ultra platform starting in 2H27 [6] - Power Supply Units (PSUs) will be upgraded to 18-30kW with three-phase AC input and outputs of +800V DC (NVDA) and ±400V DC (non-NVDA) [6] - **TECO**: - Collaborating with Hon Hai to provide new power solutions for data centers, aiming to expand into the US and Middle East markets [6] - Expects an 8-10% price increase for power products due to tariffs, with ~50% of the tariff costs passed to customers [6] - Emphasizes the need for US production of certain power products, including busways and junction boxes [6] - **Delta Electronics**: - Expected to benefit from upgrades in power solutions and data center infrastructure development [6] Market Demand and Trends - **UPS Demand**: - Significant demand for large-scale, online UPS systems exceeding 20kW, with leading vendors like Schneider and Eaton experiencing two-year order backlogs [6] - This backlog suggests potential business overflow to outsourcing partners and tier-two vendors [6] - **Cost Structure**: - Data center white space (IT equipment) constitutes ~60% of total construction costs, while power facilities in gray space account for an additional 25-30% [6] - Proven delivery capabilities and multiple production bases globally (US, China, Southeast Asia) could lead to a 30% savings in time to market for data center infrastructure projects [6] Risks and Considerations - **Upside Risks**: - Faster-than-expected global economic growth and falling raw material prices could improve margins [9] - **Downside Risks**: - Global economic slowdown, ongoing component supply tightness, rising raw material prices, and potential margin contraction due to higher operating expenses or faster average selling price (ASP) erosion [9] Valuation Methodology - **Delta Electronics Inc.**: - Base case valuation using residual income methodology with key assumptions including a cost of equity of 8%, medium-term growth rate of 14%, and terminal growth rate of 3% [7] Additional Insights - **Production and Tariffs**: - TECO's strategy includes producing certain power products in the US to mitigate tariff impacts [6] - **Investment Banking Relationships**: - Morgan Stanley has investment banking relationships with several companies in the technology hardware sector, which may influence research objectivity [4][16][18] This summary encapsulates the critical insights and data from the conference call, highlighting the strategic directions of key players in the Greater China Technology Hardware industry and the associated market dynamics.

Company Overview - Walrus Pump Co., Ltd. is showcasing its advanced smart pump technology at the 2025 Computex Taipei, expanding its market presence in various sectors including data centers and EV charging [1] - The company operates two major production bases in Taiwan and is set to begin small-scale production at its new Global Plant in Kaohsiung, which will enhance production capacity and inventory management [3] Financial Performance - In Q1 2025, Walrus reported consolidated revenue of NT$429 million, a year-over-year increase of 17.84%, with a gross profit of NT$121 million, up 15.24% YoY, and a net profit after tax of NT$32 million, up 38.45% YoY [2] Product Innovation - At Computex Taipei, Walrus unveiled two new pump series: the TPMS Slim Motor Multistage Centrifugal Pump series and the CMP Glandless Variable-Speed Pump series, both designed to enhance cooling efficiency in data centers [4] - The TPMS series features intelligent control capabilities for energy efficiency, while the CMP series reduces leakage risks and maintenance costs, aligning with ESG goals [4] Research and Development - Walrus operates a dual-power Pump Dynamic Laboratory certified by TAF and TÜV, providing tailored validation and testing technologies for customer-specific needs [5] - The company is investing in the development of Brushless DC (BLDC) motors to strengthen its position in the high-end server cooling market [7] Digital Strategy - Walrus integrates IoT technology into its products for automation and smart monitoring, enhancing reliability and safety through remote control and predictive maintenance [6] - The company also offers AI-powered customer support to ensure timely responses to maintenance needs [6] Market Expansion - With the increasing global demand for server cooling, Walrus aims to become a key partner for domestic thermal module manufacturers and strengthen its overseas presence through brand-driven market expansion [7]

Investment Rating - The report indicates a positive outlook for service providers that adapt to generative AI (genAI) technologies, suggesting a shift towards asset-based, solution-driven, and outcome-oriented business models [3][7]. Core Insights - Generative AI is significantly disrupting professional services, with providers facing pressure to reduce costs and improve efficiency. Clients are expecting up to 30% price reductions in project costs, prompting providers to innovate their delivery models [3][12]. - The report highlights that service providers must reinvent their business models to remain competitive in the AI era, focusing on automation and AI-powered delivery platforms to enhance productivity and quality [6][21]. - Major investments are being made by service providers in AI capabilities, with companies like IBM, Accenture, and PwC committing billions to enhance their AI service offerings [17][19]. Summary by Sections Disruption and Response - Service providers are on the front lines of genAI disruption, needing to adapt quickly to client demands for faster, cheaper, and higher-quality services [6][11]. - Providers are expected to build genAI-powered delivery platforms to automate tasks and improve service quality, which is crucial for maintaining competitiveness [21][23]. AI-Fueled Factors - Four key factors driving change include client expectations for lower costs, providers' lagging delivery capabilities, the slow emergence of AI computing services, and the need for new business models anchored in AI [11][12][14]. - Providers are making significant investments to build AI ecosystems and partnerships, which are essential for future business models [26][30]. New Service Offerings - The traditional time-and-materials pricing model is being challenged, with a shift towards managed service-as-software offerings that leverage AI to enhance operational efficiency [31][34]. - New AI services are emerging to reengineer business processes, focusing on automation and real-time data optimization [32][34]. Strategic Recommendations - Companies are encouraged to negotiate not just for lower prices but also for value-added services that can enhance their operational capabilities [38][41]. - Emphasis is placed on the importance of developing AI governance and leadership practices to effectively manage AI integration within organizations [42].

Core Insights - Applied Materials reported strong performance in Q2 FY2025 with a 7% year-over-year revenue growth, reaching $7.1 billion, and record earnings per share of $2.63, up 28% from the previous year [2][3][5] - The company is well-positioned in the semiconductor industry, particularly in high-performance, energy-efficient AI computing, which is driving innovation [2][3] - Despite a dynamic economic environment, customer demand remains stable, supported by a robust global supply chain [2][3] Financial Performance - Q2 FY2025 net revenue was $7,100 million, compared to $6,646 million in Q2 FY2024, reflecting a 7% increase [3][5] - Gross margin improved to 49.1% from 47.4% year-over-year, while operating margin increased to 30.5% from 28.8% [3][5] - Net income for Q2 FY2025 was $2,137 million, a 24% increase from $1,722 million in Q2 FY2024 [3][5] Non-GAAP Results - Non-GAAP gross margin was 49.2%, up from 47.5% year-over-year, and non-GAAP operating margin was 30.7%, compared to 29.0% [3][5] - Non-GAAP net income reached $1,940 million, an 11% increase from $1,744 million in the previous year [3][5] - Non-GAAP diluted earnings per share were $2.39, up 14% from $2.09 in Q2 FY2024 [3][5] Business Outlook - For Q3 FY2025, Applied Materials expects total net revenue to be approximately $7,200 million, with a non-GAAP gross margin of 48.3% [4] - The company anticipates continued growth driven by its strategic positioning in key technology areas [2][4] Segment Performance - Semiconductor Systems segment revenue was $5,255 million, up from $4,901 million, with an operating margin of 36.2% [7] - Applied Global Services segment revenue increased to $1,566 million from $1,530 million, maintaining an operating margin of 28.5% [7] - Display segment revenue rose significantly to $259 million from $179 million, with a notable increase in operating margin to 26.3% [7] Geographic Revenue Distribution - Revenue from China decreased to $1,774 million, down from $2,831 million, representing 25% of total revenue [19] - Taiwan's revenue increased to $1,997 million from $1,019 million, now accounting for 28% of total revenue [19] - Korea's revenue also saw significant growth, reaching $1,562 million, up from $988 million, representing 22% of total revenue [19]