August 17, 2025 06:58 PM GMT We raise our GB200/300 racks forecast to~34k (up from ~30k racks): Post-ODM results, we adjust our assumptions and raise CY25e GB200/300 NVL72-equivalent racks by ~4k units. This revision is mainly driven by the strong guidance given by Hon Hai, where they guided for AI rack shipments to grow 300% q/q in 3Q, with further growth in 4Q. As a result, we raised our CY25 full-year rack shipment estimate for Hon Hai to 19.5k racks, implying that they would account for ~57% of the mark ...

Summary of Conference Call Notes Industry Overview - The focus is on the **Taiwan ABF (Ajinomoto Build-up Film) substrate market**, particularly in relation to **ASIC (Application-Specific Integrated Circuit) AI servers** and their suppliers, including **Unimicron**, **NYPCB**, and **Ibiden**. Key Points and Arguments Market Demand and Growth Projections - The **2026/27 AI server ABF Total Addressable Market (TAM)** has been raised by **35%/55%**, reflecting a strong demand outlook for ASIC AI servers, with projected shipments of **3.4 million** and **4.7 million** units in **2026E/27E** respectively, compared to **5.6 million** and **7.1 million** for GPU AI chips [1][8] - The **average selling price (ASP)** for ASIC AI substrates is expected to be **US$180/US$220** in **2026E/27E**, while GPU AI substrates are projected at **US$143/US$183** [1][8] - The combined market share for Taiwan's ASIC AI substrate suppliers (Unimicron and NYPCB) is estimated to be **71%/65%/59%** for **2025E/26E/27E**, significantly higher than the **10%/19%/21%** for GPU AI server market share [9] Supplier Performance and Projections - **Unimicron** and **NYPCB** are expected to benefit the most from the improving demand outlook, with revenue contributions from AI servers projected to reach **16%** and **20%** respectively by **2027E**, up from previous estimates of **13%** and **12%** [1][4] - **Ibiden** is also anticipated to gain market share in the ASIC AI server substrate market due to its technology leadership and plans for **40% capacity expansion** from **2025-27** [2] Pricing and Supply Chain Dynamics - Prolonged lead times for high-end ABF substrates are expected due to **T-glass material shortages**, which could lead to higher pricing despite a low equipment utilization rate (UTR) forecast of **75%** for **2H25-1H26E** [3][39] - Price hikes for ABF substrates are anticipated to occur in **late September/early October**, coinciding with quarterly contract negotiations, but may not significantly impact earnings outlook for suppliers in **2H26** [3][40] - The overall ABF substrate market is projected to grow at an **18% CAGR** from **2025-27E**, driven primarily by AI server applications [38] Earnings Revisions and Target Price Adjustments - **Unimicron**'s earnings estimates for **2025E/26E/27E** have been raised by **1%/3%/3%**, reflecting higher expected demand for ASIC AI server substrates [51] - The target price for **Unimicron** has been increased to **NT$116** from **NT$110** [4][55] - **NYPCB**'s earnings estimates have been revised upwards by **96%/67%/32%** for **2025E/26E/27E**, with a new target price of **NT$125** [57][62] Long-term Outlook and Risks - The long-term outlook for high-end ABF substrate suppliers remains positive, driven by the overall AI server demand uptrend, with an **81% CAGR** expected from **2024-27E** [10] - Key risks include slower-than-expected recovery in PC demand, delays in ABF substrate upgrades, and challenges in qualifying new high-end capacities [66] Additional Important Insights - The report emphasizes the potential conflict of interest due to Goldman Sachs' business relationships with the companies covered in the research [4] - The analysis suggests that while short-term oversupply may weigh on stock performance, the long-term demand growth for high-end substrates will support earnings [44]

Investment Rating - The industry investment rating is In-Line [7] Core Insights - In 1Q25, global ODM direct server shipments reached 1.86 million units, reflecting a 25% quarter-over-quarter (q/q) increase and a 50% year-over-year (y/y) increase, accounting for 47.4% of global server shipments [2][3] - The aggregate ODM direct server shipment value was US$59.6 billion, showing a 45% q/q increase and a 253% y/y increase, driven by strong demand for AI servers and high-ASP rack architecture [3][6] - The report highlights a preference for specific ODMs, including Hon Hai/FII, Wistron, Quanta, and Wiwynn, due to their strong performance and market share gains [6] Summary by Sections ODM Shipment Performance - ODM shipment units grew 25% q/q and shipment values grew 45% q/q in 1Q25 [1] - MiTAC experienced the highest growth in shipment units at +46% q/q [2] Market Share Analysis - Wiwynn led the major ODMs with a 22.6% market share, followed closely by Quanta at 22.5% [3][12] - Intel regained unit share to 47.0%, while AMD's share dropped to 36.4% [4][11] Regional Performance - The USA was the best-performing region with a 67% y/y growth in shipment units, accounting for 74% of aggregate ODM direct shipments [5][10] Stock Implications - The strong demand for general servers from cloud services contributed to unit share gains for Quanta and Wiwynn, with expectations of continued revenue growth for major ODMs in the upcoming quarters [6]

Investment Rating - The report upgrades Aspeed Technology from Equal-weight to Overweight with a price target of NT$5,000 and raises Montage Technology's price target to Rmb100 from Rmb88 [6][35]. Core Insights - The report indicates a shift in perspective on cloud semiconductors, moving from a neutral stance to a positive outlook as a potential trough in cloud capital expenditures (capex) is anticipated in 4Q/1Q26, with US tariff impacts already priced in [2][33]. - Strong growth in US cloud capex is projected, with a year-over-year increase of 38% in 2025, marking it as the third strongest year of capex growth in the past decade [10][12]. - The report highlights that the market may be underestimating the upside risks associated with CPU and non-standard AI server demand, particularly with the ramp-up of GB racks and increased semi content in servers [9][4]. Summary by Sections Cloud Semiconductor Outlook - The report suggests that the cloud semiconductor cycle is likely to trough soon, with earnings revisions expected to bottom out and improvements in GB rack yield [2][3]. - General server demand has exceeded expectations in the first half of the year, driven by inference demand and alternative GPU solutions, indicating sustained demand into the second half [3][4]. Company-Specific Insights - Aspeed's earnings downgrades are believed to have reached a bottom, prompting an upgrade to Overweight due to anticipated earnings momentum [5][41]. - Montage is expected to benefit from the adoption of advanced interfaces by China server brands, with a projected earnings growth of 25% CAGR from 2024 to 2027 [5][33]. Financial Projections - The report raises earnings estimates for Aspeed by 9% for 2025, 8% for 2026, and 31% for 2027, while Montage's earnings are raised by 9% and 11% for 2026 and 2027, respectively [5][33]. - Montage's valuation appears attractive at 38x the estimated EPS for 2026, especially given the forecasted earnings growth [5][41]. Market Trends - The report notes that the cumulative capex from the top 11 global cloud players is expected to reach US$392 billion in 2025, representing 16.6% of their revenue, which is an all-time high [10][12]. - The anticipated increase in semi content in servers is linked to enhanced security functions, which will likely benefit companies with comprehensive product offerings [4][9].

Key Takeaways from the Taipei Computex Industry Overview - The report focuses on the Asia Tech Hardware industry, particularly highlighting developments from the Taipei Computex event held from May 20 to May 23, 2023. Key companies involved include Foxconn (2317 TT), Auras (3324 TT), Lite-on (2301 TT), Lotes (3533 TT), Winway (6515 TT), AVC (3017 TT), and Zhending (4958 TT) [1][1]. Core Insights - **GB300/B300 Display**: The GB300/B300 display was a focal point at the Computex, featuring computing trays with Cordelia interfaces and 20 sets of quick disconnect (NVQD). The GB300 is expected to adopt the Bianca design moving forward [2][2]. - **Component Shipments**: Component shipments for GB300 servers are anticipated to commence in Q3 2025, with limited rack shipments expected in Q4 2025. For the GB200, supply chain bottlenecks have been resolved, potentially increasing rack shipments to 7-8K in Q2 and reaching 10K in Q3 2025 [2][2]. - **Nvidia Collaboration**: Suppliers involved in the Cordelia design, such as Lotes, will continue to work with Nvidia to address issues in the new compute tray design planned for 2026 [2][2]. - **Market Confusion**: Investors expressed confusion regarding similar products from various suppliers at Computex. Inclusion in Nvidia's verified list (NVL) is crucial for securing orders, as CSPs ultimately determine key component suppliers [2][2]. - **Liquid Cooling Solutions**: Delta has gained significant traction among hyperscalers, with liquid cooling revenue expected to exceed NT$20 billion this year. Early entrants like AVC and Delta maintain healthy profitability despite competition [2][2]. Future Trends - **Datacenter Cooling Solutions**: Liquid-to-liquid (L2L) cooling and 800V HVDC are emerging as future solutions for datacenter cooling and power. New datacenters are increasingly adopting L2L solutions, while Nvidia collaborates with suppliers for 800V HVDC to support 1MW server racks by 2027 [2][2]. Investment Ratings - **Quanta Computer Inc (2382.TT)**: Rated Underperform with a target price of NT$240 [5][5]. - **Chroma ATE Inc (2360.TT)**: Rated Outperform with a target price of NT$480 [6][6]. - **Delta Electronics Inc (2308.TT)**: Rated Outperform with a target price of NT$490 [7][7]. - **Unimicron Technology Corp (3037.TT)**: Rated Outperform with a target price of NT$165 [7][7]. - **Luxshare Precision Industry Co Ltd (002475.CH)**: Rated Outperform with a target price of RMB47 [7][7]. Risks and Considerations - **Quanta Computer Inc**: Risks include higher-than-expected demand for AI servers and lower-than-expected demand for AI chips [49][49]. - **Chroma ATE Inc**: Risks include competition in the AI chip market and slower EV penetration [49][49]. - **Delta Electronics Inc**: Risks include competition in AI server power components and potential delays in the recovery of the automation market [55][55]. - **Unimicron Technology Corp**: Risks include weaker-than-expected demand for key products and margin pressures [55][55]. - **Luxshare Precision Industry Co Ltd**: Risks include competition and slower-than-expected market recovery [55][55]. Additional Insights - The report emphasizes the importance of securing orders through Nvidia's verified supplier list and highlights the competitive landscape among suppliers in the Asia Tech Hardware industry [2][2].