Summary of Conference Call Notes Industry and Companies Involved - **Industry**: Communications Equipment - **Companies Covered**: - Accelink Technologies (002281.SZ) - Eoptolink Technology (300502.SZ) - EverProX Technologies (300548.SZ) - GDS Holdings (GDS.O) - Innolight (300308.SZ) - Suzhou TFC Optical Communication (300394.SZ) - T&S Communications (300570.SZ) - VNET Group (VNET.O) - ZTE (0763.HK) Key Points and Arguments EverProX Technologies (300548.SZ) - Target price raised to Rmb122 from Rmb63, reflecting a 46.5x 2026E EPS valuation, which is +1 standard deviation above the 5-year historical mean due to stronger earnings growth projected at a 152% 3-year CAGR [2][11] - 2025/26/27E earnings increased by 1%/26%/45% driven by robust overseas demand for MPO/AOC components, datacenter cables, and optical transceivers [2][11] - Rated as Neutral due to high current trading P/E of ~45x compared to T&S Communications at ~32x, indicating less upside potential [2][11] Suzhou TFC Optical Communication (300394.SZ) - Target price increased to Rmb222 from Rmb196, with 2026/27E earnings raised by 36%/56% due to anticipated growth in the 1.6T light engine market [3][15] - Maintained Buy rating, citing strong long-term earnings growth potential from CPO/OIO total addressable market opportunities and expected sales of FAU, ELSFP, and MT products [3][15] ZTE (0763.HK) - Downgraded to Neutral from Buy, with target price raised to HK$29.20 from HK$27.50 [4][19] - 2025/26/27E earnings reduced by 16%/14%/11% due to margin impacts from a ramping server business and memory price effects on the smartphone segment, partially offset by tighter operating expenses [4][19] - Valuation set at 15.0x 2026E P/E, which is 1.5 standard deviations above the stock's historical average, supported by positive sentiment towards AI server developments [4][19] Accelink Technologies (002281.SZ) - Coverage transferred with a maintained Sell rating and target price of Rmb24.60 [8][20] Eoptolink Technology (300502.SZ) - Coverage transferred with a maintained Buy rating and target price of Rmb472.00 [9][21] GDS Holdings (GDS.O) - Coverage transferred with a maintained Buy rating and target price of US$51.20 [12] Innolight (300308.SZ) - Coverage transferred with rating suspended [13] T&S Communications (300570.SZ) - Coverage transferred with a maintained Buy rating and target price of Rmb137.00 [16] VNET Group (VNET.O) - Coverage transferred with a maintained Buy rating and target price of US$20.00 [17] Other Important Information - The report indicates potential conflicts of interest due to the firm's business relationships with covered companies, advising investors to consider this report as one of several factors in their investment decisions [5] - The report is not for distribution in the People's Republic of China, excluding Hong Kong and Qualified Foreign Institutional Investors [5]

Summary of Conference Call Notes Industry Overview - The semiconductor industry is undergoing significant transformation driven by the rise of AI, which has increased the complexity of chip design and testing processes. Advanced packaging techniques such as CoWoS, InFo, and SoIC are now critical for AI computing systems, enabling the integration of multiple dies into a single package to enhance performance and bandwidth [10][84]. Key Companies Discussed Taiwan Semiconductor Manufacturing Company (TSMC) - TSMC's CoWoS capacity is projected to reach 1.2-1.3 million wafers in 2026 and 1.8-2 million in 2027, indicating strong demand for advanced packaging solutions [1]. ASE Technology Holding (ASEH) - ASEH is expected to see advanced packaging revenue reach US$4 billion by 2027, benefiting from TSMC's wafer testing business for AI chips. The company is focusing on both assembly and wafer testing, which positions it well for growth [2][9]. King Yuan Electronics Co. (KYEC) - KYEC is directly exposed to advanced testing requirements, particularly in the final test and validation of high-performance AI packages. Revenue growth is anticipated at 36% and 53% for 2026 and 2027, respectively, with a gradual expansion of gross margins [2][9]. MPI Corporation - MPI is positioned as a unique player in the probe card industry, with a strong sales CAGR of 48% projected from 2025 to 2027. The company is transitioning from a cyclical supplier to a structural beneficiary of AI-driven test complexity [3][4]. Core Insights and Arguments - Advanced packaging is reshaping the semiconductor value chain, making it a core architectural decision rather than a backend consideration. This shift is crucial for managing power and thermal constraints in AI chips [1]. - The complexity of AI chip designs necessitates longer testing processes, which increases the importance of probe cards in ensuring known-good-die (KGD) at the wafer level [10][23]. - The probe card market is characterized by high switching costs and strong vendor lock-in, as each chip requires a custom probe card, leading to sticky relationships between suppliers and customers [42][43]. Financial Projections - ASEH's target price has been raised to NT$340, reflecting a 9% and 32% increase in earnings projections for 2026 and 2027, respectively [9]. - KYEC's target price is now NT$330, with expectations of expanding gross margins due to robust AI chip shipment trends [9]. - MPI's target price is set at NT$2,800, with anticipated earnings growth of 77% and 64% for 2026 and 2027, driven by a better product mix and increased demand for MEMS probe cards [4]. Additional Important Points - The integration of advanced testing technologies, such as optical interferometry and 3D scanning, is essential for maintaining the structural integrity of AI chips during the testing process [18][19]. - The competitive landscape in the probe card market is dominated by FormFactor, Technoprobe, and MPI, with each company holding unique strengths in technology and market positioning [47][64][70]. - The trend towards chiplet designs in AI chips, as seen with Nvidia and Google, is expected to drive further demand for advanced packaging and testing solutions [11][84]. This summary encapsulates the critical insights and projections from the conference call, highlighting the evolving landscape of the semiconductor industry and the strategic positions of key players.

Summary of Optical Transceiver Industry Conference Call Industry Overview - The optical transceiver market is poised for multi-year Total Addressable Market (TAM) expansion driven by AI training and inference clusters, leading to faster port-speed upgrades and increased optical content per data center buildout [5][8][10] - Traditional data centers experienced networking speed doubling every 3-4 years, but AI is compressing upgrade cycles to every 2 years, resulting in a higher cadence of refresh and deployment across 400G, 800G, and 1.6T generations [8][10] Key Market Drivers - **Structural Drivers**: 1. Accelerated networking bandwidth upgrade cycles 2. Rising optical link density as more XPUs are deployed and networks scale across distances [10] - **Bandwidth Demand**: - Aggregate bandwidth demand is expected to grow significantly, with projections of 51,000-59,500 Pb/s by 2027 [9] - The equivalent transceiver quantity is forecasted to reach 220-253 million for 400G transceivers by 2027 [9] Market Segmentation - **Scale-Out**: Hyperscalers and cloud providers are increasing the number of GPU servers, which raises the number of server-to-switch and switch-to-switch links, expanding the TAM [18] - **Scale-Across**: Longer-reach back-end networks connecting GPU clusters across distances are adding new optical demand, with major hyperscalers already engaged in projects [19] - **Scale-Up**: High-bandwidth, ultra-low-latency interconnects within a single compute domain are expected to grow, with Co-Packaged Optics (CPO) becoming increasingly important [20] Investment Opportunities - **Coherent Plugables**: A multi-year investment theme as hyperscalers push AI-era fabrics beyond single buildings, enabling higher-order modulation and better fiber utilization [25] - **Component Suppliers**: Companies like Lumentum, Tower Semiconductor, and Applied Optoelectronics are highlighted as key beneficiaries due to their roles in the optical component supply chain [6][49][52] Company Highlights - **Ciena**: Focused on coherent optics for scale-out and scale-across architectures, integrating ZR plugables with its systems [28] - **Fabrinet**: Positioned as a second-derivative play in the optical transceiver ramp, benefiting from the overall growth in optics volumes [33] - **Cisco/Acacia**: Robust demand for plugable optics, with significant orders from major hyperscalers [35] - **Lumentum**: Strong growth potential in optics, with a focus on components that carry higher margins [45] - **Tower Semiconductor**: Expected to benefit from the EML shortage and SiPho ramps, with a significant market share in SiPho wafers [49][51] - **Applied Optoelectronics**: Vertically integrated with U.S.-based manufacturing, appealing to hyperscalers seeking to reduce reliance on Chinese supply chains [52] Financial Metrics - **Optical Transceiver Industry Comparables**: - Lumentum (Market Cap: $22.7 billion, P/E: 45.5x) - Coherent (Market Cap: $26.8 billion, P/E: 29.9x) - Applied Optoelectronics (Market Cap: $1.9 billion, P/E: 57.4x) [7] Conclusion - The optical transceiver market is experiencing significant growth driven by technological advancements and increased demand from hyperscalers and cloud providers. Companies positioned within this ecosystem, particularly those focusing on coherent optics and optical components, are expected to benefit substantially from these trends.

Core Insights - Broadcom Inc. has launched the Tomahawk® 6 – Davisson (TH6-Davisson), a third-generation Co-Packaged Optics (CPO) Ethernet switch, which offers a groundbreaking 102.4 terabits per second switching capacity, doubling the bandwidth of existing CPO switches and setting a new standard for data center performance [1][2][3] Product Features - The TH6-Davisson is specifically designed to meet the increasing demands of AI networking, enhancing link stability and energy efficiency, which facilitates smoother and more cost-effective AI model training [2][4] - It operates at 200 Gbps per channel, effectively doubling the line rate and overall bandwidth compared to the previous TH5-Bailly CPO solution, while ensuring interoperability with various optical interconnects [6][15] Energy Efficiency - The switch is built for power efficiency, achieving a 70% reduction in optical interconnect power consumption compared to traditional pluggable solutions, which is over 3.5 times lower [4][15] Performance Enhancements - TH6-Davisson integrates optical engines directly onto a common package with the Ethernet switch, significantly improving link stability and cluster reliability, which is crucial for large-scale AI training jobs [5][6] - The architecture is designed to support large AI clusters, addressing the challenges of increased east-west traffic in data centers due to the exchange of vast datasets among numerous servers [3][5] Future Developments - Broadcom is already working on its fourth-generation CPO solution, which aims to double the per-channel bandwidth to 400 Gbps while enhancing energy efficiency, further solidifying its leadership in AI and cloud network scalability [7]

Core Insights - Broadcom has launched the Tomahawk® 6 – Davisson (TH6-Davisson), a third-generation Co-Packaged Optics (CPO) Ethernet switch, which offers a groundbreaking 102.4 terabits per second switching capacity, doubling the bandwidth of existing CPO switches and setting a new standard for data center performance [1][2][3] Group 1: Product Features and Innovations - The TH6-Davisson switch is specifically designed to meet the increasing demands of AI networking, enhancing link stability and energy efficiency, which facilitates smoother and more cost-effective AI model training [2][4] - It operates at 200 Gbps per channel, effectively doubling the line rate and overall bandwidth compared to Broadcom's previous TH5-Bailly CPO solution, ensuring interoperability with various optical interconnects [6][15] - The switch integrates TSMC Compact Universal Photonic Engine technology, achieving a 70% reduction in optical interconnect power consumption, which is over 3.5 times lower than traditional pluggable solutions [4][15] Group 2: Market Context and Demand - The rise of large-scale AI training is creating unprecedented east-west traffic in data centers, necessitating advanced solutions like the TH6-Davisson to handle the increased data exchange between servers [3] - The demand for improved link stability is critical as even minor interruptions can lead to significant losses in XPU and GPU utilization during AI training jobs [5] Group 3: Future Developments - Broadcom is already working on its fourth-generation CPO solution, which aims to double per-channel bandwidth to 400 Gbps while enhancing energy efficiency, further solidifying its leadership in AI and cloud network technologies [7]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **AI datacenter connectivity sectors** in China, specifically highlighting **copper connectors**, **optical transceivers**, and **PCBs** [1][13] - The analysis identifies **Luxshare**, **Innolight**, **Eoptolink**, **TFC**, **Victory Giant**, and **Sinoma** as key players in their respective segments [1][4] Copper Connectivity - **Copper solutions** are expected to dominate in-rack connectivity due to their cost-effectiveness and low latency for short-reach applications [2][15] - **Luxshare** has experienced a **50% YoY growth** in its communication segment in 1H25, contributing **9%** to corporate revenue [2][22] - The company is projected to gain market share from **Amphenol** for the **GB300 backplane copper connector**, which could positively impact EPS estimates for 2026 [2][23] - **Co-Packed Copper (CPC)** technology is being developed to enhance performance and reduce costs in copper connectivity [24] Optical Transceivers - The demand for **optical transceivers** is driven by the broader adoption of **ASIC chips** and the need for high-speed communication in AI datacenters [3][38] - The market for **Ethernet optical transceivers** is projected to grow at **30-35% annually** in 2025 and 2026, with AI applications increasing from **55% to 65%** of the market by 2030 [38][42] - **Silicon photonics (SiPh)** technology is expected to capture **40% market share by 2025** and **60% by 2030**, contributing to margin improvements for companies like **Innolight** [39][41] - Risks include geopolitical tensions and lower-than-expected ASIC adoptions, which could impact stock performance [3][64] PCB and HDI Market - The **PCB market** is expected to grow at **5% CAGR** over the next two years, with the server/storage sector outpacing this growth at **11% CAGR** [84][88] - The **HDI market** is projected to reach **US$14B** in 2025, with server demand increasing from **5% to 18%** of the market [85][90] - **Victory Giant Technology** is expanding capacity to meet rising demand for HDI, while **Sinoma** benefits from the booming AI demand for PCB materials [4][84] Investment Implications - **Luxshare** is rated **Outperform** with a target price of **RMB 59**, reflecting its strong growth potential in the AI connectivity market [10][31] - **Chroma ATE**, **Unimicron Technology**, and **Delta Electronics** are also rated **Outperform**, indicating positive outlooks for these companies [6][7][8] Additional Insights - The **global connector market** is valued at approximately **US$85B**, with **Luxshare** holding a **4% market share** as of 2022 [21][25] - The transition to **hybrid solutions** combining copper and optical technologies is anticipated to become the norm in the mid-term [16] - The **PCB market** is capital-intensive and cyclical, posing long-term risks despite current growth trends [4][84] This summary encapsulates the key insights and projections regarding the AI datacenter connectivity sectors, highlighting the competitive landscape and potential investment opportunities.

Summary of Conference Call on ABF Substrate Industry Industry Overview - The ABF (Ajinomoto Build-up Film) substrate market is expected to experience oversupply conditions until the second half of 2026, with a projected 7% oversupply in 2025 [1][11][25]. - The total addressable market (TAM) for ABF substrates has been revised down by 12% and 10% for 2025 and 2026, respectively, due to lower-than-expected AI server GPU substrate shipments and increased pricing pressure [2][22]. Key Insights - **Demand Dynamics**: The demand for AI server substrates has been cut by approximately 50% for 2025, reflecting a significant decrease in AI server rack shipments, which are expected to decline by 35% [2][60]. - **Pricing Pressure**: The average selling price (ASP) for AI GPU substrates has decreased from over US$120 earlier in the year to US$100, indicating a challenging pricing environment [2][60]. - **Impact on Suppliers**: Tier-2 suppliers like Unimicron and Kinsus are expected to face significant challenges due to their exposure to legacy ABF products and weaker-than-expected spillover orders from tier-1 suppliers [2][9][24]. Supplier Performance - **Unimicron**: Downgraded to Neutral from Buy due to weaker AI spillover orders and a slow PC demand outlook. Target price revised from NT$170 to NT$90 [9][10]. - **Kinsus**: Downgraded to Sell from Neutral, with a new target price of NT$63, reflecting less favorable growth in the mid-to-low-end ABF substrate market [9][10]. - **Ibiden**: Maintained Buy rating with a target price of ¥6200, benefiting from its leading position in the high-end substrate market [10][22]. - **Zhen Ding Technology (ZDT)**: Initiated with a Buy rating, expected to benefit from ABF demand expansion from Chinese IC design houses [8]. Future Catalysts - The mid-to-long-term outlook for Taiwan ABF suppliers is expected to improve with the localization of AI IC production in China, projected to grow at a CAGR of 53% from 2025 to 2027 [3][4]. - Adoption of CPO (Chip-on-Package) technology is anticipated to double the consumption of switch IC ABF substrates compared to general 2.5D packaging substrates [3]. Capacity and Utilization - The overall industry capacity is expected to increase by approximately 40% from 2024 to 2027, with a significant portion of new capacity planned before 2024 [29][53]. - Utilization rates for ABF substrate suppliers are projected to improve in 2025, but overall industry utilization will remain below 80% [27][24]. Risks and Challenges - Potential risks include higher electricity costs in Taiwan and the impact of tariffs, which could increase costs as a percentage of revenue significantly [46][45]. - The overall cash margins for ABF substrate suppliers are expected to remain under pressure until at least the second half of 2025, with a potential recovery starting in 2026 [44][59]. Conclusion - The ABF substrate industry is currently facing a challenging environment with oversupply and pricing pressures, particularly affecting tier-2 suppliers. However, long-term growth opportunities exist through technological advancements and increased demand from AI-related applications. The market is expected to stabilize post-2026, with significant growth driven by AI and server upgrades.