Summary of Gigadevice (603986.SS) Earnings Call Company Overview - **Company**: Gigadevice - **Industry**: Semiconductor, specifically focusing on DRAM, NOR flash, and MCU products Key Points Earnings and Guidance - Management provided an upbeat guidance for 3Q25, indicating accelerating growth momentum and a robust long-term outlook driven by the specialty/customized DRAM business [1][2] - 2Q25 earnings were softer than expected, but concerns regarding potential weak results have been alleviated [1] DRAM Pricing and Margins - A significant price hike for specialty DRAM products (DDR4) is expected in 3Q25, driven by supply constraints [2] - DDR4 prices began to rise in mid-2Q25, leading to a recovery in DRAM segment gross margins, which are projected to reach double-digit percentages compared to single-digit margins in 1Q25 [2] - The DRAM segment gross margin is estimated to reach 37% in 3Q25E [2] Long-term Revenue Targets - Gigadevice aims to achieve Rmb7 billion (approximately US$1 billion) in DRAM sales within five years, supported by product expansion and market share gains as global competitors exit the legacy DRAM market [3] - DDR4 products currently account for over 60% of total DRAM sales, with expectations for DDR4 8Gb products to contribute over 30% of DRAM sales and LPDDR products to contribute double-digit percentages in 2025 [3] - The company targets over 50% sales growth in the DRAM segment for 2025 [3] Customized DRAM Business - The customized DRAM business is still in its early stages, with meaningful revenue contributions expected between 2H26 and 1H27 [4] - The wafer-on-wafer (WoW) customized DRAM solution is gaining traction, particularly in AI applications [4][7] Financial Projections - Minor revisions to earnings estimates were made, primarily reflecting higher margins due to NOR flash price increases, resulting in a 1%-2% upward revision in net profit estimates for 2025E-27E [8] - The updated 12-month target price (TP) is Rmb173, up from Rmb151, based on a revised target P/E multiple of 45x for 2026E [8][17] Revenue and Profit Estimates - Projected revenues for 2025E, 2026E, and 2027E are Rmb9.167 billion, Rmb11.816 billion, and Rmb14.280 billion respectively [9] - Gross margins are expected to be 40.3% in 2025E, 42.1% in 2026E, and 43.0% in 2027E [9] Risks - Key risks include slower-than-expected DRAM ramp-up, geopolitical tensions affecting the supply chain, weaker-than-expected growth in NOR and MCU segments, and slower wafer cost reductions impacting margins [17] Conclusion - Gigadevice is positioned for growth in the DRAM market, with strong guidance and a focus on specialty products. The company is optimistic about its long-term revenue targets and is actively expanding its product offerings to capitalize on market opportunities.