Summary of Longji Technology Conference Call Company Overview - Longji Technology is the largest semiconductor packaging and testing company in China and ranks among the top three globally. The company has production bases worldwide, including Shanghai, Jiangyin, and Suqian, and has enhanced its packaging technology and capacity through acquisitions such as Xinke Jinpeng and Longji Korea [3][4]. Financial Performance - For the first half of 2025, Longji Technology reported revenue of 18.6 billion yuan, a year-on-year increase of 20%. However, net profit fell to 470 million yuan, primarily due to the product introduction phase of advanced factories and rising R&D expenses, along with international policy uncertainties affecting customer demand [2][5]. - Advanced packaging revenue exceeded 1 billion yuan, with a year-on-year growth of nearly 40%, and net profit reached 280 million yuan, more than doubling from the previous year, with a net profit margin of 27.48% [2][5]. International Operations - The overseas core factories, Xinke Jinpeng and Longji Korea, generated revenues of 6 billion yuan and 6.6 billion yuan, respectively, with year-on-year growth of 1.8% and 6.8%. Xinke Jinpeng achieved a profit of 500 million yuan, while Longji Korea reported a loss of 16 million yuan [6]. Market Trends and Technology Development - The chip packaging technology is undergoing rapid iterations, transitioning from traditional wire bonding to 2.5D and future 3D packaging. The advanced packaging segment has a net profit margin of 27.5% in the first half of 2025, benefiting from high value and technical barriers [9]. - The global new packaging market has surpassed 50% market share, with the narrow definition of new packaging expected to reach a market size of 10 billion USD by 2027-2028 [9]. Key Applications Driving Growth - Mobile phones and AI are the core downstream applications driving the development of new chip packaging. The increasing demand for area efficiency and heat dissipation in mobile devices, along with the significant computational power requirements from AI, are pushing advancements in packaging technology [12]. Strategic Acquisitions - The acquisition of Shenzhen Semiconductor aims to enhance Longji's flash memory packaging capabilities, with the storage market expected to reach hundreds of billions of USD. Longji has a long-term partnership with Western Digital, which continues to provide substantial storage orders [16][17]. Automotive Electronics Sector - The automotive electronics sector is experiencing significant growth, with the average semiconductor value per vehicle expected to rise from hundreds of yuan to potentially thousands of dollars. The global automotive electronics chip market is projected to exceed 100 billion USD by 2030 [18]. - Longji is actively investing in the Lingang automotive electronics project and aligning with international clients under the "China for China" strategy to enhance its market position [19][20]. Future Outlook - The overall semiconductor demand in 2025 is strong, with expectations for continued growth in various sectors, including AI, automotive electronics, and storage. Longji's recent change in ownership to China Huaren Group is anticipated to provide additional resources and support for future growth [21].

Investment Rating - The report does not explicitly state an investment rating for ARM, but it provides insights into the company's performance and future expectations, indicating a generally positive outlook based on growth drivers in AI and custom chip solutions. Core Insights - ARM's FY1Q26 revenue was $1.05 billion, slightly below market consensus of $1.06 billion, with EPS at $0.35, in line with expectations. Royalty revenue increased by 25% YoY to $585 million, while License revenue decreased by 0.8% YoY to $468 million due to a strong base in FY1Q25 [1][6]. - The company is evolving towards full-end solutions to address increasing chip complexity and extended development cycles, with strong demand for Compute Subsystem (CSS) solutions, which have licensing fees twice that of Armv9 [2][7]. - ARM's custom chips are driving significant growth in cloud-based AI, with over 70,000 enterprises running AI workloads on Arm Neoverse chips, representing a 40% YoY increase. The company expects to capture nearly 50% market share among leading hyperscale customers this year [3][8]. - For 2Q26, ARM expects revenue between $1.01 billion and $1.11 billion, with a midpoint representing a 25% YoY increase. Non-GAAP EPS is projected to be between $0.29 and $0.37, with a median of $0.33, slightly below market expectations [9]. Summary by Sections Financial Performance - FY1Q26 revenue: $1.05 billion, slightly below consensus of $1.06 billion - EPS: $0.35, in line with expectations - Royalty revenue: $585 million, up 25% YoY - License revenue: $468 million, down 0.8% YoY [1][6] Business Strategy - ARM is transitioning to full-end solutions to tackle chip complexity and development cycles - Demand for CSS exceeds expectations, with licensing fees significantly higher than previous models - ARM supports chiplet development and aims to expand into complete solutions [2][7] AI and Market Outlook - Over 70,000 enterprises using Arm Neoverse chips for AI workloads, a 40% YoY increase - Expected market share among hyperscale customers to approach 50% - ARM's platform combines AI performance with energy efficiency, enhancing TCO [3][8] Future Guidance - 2Q26 revenue guidance: $1.01 billion to $1.11 billion, midpoint indicating 25% YoY growth - Non-GAAP EPS guidance: $0.29 to $0.37, median of $0.33, below market consensus [9]