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]

Summary of Conference Call Notes Industry Overview - **Industry**: Greater China Technology Hardware - **Date**: July 29, 2025 - **Analysts Involved**: Howard Kao, Shoji Sato, Shawn Kim, Joseph Moore, Charlie Chan, Sharon Shih Key Points on Nvidia and CoWoP Technology - **Nvidia's Chip Packaging Technology**: There is speculation regarding Nvidia's potential adoption of CoWoP (Chip on Wafer on PCB) for its next-generation data center GPUs, specifically Rubin Ultra [3][4] - **Current Technology**: Nvidia currently utilizes TSMC's CoWoS (Chip on Wafer on Substrate) technology, which reportedly has a yield rate close to 100% [6] - **Challenges with CoWoP**: - The transition to CoWoP would require a significant reduction in the line/space (L/S) of the PCB to below 10/10µm, which is currently challenging given that average HDI PCBs are at 40/50µm [4] - The complexity and risks associated with shifting to CoWoP, including yield risks and supply chain reshuffling, make it unlikely for Rubin Ultra to adopt this technology in the near term [4] - **Potential Development**: Nvidia may still be developing CoWoP technology alongside existing mass production methods to address issues like substrate warpage and supply tightness [5] Implications for Suppliers - **Beneficiaries of CoWoP**: If CoWoP is adopted, suppliers with mSAP (modified semi-additive) manufacturing capabilities, such as Zhen Ding and Unimicron, could benefit [12] - **Negative Impact on ABF Suppliers**: Companies like Ibiden and Unimicron, which are key partners for Nvidia's AI GPU substrates, may face negative implications if CoWoP becomes widespread [12] Valuation and Risks - **Unimicron Valuation**: The target price-to-book (P/B) ratio for Unimicron is set at 1.2x for 2025, reflecting a decrease from the 2020-23 average of 2.2x due to expected lower return on equity (ROE) [15] - **Risks to Upside**: - High-value-added ABF package products could support earnings more than anticipated [17] - Better-than-expected demand for ABF substrates from PC and server customers [20] - **Risks to Downside**: - Sudden demand shortfalls and technological changes that reduce the need for ABF substrates could negatively impact suppliers [20][25] Additional Insights - **CoWoP vs. CoWoS**: CoWoP aims to resolve issues like substrate warpage and improve cooling efficiency, but the high yield rate of CoWoS presents a strong argument for its continued use [7][11] - **Market Dynamics**: The shift towards CoWoP could lead to increased competition and pricing pressure among suppliers, particularly in the context of evolving technology and market demands [20][25] This summary encapsulates the critical insights from the conference call, focusing on Nvidia's technology developments, implications for suppliers, and the broader market context within the Greater China Technology Hardware industry.

Investment Rating - The report maintains a "Buy" rating on ZDT and raises the target price (TP) to NT$140 from NT$130, maintains a "Neutral" rating on Unimicron and NYPCB with TP raised to NT$97 and NT$110 respectively, and maintains a "Sell" rating on Kinsus with a new TP of NT$70 from NT$63 [8][21][31]. Core Insights - The increase in BT substrate prices in early Q3 2025, driven by T-glass and gold price hikes, is expected to improve revenue trends for substrate makers, particularly Kinsus and NYPCB, with BT revenue exposure projected to exceed 25% of total revenue in 2025 [2][3]. - The report anticipates a potential further pricing hike for high layer count ABF substrates in the coming months, which could enhance revenue and profitability outlook for substrate suppliers in the second half of 2025 [3][7]. - The T-glass shortage is expected to ease by the first half of 2026, which may stabilize pricing levels despite the current supply constraints [4][7]. Summary by Sections Pricing and Revenue Outlook - BT substrate prices have increased by 5%-20% in early Q3 2025 due to T-glass supply tightness and rising gold prices, which account for 30-40% of BT cost of goods sold (COGS) [1][2]. - The report expects improved profitability for BT substrates in the second half of 2025 compared to the first half, despite potential unfavorable gross margin and operating profit margin conditions due to material cost hikes and currency appreciation [2][3]. Company-Specific Earnings Revisions - Unimicron's 2025 earnings estimate has been cut by 25% due to unfavorable foreign exchange conditions, while revenue is expected to increase by 1% [17][19]. - NYPCB's earnings estimates for 2025, 2026, and 2027 have been revised up by 3%, 11%, and 7% respectively, reflecting a positive outlook on substrate pricing [23][25]. - Kinsus's 2025 earnings estimate has been reduced by 16% due to unfavorable FX conditions, but 2026 and 2027 estimates have been increased by 10% and 11% respectively [28][30]. - ZDT's earnings estimates for 2025, 2026, and 2027 have been revised down by 17%, 1%, and 1% respectively, primarily due to unfavorable FX conditions [33][35].