Accessible version Greater China Tech Hardware Cooling: critical for AI server; ongoing evolution/innovation, more customization Price Objective Change Cooling: critical/evolving for AI; few high-end suppliers Cooling in AI server rack is critical with hotter AI chips under packed rack design. We expect growing cooling content value, rising TDP, and more innovative/customized designs. TDP for Nvidia Rubin Ultra GPU should exceed 3.5KW, vs. Rubin's 2.3KW and B200/B300's over 1KW (Exhibit 5). Few cooling supp ...

Core Insights - The acquisition of liquid cooling company Limin Da by Lingyi Zhi Zao for 875 million yuan is a strategic move to secure scarce resources in the AI computing power sector, which is characterized by high certification barriers and core technology challenges [1][4] - Limin Da has achieved dual certification from NVIDIA and is a core supplier for its GB200/300 series products, which enhances its market recognition and compatibility [2][3] - Lingyi Zhi Zao's business strategy focuses on a synergistic layout of core components and system solutions, integrating liquid cooling and power supply services to meet the increasing demands of AI servers [3][4] Industry Overview - The AI server liquid cooling market is expanding at an annual growth rate exceeding 50%, with Limin Da's products entering mass production, which, combined with Lingyi Zhi Zao's manufacturing capabilities, is expected to lower production costs and enhance profitability [4] - The strategic acquisition is seen as a proactive measure to integrate technology, customers, and production resources, allowing Lingyi Zhi Zao to quickly enter high-growth sectors and leverage its manufacturing advantages [4] - Analysts have raised profit forecasts for Lingyi Zhi Zao, projecting net profits of 2.516 billion yuan, 3.575 billion yuan, and 4.765 billion yuan for the years 2025 to 2027, highlighting the expected synergistic growth from liquid cooling and power supply businesses [3]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Direct Liquid Cooling (DLC)** market, particularly in the context of AI server racks and thermal management technologies. The market is projected to grow significantly due to increasing power densities in AI silicon, with a **CAGR of 51% from 2025 to 2030**, reaching **US$31 billion** by 2030 [3][10][14]. Core Insights and Arguments - **Market Growth Potential**: The upcoming transition to DLC is seen as a critical upgrade rather than a gradual hardware change, driven by competition in AI silicon [11][12]. The market is expected to expand rapidly, with the **DLC market size projected to grow from US$1.14 billion in 2024 to US$31 billion in 2030** [10][14]. - **Thermal Management Needs**: As AI silicon power density exceeds **1,000W TDP**, DLC is becoming essential for managing heat in advanced AI racks [4][11]. The report emphasizes that DLC is not just a utility but a strategic enabler of compute performance [14]. - **Micro-Channel Lid (MCL) Adoption**: The report anticipates that MCL technology will start to be adopted minimally by **Q4 2026**, with significant growth expected by **H2 2027**. MCL is projected to serve applications above **3,500W TDP** [5][20]. The total addressable market (TAM) for MCL is estimated to reach **US$2.7 billion by 2030** [5][10]. - **Cold Plate Market Dynamics**: Cold plates are expected to remain dominant for applications under **3,500W TDP**, with a projected TAM of **US$8.9 billion by 2030**. Concerns about pricing pressures are considered overblown, as the value of content per rack is expected to increase [6][10]. - **Investment Recommendations**: Coverage is initiated on three companies—**AVC, Auras, and Jentech**—all rated as **Buy**. AVC is recognized as a leader in cold plates, while Jentech is positioned to benefit from MCL adoption [7][28][30]. Additional Important Insights - **Market Bifurcation**: The report argues against the notion that the cold plate market will suffer from commoditization due to MCL adoption. Instead, it suggests that the market is bifurcating, with both MCL and upgraded cold plates coexisting [21][30]. - **Thermal Interface Material (TIM) Challenges**: The report highlights the thermal bottleneck posed by TIM 2, which is critical for future AI platforms. MCL technology is seen as a solution to eliminate this bottleneck [17][26]. - **Competitive Landscape**: The report notes that Nvidia's aggressive TDP roadmap and competition from AMD and Google TPU could accelerate the adoption of MCL technology [19][20]. - **Long-term Risks**: The potential for vertical integration by ODMs like Hon Hai could disrupt traditional thermal supply chains, posing a long-term risk to existing players [30]. - **DLC as the Preferred Method**: The report concludes that DLC will remain the dominant liquid cooling method due to its scalability, lower capital expenditure, and feasibility for retrofitting existing data centers [31][32]. This summary encapsulates the critical insights and projections regarding the DLC market and its implications for the companies involved, providing a comprehensive overview of the current landscape and future opportunities.

Summary of Key Points from the UBS Taiwan Summit Conference Call Industry Overview - **Industry Focus**: The conference primarily covered the **APAC Technology** sector, with a focus on **Original Design Manufacturers (ODMs)**, **Printed Circuit Board (PCB)** suppliers, and **cooling technology** providers, particularly in the context of AI and server demands [2][3]. Core Insights 1. **Wistron**: - Observed a bottoming out in August with a strong ramp expected in Q4 2025 into 2026, alongside margin recovery due to improved notebook demand [3][4]. - Anticipates a peak quarter in Q4 driven by strong order backlogs and client demand [22]. 2. **Cooling Technology**: - **AVC** and **Auras** are experiencing significant growth in cold plate demand, with discussions ongoing about the transition from cold plates to micro-channel lids (MCL) [3][12]. - Cold plate suppliers are optimistic about design improvements, while MCL suppliers highlight advantages in heat dissipation and assembly [3]. 3. **PCB and Substrate Market**: - **Zhen Ding** is targeting NT$33 billion in capital expenditure over three years to meet AI PCB and substrate demand, indicating a strong growth trajectory in this segment [3][22]. - **Elite Material** is expanding capacity aggressively to meet demand, with no current material supply constraints [11][15]. 4. **Display Technology**: - **AUO** reported better-than-expected TV demand, leading to a potential upside in Q3 performance, with a focus on premium mobility and vertical solutions for long-term growth [8][25]. 5. **Pegatron**: - Stable PC demand is noted, with a better-than-expected commercial PC replacement cycle and efforts to diversify into server business [3][17]. 6. **Kinsus**: - Anticipates a slowdown in gaming and CPU rush orders into Q4, but remains optimistic about 2026 drivers from ABF and DDR advancements [3][14]. Additional Important Insights - **Market Dynamics**: The overall sentiment among ODMs is positive, with expectations of increased demand for AI-related products and services, particularly in the server and cooling segments [2][3]. - **Investment and Capacity Expansion**: Companies like Elite Material and Zhen Ding are making significant investments in capacity expansion to meet future demand, particularly in AI and high-layer count PCBs [11][22]. - **Long-term Growth Strategies**: AUO aims for stable profitability in display technology while expanding into premium segments, indicating a strategic shift towards higher-margin products [8][25]. Stock Implications - **Wistron** is viewed positively with upcoming catalysts from sales ramp-up and margin recovery, while the overall valuation of ODMs remains attractive compared to the AI supply chain [4]. - **PCB/Substrate** companies are expected to see balanced growth, factoring in recent share price appreciation and increased supply to meet demand [4]. This summary encapsulates the key takeaways from the conference, highlighting the optimistic outlook for the APAC technology sector, particularly in relation to AI and cooling technologies, alongside strategic growth initiatives from key players in the industry.

Summary of Liquid Cooling Market Research Industry Overview - The liquid cooling market is driven by the growth in AI chip power consumption and shipment volumes, as well as the development of complete cabinet solutions [2][4] - The market potential for liquid cooling in AI chips is estimated to reach hundreds of billions of RMB with approximately 10 million AI chips utilizing liquid cooling [2][4] Key Insights - **Value Breakdown**: - Single chip liquid cooling value is approximately 2,000 to 3,000 RMB, while single cabinet liquid cooling value ranges from 300,000 to 600,000 RMB depending on the model [2][6] - The total market space for 100,000 ML72 cabinets could reach 500 to 600 billion RMB [6] - **Components of Liquid Cooling Systems**: - Liquid cooling systems are divided into primary (external data center equipment) and secondary (internal server equipment) sides [2][7] - Key components include: - Cold plates (30-40% of value) - Quick disconnect couplings (QDC) (10-20% of value, highest profit margin of 50-60%) - Central Distribution Unit (CDU) (10-20% of value, profit margin around 30%) - Manifold and piping (approximately 10% of value) [7][12] - **Material and Cost**: - Cold plates are primarily made of copper, with CPU cold plates valued at around 500 RMB and GPU cold plates at about 1,000 RMB [10] - Domestic quick disconnect couplings are valued at approximately 600 RMB, while overseas they can reach 1,300 RMB [11] - CDU costs about 1,000 RMB per kW domestically and 200-240 USD per kW internationally [11][12] Market Dynamics - The growth of the liquid cooling industry is primarily driven by the increasing power consumption of chips and cabinets [4][6] - Not all chips require liquid cooling; traditional air cooling remains viable for many [4] - Future advancements in cooling technology, such as phase change or immersion cooling, may significantly increase the value contribution of liquid cooling systems [5][13] Additional Considerations - The primary side of the cooling system is mature and competitive, involving equipment like dry coolers and cooling towers [5][9] - The choice of cooling equipment depends on the climate and water resources of the data center's location [9] - The liquid types currently used are mainly water-based solutions, but future innovations may introduce more advanced fluids, enhancing system value [13]