Summary of the Investor Presentation on Greater China Technology Hardware Industry Overview - The focus is on the Greater China Technology Hardware sector, particularly in relation to AI demand growth and design value upgrades, which are expected to drive profit increases [4][5][6]. Core Insights - Preference for AI server components over AI server Original Design Manufacturers (ODMs) due to better execution and production flexibility [4][6]. - Consumer electronics demand is described as lukewarm, indicating a potential slowdown in this segment [5]. - Significant opportunities are identified in AI GPU and ASIC server/rack design upgrades, with major design upgrades anticipated for platforms such as GB300, Vera Rubin, and Kyber architecture [6]. - AI ASIC servers are expected to enhance computing power and increase rack density, with demand growth anticipated in 2026-2027 [6]. - Transition to 800V High Voltage Direct Current (HVDC) power architecture is noted as a power solution upgrade [6]. - Adoption of liquid-to-air solutions is highlighted for faster deployment in server setups [6]. - Expansion of PCB/substrate capacity is necessary to support ongoing design upgrades [6]. - Upcoming foldable iPhone models are anticipated in the second half of 2026, which may influence market dynamics [6]. - The proliferation of AI PCs is expected to take time, indicating a gradual market shift [6]. - The status of supply chain reorientation and its potential impacts are acknowledged, suggesting ongoing adjustments in the industry [6]. Key Stock Ideas - Recommended stocks in the AI server components category include Delta Electronics, AVC, Gold Circuits, Lotes, Unimicron, and LandMark [6]. - Recommended stocks in the AI server ODMs category include Hon Hai/FII, Wistron, Wiwynn, Quanta, and Lenovo [6]. Valuation Comparison - A detailed valuation comparison of various companies within the Greater China Technology Hardware sector is provided, including metrics such as closing price, market cap, EPS, P/E ratio, P/B ratio, P/S ratio, EV/EBITDA, ROE, ROA, trading volume, and yield [8]. - Notable companies include Lite-On Tech, Delta, Hon Hai, Foxconn Tech, and others, with varying ratings and target prices [8]. Additional Considerations - The report emphasizes the importance of considering Morgan Stanley Research as one of several factors in investment decision-making, highlighting potential conflicts of interest [2].

Summary of the Conference Call on Greater China Technology Hardware Industry Overview - **Industry**: Greater China Technology Hardware - **Date**: August 18, 2025 - **Analysts Involved**: Sharon Shih, Howard Kao, Duan Liu, Yang Liu, Eddy Wang, CFA Core Insights and Arguments - **Market Performance**: The industry view is rated as "In-Line" by Morgan Stanley, indicating expectations of performance in line with the broader market benchmark [2][46]. - **Hon Hai (Foxconn)**: - Price target set at NT$250, with a current rating of "Overweight" [5]. - Monthly shipment data shows significant growth, with August 2025 shipments reaching 3,000 units, representing a 69% supply share [8]. - Revenue projections indicate a steady increase across product segments, with a notable rise in cloud and networking revenues [9]. - **FII (Foxconn Industrial Internet)**: - Price target set at Rmb52.50, with a strong revenue guidance for Q3 2025, expecting over 15% YoY growth in Telecom & Networking Equipment and over 100% YoY growth in Cloud Equipment [10][11]. - Cloud server revenue is projected to contribute over 75% of total server revenue, indicating a strong market position [10]. Additional Important Information - **Shipment Estimates**: - Hon Hai's GB200/300 rack output for 2025 has been raised by approximately 4,000 to a total of 34,000 units [14]. - The notebook build estimate for Q3 2025 has been increased by 6% to 33.6 million units, reflecting a slight quarter-over-quarter increase [24]. - **Valuation Methodology**: - Hon Hai's valuation is based on a residual income model with a cost of equity of 8.5%, a medium-term growth rate of 13%, and a terminal growth rate of 3% [25]. - FII's valuation is derived from a multi-stage residual income model, with a medium-term growth rate of 16% and a terminal growth rate of 5% [26]. - **Risks**: - Upside risks include better-than-expected iPhone sell-through and faster progress in AI server business [27]. - Downside risks involve geopolitical developments and lower-than-expected demand in 5G and data centers [27]. Conclusion The conference call highlighted a positive outlook for the Greater China Technology Hardware sector, particularly for key players like Hon Hai and FII, with significant growth projections and strategic insights into market dynamics. The analysts emphasized the importance of monitoring shipment data and revenue contributions from emerging technologies such as cloud computing and AI.