J P M O R G A N Asia Pacific Equity Research 13 September 2025 Cooling components Ample room to grow: Race driven by spec upgrade positive for leading companies We are bullish on the growing TAM of liquid cooling components, driven by continuous upgrades in thermal design power (TDP). We believe the spec upgrades will support underlying demand for various tier-one suppliers across each liquid cooling component, including heat spreaders/lids, cold plates, inner manifolds and quick disconnect fittings. On thi ...

Summary of Key Takeaways from APAC's OCP Summit Industry Overview - The report focuses on the AI server development industry, particularly the challenges and innovations discussed at the APAC's Open Compute Project (OCP) Summit held in Taipei on August 5-6, 2025. Core Points and Arguments 1. **AI Datacenter Clusters and Power Innovations**: Current large-scale datacenters consume between 50-100MW and are not fully compliant with AI server hosting standards. Companies like Meta are planning to build Titan AI clusters, with the first 1GW+ AI datacenter (Prometheus) expected to be operational by 2026. Another datacenter, Hyperion, will have a capacity of up to 5GW. Key beneficiaries include Delta, Vertiv, and power plant vendors [1][12][31]. 2. **Capex Increase for US CSPs**: The top four US Cloud Service Providers (CSPs) are expected to increase their capital expenditures (Capex) by 55% and 25% year-over-year in 2025 and 2026, respectively, indicating a robust multi-year investment in AI infrastructure [1][12]. 3. **Modular Design Trends**: The DC-MHS (Datacenter Modular Hardware System) is gaining traction as a modularized computing platform that enhances scalability and cost efficiency. Intel is a key player in this trend, which is expected to see high adoption rates starting with its next-generation server platform [9][12]. 4. **Customized Liquid Cooling Solutions**: There is a rising demand for customized liquid cooling solutions among the top four US CSPs. Amazon is shifting to its proprietary thermal solution, IRHX, while Google is developing a customized L2L CDU design. Delta is identified as a key ODM for these solutions [12][31]. 5. **HVDC Power Technologies**: The report discusses bifurcated HVDC (High Voltage Direct Current) power technologies, with a focus on the ±400V architecture being more favorable due to its compatibility with existing datacenter practices. This shift could benefit suppliers of SiC or GaN components [18][21]. 6. **Increased Content in Power Rack Designs**: CSPs are expected to introduce side power rack designs to accommodate higher power density. This will lead to significant content increases for system vendors like Delta, as the complexity of power delivery systems rises [21][23]. 7. **Vertical Power Delivery Adoption**: Vertical power delivery is anticipated to become more common in next-generation AI accelerators, driven by the need for power efficiency. This trend is expected to benefit power vendors like Delta and Infineon [29][31]. 8. **Networking Equipment Upgrades**: The demand for high-end networking equipment is increasing due to the growth of AI clusters. Ethernet technologies are being explored as alternatives to Infiniband for scale-up networking solutions, which could benefit Ethernet switch vendors [31][32]. Other Important Insights - The introduction of OpenBMC and Caliptra is expected to enhance security in server designs without necessarily lowering entry barriers for BMC chip vendors [7][12]. - The report highlights the importance of customized solutions in the evolving landscape of AI server infrastructure, indicating a shift towards more tailored approaches in hardware design and cooling solutions [12][31]. This summary encapsulates the key insights and trends discussed at the OCP Summit, emphasizing the ongoing innovations and investment opportunities within the AI server development industry.

Summary of Conference Call Notes Industry Overview - The focus is on the Taiwan ODM/Brands sector, particularly companies involved in the AI servers and PCs supply chain, including Quanta, Wiwynn, Wistron, Gigabyte, ASUS, Inventec, Pegatron, and Compal [1][2]. Key Insights Revenue Projections - **Monthly Revenue Growth**: Expected average revenue growth for the 10 companies is projected at -4% in July, +2% in August, and +8% in September 2025. Apple's supply chain is anticipated to outperform with Hon Hai at +7% and Pegatron at +9% in July due to new smartphone models [3]. - **Year-over-Year Revenue Growth**: Projected average revenue growth for July, August, and September 2025 is +41%, +30%, and +26%, respectively. Wiwynn is expected to lead with +152% YoY growth in July [4]. Company-Specific Insights - **Hon Hai**: Expected to see 3Q25 revenues grow 4% YoY and 7% QoQ to NT$1,927 billion, driven by AI server ramp-up and new smartphone launches. June revenues were 3% below estimates due to declines in consumer electronics [17]. - **Quanta**: Anticipated 3Q25 revenues to grow 29% YoY and 9% QoQ to NT$548 billion, supported by AI server ramp-up. June revenues exceeded estimates by 9% [24]. - **AVC**: Expected 3Q25 revenues to grow 69% YoY and 9% QoQ to NT$32 billion, driven by rising liquid cooling penetration in ASIC AI servers. June revenues were 25% higher than estimates [38]. - **Wiwynn**: Projected 3Q25 revenues to grow 126% YoY to NT$221 billion, supported by demand for ASIC AI servers. June revenues were 28% higher than estimates [43]. Market Dynamics - **AI Server Demand**: The ramp-up of rack-level AI servers and increasing penetration of liquid cooling technologies are key drivers for revenue growth across the sector [1][4]. - **Consumer Electronics Impact**: The consumer electronics market is facing uncertainties due to tariff issues, affecting companies like Pegatron and Compal, which are expected to post negative revenue growth YoY [4]. Additional Considerations - **Risks**: Key risks include slower-than-expected ramp-up of AI servers, weaker performance in EV solutions, and increased competition in consumer electronics [22][42]. - **Earnings Revisions**: Companies like Wiwynn and Quanta have seen upward revisions in revenue and net income forecasts due to better-than-expected demand for AI servers [49][28]. Conclusion - The Taiwan ODM/Brands sector is poised for significant growth driven by advancements in AI server technology and new product cycles, particularly in the smartphone market. However, companies must navigate challenges related to consumer electronics demand and competitive pressures.