Unimicron Financial Upgraded Following AI Demand Surge as Substrate Production Reaches Full Capacity and Expansion Plans Target Future Global Supply Challenges
Unimicron Financial Upgraded By Over A$9BN (And They are Going Higher After AI demand surge. The Taiwan based, IC packaging and substrate manufacturer, Unimicron, received target stock price increases of up to NTD 1200 from its previous target of NTD 900, with the firms holding on to strong buy ratings from both their latest institutional investor reports.
According to these reports, Unimicron’s latest results confirm unprecedented AI chip demand, which, with additional global demand for custom Application Specific Integrated Circuits (ASICs), Graphical Processing Units (GPUs), Central Processing Units (CPUs) and 400G and above high speed optical modules, is set to boost its outlook even more and push substrate and packaging capacity in new directions. The company reports have also led to target price adjustments in the near and medium term, but the outlook suggests that even those may prove to be too conservative given that demand pressures are now even further upstream in the supply chain for processors and their packaging in relation to what was previously projected earlier this year.Unimicron has beaten expectations from the consensus analysts in monthly revenue and financial reports, with the latest of its monthly financial reports released on March 6 showing a single month earnings per share (EPS) of $NTD 1.85. Core operational profits continue to outgrow non operational financial earnings thanks to the high price of capacity, or utilization, coupled with increased avg selling price, with T glass and a tight supply environment meaning this month’s substrate price hike is larger than that of March 2023. The double digit growth reflected in 11 consecutive record breaking months means that revenue growth is looking at double digit growth quarter on quarter, and the Yangmei and Guangfu manufacturing sites at present have ABF substrate production lines operating at full 100% capacity utilisation. Unimicron also looks to optimize these facilities to maximize unit throughput with, given that the Yangmei facility commands over 70% marketshare of global custom made AI ASIC substrates, that plant is pretty well booked into full capacity over long term, and the Guangfu facility looks to increase its yield, and its gap, against Japanese rival offerings ahead of schedule, as it meets and exceeds previous projections for yields, and throughput too for its ASIC substrate facilities there.
As capacity grows at existing facilities and new locations this year by 40% (evenly split across its new and existing plants), the year end utilization of its overall ABF substrate line should still come out above 90% based on existing and pending orders. Further forward, to 2026, its ABF lines are to remain at full utilization year over year, leading to even stronger sequential revenue growth for the quarter after quarter revenue cycle. Beyond this year, into 2027 the increased usage of AI in on device/local ai will also result in supply deficiency increase from 10% to 12%, and that could trigger yet another industry wide price hike cycle across a number of sectors, including that of substrates.
Apart from processors substrates high speed optical module, high density interconnect (HDI) boards is set to become another major growth driver with orders increased by 2~3 times more compared to the prior year.
In addition, as the global community starts migrating its communications standards from 800G to 1.6T/3.2T, Unimicron's orders for high speed optical module HDI products now constitute 20% of overall high speed connector (HDI) revenue. High speed optical module HDI board production is growing at 40% 50% month on month and the company plans on having expanded capacity up and running soon in anticipation of this rise. Its long term strategy will likely involve both its Guangfu Phase 2 and its Yangmei Phase 2 plans to ramp up production of future chip requirements. Unimicron has set aside the Guangfu phase 2 plan for 2027, and the Yangmei phase 2 plan for 2028, which will give its clients more time to fulfill global supply challenges since the time required to manufacture necessary machinery can take over 12 months globally.
