ASIC manufacturer Alchip Technologies reported robust second-quarter earnings, driven by strong demand for AI chips from North American customers. The company posted a gross profit margin of 19% and an after-tax net profit of NT$20.09 per share. For the first half of the year, Sechip recorded revenue of NT$24.072 billion (approx. $760 million), with a gross profit margin of 18.89% and an operating profit margin of 11.89%. The net profit after tax reached NT$2.817 billion (approx. $89 million), translating to NT$35.92 per share.
Alchip attributed its strong performance to higher-than-expected AI chip shipments, particularly the launch of 5nm AI acceleration chips to North American IDM customers at the end of Q2. While the company achieved record profits, the gross profit margin saw only a slight improvement due to the high proportion of mass production in its revenue mix. Interest income also contributed to non-operating income in Q2.
Looking ahead, Sechip expects continued strong demand for its 7nm AI ASICs from major North American customers in Q3, although a slowdown is anticipated in Q4. However, the momentum for 5nm AI accelerators is projected to extend into 2025, driving an expected revenue growth of at least 20% next year. This growth will largely depend on the availability of CoWoS production capacity.
Regarding potential price increases in TSMC’s 3nm wafer foundry, Alchip’s management expressed confidence that the costs can be passed on to customers, which could also support higher NRE (commissioned design) fees. Alchip’s CFO, Daniel Wang, noted that while mass production has weighed on gross profit margins this year, an increased focus on NRE in 2024 is expected to improve profitability.
