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Speaker 1: Now time on his industry. Giant fox Con is holding

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Speaker 1: its annual tech Day in Taipei. The company, known formally

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Speaker 1: as hot High, is the largest contract electronics maker in

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Speaker 1: the world, and now it's pushing to diversify and build

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Speaker 1: more future proof income streams. That's the hope at least

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Speaker 1: our tech report. Annabel Dreolism joins us from the event. Annabel,

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Speaker 1: thanks Tom.

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Speaker 2: Yeah, this is a really big day for Ho Hi.

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Speaker 2: It's the fiftime I've ever held its tech day. It's

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Speaker 2: also the fiftieth anniversary this year of the company. And

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Speaker 2: is you said, it's that focus on what are the

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Speaker 2: future growth drivers for the business, and there's no question today,

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Speaker 2: yes there's the focus on AIS but rather evs, but

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Speaker 2: AI service is really what's grabbing a.

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Speaker 3: Lot of investor attention as well.

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Speaker 2: And I'm very pleased to say that we're joined by

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Speaker 2: the chairman, Young Lou this afternoon, and thank you very

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Speaker 2: much for joining us. And as we said, is really

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Speaker 2: so much attention is on the AI service and the market.

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Speaker 3: Share that you're gaining in this area.

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Speaker 2: In particular, you just said earlier on stage that sales

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Speaker 2: of AI service made with Blackwell ships are doing better

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Speaker 2: than expected.

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Speaker 3: Can you share more details about what you meant by that?

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Speaker 4: Yeah, the black Well demand very very strong, as Jameson

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Speaker 4: College is crazy. The demand is crazy, and we're building

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Speaker 4: up the capacity, and the capacity, as we mentioned, is

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Speaker 4: probably very very big, much bigger than we thought so

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Speaker 4: so far. The shipping day will be sometime by the

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Speaker 4: end of the year.

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Speaker 2: So you're planning to start the shipments of servers and

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Speaker 2: the demand is better than you expected. What were you

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Speaker 2: expecting and what are you actually seeing? Can you quantify

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Speaker 2: it for us?

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Speaker 4: Okay, because there were a lot of saying about, you know,

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Speaker 4: the compute. The need for the compute may be saturated

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Speaker 4: pretty soon, but it looks like that the demand is

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Speaker 4: still growing. So that's you know, that's beyond our expectation.

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Speaker 2: Again, if it's beyond your expectation, what was your expectation?

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Speaker 2: How many, for instance, were you planning to ship by

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Speaker 2: the end of the year. How many you actually looking

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Speaker 2: to ship instead?

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Speaker 4: Yeah, if you talk about our shipping plan, I would

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Speaker 4: say we planned to ship in the beginning of Q four,

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Speaker 4: but due to certain peacup with the super chip, so

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Speaker 4: it's moving later to the later part of the Q

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Speaker 4: four from that angle, it's worse than what we expected,

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Speaker 4: but the demand is much bigger than our expect.

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Speaker 2: So the shipman you expected to come earlier in the

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Speaker 2: fourth quarter, it's been delayed to the fourth quarter. The

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Speaker 2: demand that you're seeing is actually better than expected. Again,

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Speaker 2: can you share more quantity, like how much of the

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Speaker 2: demand are you trying to capture here?

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Speaker 3: How much of the market?

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Speaker 4: But that I really cannot give you the quantity, exact

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Speaker 4: quantity because we just started to build it, Okay, but

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Speaker 4: we see the demand is over what we you know,

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Speaker 4: we can shift.

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Speaker 2: So if you can't meet the demand right now, how

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Speaker 2: long do.

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Speaker 3: You see that extending?

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Speaker 2: For?

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Speaker 3: What sort of sales do you have.

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Speaker 2: Booked going into next year as well?

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Speaker 4: We see in yeah, maybe somewhere around quanity thousand, that

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Speaker 4: kind of a number.

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Speaker 2: You're looking to ship twenty thousand AI service maybe with

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Speaker 2: black Well ships over the course of next year, is

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Speaker 2: that right right?

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Speaker 3: Okay?

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Speaker 2: And in any particular quarter that you're looking at in

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Speaker 2: particular for that or do you see.

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Speaker 3: It being that's a year per quarter?

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Speaker 2: Are you expecting a bulk of those to go on

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Speaker 2: one particular quarter or do you see it spread evenly

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Speaker 2: across the course of this year or next year.

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Speaker 4: Rather, it really depends on once we start shipping the demand,

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Speaker 4: whether the demand will will change or not. If the

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Speaker 4: demand doesn't change after we start shipping and the demand

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Speaker 4: or maybe it will be even higher than we.

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Speaker 2: Expected, well, what's what sort of capacity?

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Speaker 3: Then? How much can you ramp up production?

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Speaker 2: Do you think how many of these service could you

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Speaker 2: be providing to the market?

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Speaker 3: Do you think, Hm, okay, but that that.

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Speaker 4: Really cannot give you the number because the facility is there,

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Speaker 4: but the equipment is being put there, and also the

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Speaker 4: power needed to build those servers. You know, they require

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Speaker 4: a lot of power to do that, so that's also

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Speaker 4: been prepared. So the capacity of that, I really can't

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Speaker 4: give you that number from my head. I had to

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Speaker 4: go and check it out, right, I don't want to

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Speaker 4: give you the Ryan inspectation.

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Speaker 2: The demand that we see from hyperscalers, there has been

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Speaker 2: that big question sort of hanging over AI for the

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Speaker 2: course of the year. Would we start to see any

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Speaker 2: concerns around that fading? Do you see any of the

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Speaker 2: customers that you speak with them.

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Speaker 3: I'm speaking here.

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Speaker 2: About the hyperscalers that are looking like they maybe need

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Speaker 2: to pause on investments for a period to wait and

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Speaker 2: see if they if they actually do see ROI.

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Speaker 4: We haven't seen any of that. We haven't seen any

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Speaker 4: of that concern. But you've probably heard some analysts talking

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Speaker 4: about that concern, but from the market, we don't see.

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Speaker 4: We haven't heard any concern like that.

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Speaker 2: And video has very tight control over the designs of

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Speaker 2: its products. How closely do you work with the company

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Speaker 2: to add your own value to the designs as well

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Speaker 2: your own expertise?

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Speaker 3: I'm thinking energy for instance, is one area in the calling.

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Speaker 4: Technology mentioned in the past that fast Come is most

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Speaker 4: integrated vertically integrated the supplier to the server industry. If

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Speaker 4: you don't account TPU, CPU and some minor ic components,

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Speaker 4: the component the percentage that we are able to cover

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Speaker 4: by ourselves is anywhere between eighty to ninety percent. That

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Speaker 4: tells you how vertically integrated that we are capable of.

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Speaker 2: When you add that sort of value to the company

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Speaker 2: or to Nvidio's designs, how much value do you extract

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Speaker 2: as a business and how much can you differentiate yourself

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Speaker 2: as opposed to other AI server resemblance and.

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Speaker 4: The differentiation in terms of the vertical integration capability, Yes,

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Speaker 4: we are one of the best. But in terms of

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Speaker 4: what added value to the overall.

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Speaker 2: The over.

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Speaker 4: Server, I think it really depends on how much uh

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Speaker 4: Mmediate is pricing their CPUs and gp us. That definitely

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Speaker 4: will impact our gross popular margin.

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Speaker 3: In terms of proper margin.

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Speaker 2: Then what I understand for the AI service, it can

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Speaker 2: be in the load teens. Do you see a way

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Speaker 2: to expand that and too increases.

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Speaker 4: I think in the low teams you're probably right, but

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Speaker 4: that will have to be based on, you know, how

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Speaker 4: much vertical integrate, how much components that you're able to provide.

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Speaker 4: So with that it varies to a certain degree. But

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Speaker 4: because the CPU and GPU is very high priced, so

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Speaker 4: the rest of the server, you know, has only some

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Speaker 4: limited impact in terms of a cord overall.

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Speaker 3: Right, Chairman, stay with us for a moment.

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Speaker 2: Tom will hand back to you now for this portion

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Speaker 2: of the interview.

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Speaker 3: But Chairman, if I cannot continue, to ask you some further.

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Speaker 2: Questions, and this is around the shift to the smartphone

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Speaker 2: and space in particular.

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Speaker 3: Yes, okay, I want to talk more about the Thank

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Speaker 3: you very much,