Bank of America: Strong Demand from Tech Giants like Google and Microsoft, ASIC Supply Chain Enters Super Cycle

According to the latest research report from Bank of America, with the widespread adoption of AI ASICs by CSP cloud service providers both internally and externally, the ASIC chip supply chain is showing strong and sustained growth. Despite the extended project cycles for CSPs, the higher performance requirements and the current generation product lifecycle extension due to delays in next-generation products have created a historically significant super demand cycle for the global ASIC supply chain. In terms of market landscape, Bank of America expects that the annual production of ASIC chips by Google (GOOGL.US) and Amazon (AMZN.US) will stabilize at over 1 million units, while Meta (META.US) and Microsoft (MSFT.US) will gradually catch up.

MPl: Growing Demand for Probe Cards, Capacity Expansion Eases Competition Concerns

As a key probe card supplier for ASIC chips, MPl is benefiting from strong customer demand. It is expected that by the third quarter of 2025, its MEMS probe card capacity will expand from 600,000 units per month to nearly 1 million units, with plans to reach a capacity level of 1 million units/month by the end of 2025. Looking ahead to 2026, aggressive expansion on the MEMS side is expected to continue, while the capacity increase for VPC will be relatively moderate.

Bank of America believes this will help alleviate some investors' concerns about potential competition and market share loss during the migration of AI ASIC projects to 3nm and below processes. Additionally, as chip design trends towards chiplet designs below 2nm increase, this will also benefit probe card demand. Based on an expected price-to-earnings ratio of 28 times for 2026 (previously for the second half of 2025 to the first half of 2026), MPl's target price has been raised from the previous level to NT$ 1,050, while the estimate remains unchanged.

Aspeed: Positive Outlook for BMC Business, Non-BMC Product Line Expected to Accelerate Growth

Aspeed has performed well in its BMC (Baseboard Management Controller) business, with its AST2700 expected to be adopted by the Rubin platform, facing reduced competitive pressure (from Nuvoton or Axiado). Therefore, Bank of America has raised its earnings per share expectations for 2026 and 2027 by 5% and 12%, respectively, and has increased the target price from the previous level to NT$ 6,250, while raising the mid-term revenue growth assumption from 14% to 17%.

For the third quarter of 2025, revenue is expected to reach NT$ 2.2 billion (guidance range of NT$ 2.0-2.1 billion), with a gross margin of 66% (±1%). Bank of America expects Aspeed's compound annual growth rate for earnings per share during 2025-2027 to be 41%, and its high market share in the server BMC market, along with the continued growth of the overall server market, will support its valuation. However, there are also some risks, such as weak server demand, loss of BMC market share, and macroeconomic uncertainties

Alchip: Increased Collaboration Opportunities with Key Clients, Trainium 3 Mass Production Imminent

With the advancement of the CSP project, Alchip has increased collaboration opportunities with at least one project among key clients. In the context of increasing difficulty in designing advanced process ASIC chips and the expansion of ASIC projects and application scenarios, clients tend to choose some interchangeable backup plans. Although Bank of America maintains its estimates for Alchip, it has rolled the valuation period forward to the second half of 2026 to the first half of 2027 (previously 2026) based on the same 30 times price-to-earnings ratio, raising the target price from the previous level to NT$ 3,900, believing that the likelihood of Trainium 3 entering mass production during this period is higher.

Bank of America pointed out that Alchip's upside risks include other non-AWS projects entering mass production faster and better profit margins and strong demand resulting from the relaxation of U.S. restrictions on China. Downside risks include intensified competition, delays in new product launches, slow migration of foundry nodes, and insufficient supply chain support.

Summary

Overall, Bank of America holds an optimistic view of the ASIC chip market, believing that MPl, Aspeed, and Alchip all have good development prospects in the current market environment. With the continued growth in demand for AI ASICs from CSPs and ongoing advancements in related technologies, these three companies are expected to achieve greater market share and revenue growth in their respective fields. However, investors should also pay attention to risks that may arise from market competition, technological developments, and macroeconomic factors