Alchip Technologies Ltd (世芯), an application-specific integrated circuit (ASIC) designer specializing in server chips, expects revenue to decline this year due to sagging demand for 5-nanometer artificial intelligence (AI) chips from a North America-based major customer, a company executive said yesterday.
That would be the first contraction in revenue for Alchip as it has been enjoying strong revenue growth over the past few years, benefiting from cloud-service providers’ moves to reduce dependence on Nvidia Corp’s expensive AI chips by building their own AI accelerator by outsourcing chip design.
The 5-nanometer chip was supposed to be a new growth engine as the lifecycle of its 7-nanometer AI accelerator gradually comes to an end this year. However, their hopes were dashed as the company saw first-quarter revenue weakened, dipping 21 percent sequentially or 4.4 percent annually to US$318.74 million.
Photo: screen grab from Alchip Technologies’ Web site
“We expect revenue to remain subdued for the remaining three quarters,” Alchip chief financial officer Daniel Wang (王德善) said at an online earnings conference. “The demand for 5-nanometer AI accelerator appears to be weak, as the customer has rescheduled production several times.”
However, Alchip expects “significant revenue growth” from the new 3-nanometer chip, which is to start volume production early next year, Wang said.
On top of that, Alchip has secured multiple new design projects using 2-nanometer process technology, indicating robust growth momentum in the following years, Wang said.
“We are still positive about the AI market. As an industry leader, we will outgrow the AI market’s compound annual growth rate in the high-performance computing [HPC] segment from 2025 to 2027,” Alchip CEO Johnny Shen (沈翔霖) said.
A majority, or 95 percent, of Alchip’s revenue last quarter came from the HPC segment, from 92 percent in the fourth quarter last year.
Based on Alchip’s latest filing with the Taiwan Stock Exchange, revenue last month plunged 21.5 percent year-on-year and 12.95 percent from a month earlier to NT$3.15 billion (US$103.9 million).
Net profit last quarter plummeted 22 percent sequentially, but grew 13.9 percent year-on-year to US$44.42 million. Earnings per share dropped to NT$18.1 from NT$23 a quarter ago, but increased from NT$15.8 a year earlier.
Gross margin last quarter surged to 23.16 percent from 21.2 percent the previous quarter and 18.79 percent a year earlier, marking the highest in six quarters.
Alchip attributed it to higher revenue contribution from its non-recurring engineering (NRE) business. It expects the uptrend to continue through the rest of this year, as NRE revenue rises due to increasing complexity in chip designing and manufacturing, Wang said.
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