Excerpts from CGS-CIMB report

Analyst: William Tng, CFA

AEM Holdings Ltd
Read through from Nvidia
Nvidia has confirmed that it may consider using Intel to manufacture some of its chips.


Share price: 


If Intel Foundry Services is offering the whole solution (chip manufacturing to test and assembly), this will support test handler (made by AEM) demand.

Reiterate Add and TP of S$6.85.

Nvidia may consider using Intel Foundry Services
In a question and answer session with the press on 24 March 2022, Tom’s Hardware (www.tomshardware.com) reported that Nvidia CEO Mr. Jensen Huang confirmed that his company is considering using Intel's foundry services to possibly make some of its chips.

As part of its diversification strategy,
Mr. Huang noted that using Intel as a foundry partner is not inconceivable. However, Mr. Huang also noted that operating foundry services required an ability to keep pace with customers’ evolving changes.

n a press release on 26 July 2021, Intel announced that its first foundry customers were Qualcomm and Amazon Web Services.

Nvidia will also offer CPU product
On 22 March 2022, Nvidia announced its first Arm-based data centre CPU (Central Processing Unit), the NVIDIA Grace™ CPU Superchip designed for AI infrastructure and high performance computing.

Nvidia highlighted that its Grace CPU Superchip will run all of NVIDIA’s computing software stacks and can be configured into servers as standalone CPU-only systems or as GPU-accelerated servers with one, two, four or eight Hopper-based GPUs (another Nvidia product), allowing customers to optimise performance for their specific workloads while maintaining a single software stack.

In its press release, Nvidia highlighted that it expects these products to ship in the first half of 2023.

Potential long-term impact on AEM
If Intel offers the complete solution to Nvidia (chip manufacturing including test and assembly), this should be a positive for the demand for Test Handlers (from AEM) required for testing purposes.

In terms of the competitive risk, Intel will face stiffer 
competition for its data centre products as customers will have another possible supplier to choose from.

Reiterate Add
williamtng4.14William Tng, CFA.We reiterate Add on AEM based on an unchanged 15.62x FY23F EPS of S$0.4384. 

Potential re-rating catalysts are stronger-than-expected orders from its major customer and earlier-than-expected success in securing orders from other prospective customers.

Downside risks are delivery delays, aggressive competitive response and loss of sole supplier status or emergence of a new supplier.

Full report here.

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