Struggling sales predicted for Alchip due to lessened demand from major client
Title: Troubles for Alchip Technologies as Demand for 5-nanometer AI Chips Falters
By Street Ode
In a surprise twist, Alchip Technologies Ltd, the ASIC geniuses known for server chips, predict a revenue nosedive this year. This trailing off is attributed to a drooping desire for 5-nanometer AI chips from a significant North American client, according to a company exec.
This downward spiral? It's a first for Alchip, as they've been basking in revenue increases over the past few years, thanks to cloud-service providers shunning Nvidia Corp's costly AI chips. Instead, they're opting to produce their AI accelerators by outsourcing chip design.
The 5-nanometer chip was anticipated to be a new growth engine, replacing the declining life of their 7-nanometer AI accelerator. Sadly, this hope evaporated as the firm reported weak first-quarter revenue, a 21% sequential decrease or a 4.4% annual drop to a grand total of $318.74 million.
"We anticipate the revenue to remain sluggish for the remainder of the year," Alchip's CFO Daniel Wang (王德善) shared during a virtual earnings conference. The demand for the 5-nanometer AI accelerator appears to be lackluster, as the customer has repeatedly delayed production schedules."
However, Alchip remains positive "significant revenue growth" is forthcoming from the new 3-nanometer chip, scheduled for volume production in early 2022. Moreover, Alchip has secured several new design projects using the 2-nanometer process technology, suggestive of a promising growth trajectory in the future.
"We're bullish about the AI market. As an industry juggernaut, we'll 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) declared.
Last month’s revenue fell steeply by 21.5% year-on-year and 12.95% from the previous month to TWD 3.15 billion (US$103.9 million). Net profit took a 22% sequential hit but registered a 13.9% year-on-year increase to $44.42 million. Earnings per share retreated to TWD 18.1 from TWD 23 the quarter prior, but crept up from TWD 15.8 a year ago.
Gross margin surged to 23.16% from the previous quarter's 21.2% and the year-ago's 18.79%, marking the highest in six quarters. Alchip credited this to higher revenue contribution from its non-recurring engineering (NRE) business, with continued growth anticipated throughout the rest of the year, as NRE revenue rises due to increased complexity in chip designing and manufacturing.
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- Despite Alchip Technologies' since-long rise in revenue, the fluctuations in the demand for 5-nanometer AI chips have led to projected decreased earnings for the current year.
- The dip in revenue at Alchip Technologies, typically a frontrunner in server chips, is attributed to a significant North American client's delayed production schedules for the 5-nanometer AI chips.
- Alchip Technologies' CFO Daniel Wang anticipates the sluggish revenue to persist throughout the year due to the lackluster demand for the 5-nanometer AI accelerator.
- Looking forward, Alchip Technologies remains optimistic about the AI market, aiming to outgrow the high-performance computing (HPC) segment's compound annual growth rate from 2025 to 2027, with success from the new 3-nanometer chip and numerous design projects using the 2-nanometer process technology.
