All right. Dear investors, analysts, and portfolio managers, this is Daniel Wang, CFO of Alchip Technologies.

Welcome to our fourth-quarter '25 earnings call. Thank you for your patience.

We will start the meeting immediately. For this page, as a routine, it is a safe harbor disclaimer.

This meeting will be in English. If you need Chinese presentation slides, you can please go to the MOPS, [公開資訊觀測站?]

, to download the Chinese version. You can write down your questions through Teams message function, and we will answer them accordingly.

Or during the Q&A session, you can use the raise hand function, and we will constantly answer your questions. This video and audio content of the meeting will upload to MOPS.

It takes about 3 to 2 to 3 hours to upload the file, if you want to review the meeting, you can go to MOPS for the video and audio content about 5:00. The first part will be the message from our CEO, Johnny Shen.

Please. All

right. Good afternoon, ladies and gentlemen.

I'm Johnny Shen, CEO and Chairman of Alchip Technologies. Thanks for joining our investor conference today.

We truly appreciate the opportunity to share our Q4 financial results and provide an update on our business outlook going forward. Our fourth-quarter revenue come come in below the plan.

Primary reason is due to lower than expected production revenue. However, our service business record modest growth.

As a result, the revenue reached $153 million, with the net income of $47.8 million and EPS NT$18.29, which is slightly higher than Q1 and the highest quarterly EPS for the year. The more detailed financial breakdown and analysis will be presented by CFO in the later section.

Let me recap few highlights of last year. 2025 was not a pleasant pleasant year for us, especially given that most of major AI-related player deliver exceptional performance in terms of revenue, earning, and share price.

In contrast, Alchip's revenue declined significantly, with net income and EPS also decreasing by approximately 10% to 15% year-over-year. The primary reason is decline for this decline is due to lack of production revenue, as we missed one product generation from our number one customer.

The most important highlight for last year is that we successfully regained the position with this customer. The new design was taped out last year, and chip now is ready for high-volume production starting from Q2 this year.

In addition, design activity for the next generation has already begun. We expect to complete the design by Q3 this year, positioning us well for the next phase of growth.

Another highlight of last year is our automotive business in China. While the design and prototyping stage process smoothly, we did encounter some geopolitical-related challenge during the process.

This issues has been fully clarified and resolved, and mass production has already begun. In addition, development for next-generation product has already started, further strengthen our position in this segment and supporting continuously growth in automotive market.

Other than this two high-volume production, we have also achieved several important milestone with emerging AI-related customer, primarily in US market, leveraging the latest technology like N2 or N3. This engagement representing promising opportunity to lay foundation for future growth in advanced AI silicon platform.

Another highlights was improvement of our gross margin. Although the revenue declined significantly due to lack of production revenue, but our NRE remained very strong, contributing about 7 percentage point improvement in gross margin compared to the year before, reflecting our better business mix and improve of supplier relationship.

Ecosystem partners: like I mentioned before, starting from Q2, starting from N2 process, sorry, the HPC design become very complicated. Single design require integrating multiple die and diverse solution.

Unlike most of our competitor follow a captive kind of solution, seeking for higher margin, Alchip is promoting an open open ecosystem strategy, collaborating with broad range of partners to develop complete, comprehensive, and efficient solution. Our ecosystem network has expanded substantially in the recent quarter, with many partner eager to to get in.

We firmly believe the future AI industry will rely on ecosystem instead of a captive solution. Geopolitical risk management: we continuously to diversify our business and design resource beyond China.

In 2025, less than 8% of total revenue contribute from China. To strengthen our global engineering capability, we've been we have launched a very aggressive hiring plan focus the region outside of China.

Now our Japan office can accommodate more than 250 employee, while our Malaysia and Vietnam office now host over 120 engineer combined. In conclusion, we expect Q1 revenue remain a similar level, but beginning of beginning in Q2, we anticipate a strong ramp as a key production revenue resumes.

For the full year, we have confidence in delivering significant revenue growth, even compared to our peak year in 2024. Looking ahead, we remain very optimistic in long-term outlook for AI market.

From this year to 2029, we expect our growth momentum remain in line with the industry leader and competitors. We are confidence in our ability to outperform the overall market CAGR in high-growth HPC and AI market.

Thank you very much.

Okay. For this page, this page is the fourth-quarter P&L.

The numbers just like Johnny mentioned. For the fourth quarter last year, we record $152.7 million, which represents 31.5% quarter-on-quarter decrease and 52.2% year-on-year decrease.

Given the improvement of the gross margin, our operating income last quarter was $39.1 million, which is 1% quarter-on-quarter growth and 27.9% year-on-year decline. For the net income last quarter, we record $47.9 million for the net income, translating into EPS of NT$18.3, which is a 1 8.1% quarter-on-quarter growth and 16% year-on-year decline.

For the yearly numbers, like Johnny mentioned, due to lower production revenue contribution last year, our revenue for last year is $991.9 million, which is a 39% year-on-year decline. However, given the gross margin improvement, our operating income last year was $160.9 million, which is a 20% year-on-year decline.

The net income was $179.5 million, which is 11% year-on-year decline. For the full-year EPS for last year, 2025, was NT$69.2.

The next page is our revenue breakdown by applications. You can see that the HPC AI-related revenue still accounts for the majority of our revenue, quarterly or yearly.

For last quarter, the AI HPC revenue accounts for 67% of our total revenue, while the niche market, networking, and consumer accounts for 4%, 7%, and 22%, respectively. For the yearly breakdown, for last year, 83% of our revenue contributed by the HPC AI category, and the other sectors, such as niche market, networking, consumer, accounts for about 15% to 16% of our total revenue last year.

For the process node, we can still proudly say we are the industry leader in terms of the process node technology. For last quarter, 3-nanometer and the 2-nanometer combined accounted for 36% of our total revenue, while 5-nanometer and the 7-nano accounts for 43% of our total revenue.

Combined with the 3-nanometer, 7-nanometer, total at nearly 80% of our total revenue last quarter. For 2025 as a whole, 3-nanometer and the 2-nanometer revenue accounts for 14% of our total revenue, while 7-nanometer and the 5-nanometer accounts for the majority, which is 73% of our total revenue last year.

For the regional breakdown, for last quarter, North America still the major market for us, which accounted for 50% of our total revenue, while the Asia-Pacific accounts for 18% of the total revenue, and the revenue from Japan accounts for 6%, and the others accounts for 26% of our total revenue. For last year as a whole, North America remains the majority, accounted for 78% of our total revenue last year, and the other three areas, including the Japan, Asia-Pacific, and the others, accounts for 8%, 8%, and the 6%, respectively.

For the number review, for last quarter, like Johnny mentioned, despite the weaker revenue last quarter, the high gross margin made it the most profitable quarter last year. The fourth-quarter revenue declined 31% quarter-on-quarter, due mainly to lack of the production revenue.

Although the sales is not strong, the gross margin last quarter reached 42%, and which makes our net income the highest among four quarters in 4Q '25. To us, from the number-wise, we consider last year is a temporary hiccup prior to returning to a long-term growth because, like I mentioned, we lost a generation of the major product, but we regained the next generation last year, which makes our revenue has a gap in 2025.

However, since we already taped out the 3-nanometer accelerator last year, and then we are targeting to start the shipments in the second quarter this year, we think, for this year, the overall revenue we will enjoy a very good growth. Beyond this year, since we already secured the 2-nanometer project, which will lead a relatively long-term growth outlook for Alchip Technologies in the next 4 to 5 years.

This page is for the outlook in the first quarter and the 2026. The fourth-quarter, revenue-wise, remains sluggish, to be honest.

I would say the first quarter this year will be pretty similar to last quarter. We don't have too many production revenue.

The NRE, although from the full-year perspective, the NRE will be strong, however, the first quarter usually is the lowest quarter for our NRE revenue performance. For the first quarter, we are expecting the overall P&L will be pretty similar to the fourth quarter last year.

For this year as a whole, first of all, we emphasized many times that our 3-nanometer AI accelerator will start contributing to our revenue in second quarter. The NRE demand and the pipeline projects remain very strong.

We see multiple projects in most leading-edge process node to kick off this year, starting actually from the first quarter through the whole year. The majority of the projects, those AI, HPC-related projects, come from the North American market.

We do expect multiple 2-nanometer project to kick in in the following days of this year, which will bring in a strong momentum to our NRE growth. The last one is we are expecting the most important 2-nanometer accelerator project to tape out by the end of this year, which will ensure Alchip a pretty good long-term growth outlook.

I guess that's our presentation part of today's earnings call. We will go into the Q&A session.

You can, like mentioned, you can use the raise hand function for asking questions, or you can ask questions through the message board. We will answer those questions accordingly.

Thank you. BofA, Hass.

Please. You can unmute.

Thank you so much Johnny and Daniel for taking my question, and it is great to see the business is coming to the inflection. I would like to start from your major hyperscaler AI accelerator projects.

You mentioned we should see significant growth from 2Q this year and also into second half to drive a solid growth this year and also next year. I'm just wondering how should we think about the linearity for the project ramp on a quarterly basis, or to be more specific—

Can you slow down a little bit? Your voice is a little bit breaking down.

Oh, okay. I just want to be more specific that how should we think about your revenue pattern for first half versus second half this year?

Thank you. That's my first question.

Haas. I would say it will be very imbalanced.

I would say probably 80% of our total revenue this year will be concentrated into the second half. Johnny?

Yeah. That includes NRE and also production business, right?

Both of the business.

For the total revenue. From the total revenue standpoint of view.

Yeah. Since production revenue become very big, the NRE become to play a very insignificant role for total revenue.

Okay. Just on that, how should we think about the margins profile because you are reramping your production business quite significantly again, and should we expect that trend to persist into 2027, especially with your customer recently signing a 2-gigawatt computing power supplying to OpenAI powered by the ASIC?

Thank you.

I would say our customers' business has nothing to do with our margin. For the margin guidance, our previous guidance remains unchanged.

I don't consider '25 2025 is a good benchmark for 2026, since in 2025, we don't have a very big production. So 2024 is actually a better benchmark for 2026.

Our guidance remains the same: our gross margin will be higher than what we had in 2024.

Okay. Just on the 2-gigawatt computing power signed between Amazon and also OpenAI last week or two weeks ago, I was wondering if you are seeing incremental orders from your customer on that kind of agreement.

Or on the supply chain side, are you able to mitigate through the supply shortage of 3-nanometer CoWoS as well as substrate this year, and how are you going to just manage that

just

to grab from your major increase? We don't comment on

some news or some actions by those hyperscalers. I can only say, for the substrate shortage, I would say this way: we communicate frequently and intensively with our supplier, include the substrate supplier.

Since this project is very important, a very good application for a very good end customer, the substrate supplier has very high commitment to the project. Even there is a potential shortage for the substrate, based on the current information we received from those vendors, the impact will be very, very limited.

Also as the N3 capacity is very, very tight. Even though you see some upside from somewhere, I think it unlikely happen in this year.

Right now the N3 capacity is fully booked in the industry.

Yeah. At least that is a good readthrough to 2027 for the incremental demand.

And—

Hass, can we go back to you later?

There

are others are waiting to ask questions. Charlie, please.

Morgan Charlie Chan, you can unmute your microphone. Charlie, are you there?

Okay. Seems has some problem.

Sorry about that. Charlie.

Oh, yes. Thanks for your presentation, Johnny and Daniel.

My first question is also about this year's revenue trend, because you just mentioned that the second half, you have 80% revenue concentration. Can I also get another hint whether your single-quarter revenue can reach $1 billion in this year?

We cannot give such precise guidance because of the regulation. I will say, for this

year—

Maybe that's a good target for us, which we try to achieve. Maybe that's possible.

Yeah.

Okay. Okay.

I wanted to provide some more ground for you to confirm that potential target, a quarterly revenue to be $1 billion. I want to follow up whether your team can really squeeze out more outputs from your testing program so that's why you see kind of additional revenue from the major 3-nanometer projects?

I would say it is not that related to the testing program, because like Johnny mentioned, for this year, actually the wafer capacity is very, very tight. It is also because the turnaround time for the production for this 3-nanometer accelerator is very, very long.

For now, we already placed the wafer orders for November. The room for the expected numbers to change is limited.

Okay. Because last time you just mentioned that through your efforts in the testing program, there could be additional outputs per wafer.

Yes, we are still trying, because there is a last month. In the end of this year, a month revenue for a single month is also quite significant.

Okay. Thank you.

Thanks for the additional color.

Also

you mentioned that you're going to tape out the 2-nanometer by the end of this year, right? I'm not sure is there any schedule pull-in, yeah, because I know the demand from your major customer and also your customer's customer, right,

the

OpenAI deal seems to suggest very long-term demand for that chip. Our checks also suggest that the Trainium3 system performance is not that ideal, right?

I'm not sure if we can have this kind of conclusion that 2-nanometer need to pull in, and also can we get your confirmation that whether second half next year, we are going to see 2-nanometer mass production revenue?

Charlie. I would say our customer is very satisfied with the performance of the 3-nanometer accelerator we designed.

I haven't heard any complaint about the performance or design by the customer. For the schedule, I would say the customer always want the chip to tape out quicker, try to pull in the project schedule.

It is a norm in the industry, which can leave our customer more buffer for arrange the timing, the presentation, everything. The quicker the better.

However, it is about engineering, we try our best to satisfy the customer. For now, I would say we are not committing to do that, to meet the schedule, but we will try our best.

For now, everything is on schedule. We are very happy with it.

That's the current situation for the 2-nanometer project. Right.

For N2, even you call 2-nanometer, but it also contain other tape-out in other technology like N3. This design, unlike before, is very complicated.

It require multiple tape-out, and also the verification stage will be longer. If we can complete the design by this year, I think that's a must to achieve, but if we can do that, I think the customer will be very happy to achieve.

Yes, you are right. They are shooting for prototyping production schedule by near the end of the next year.

That's their target schedule.

That's a public information.

Thanks Johnny and Daniel. Last one, I will be back to the queue.

The CPO adoption timing, right? I think Broadcom CEO said that the CPO adoption for ASIC would be very late, but I'm not sure what's your observation.

Would that be CPO adoption in your N2 generation or your 1.4-nanometer generation? What's your take on MediaTek stacking your optical I/O die partner Ayar Labs?

I know you want to promote this open ecosystem strategy, right? Why would your industry peer want to stack in this Ayar Labs?

Okay. For for when will be the CPO-related product go to production, I think the situation changed a bit.

Before, people thinking about whatever the speed over 400-gig, it has to be go to optical. Recently, Nvidia just announced this kind of bidirectional SerDes.

I think that we can say that still a one generation. Like unlikely the N2-related design will adopt fully adopt the CPO.

Most likely, I think will be the next next generation. I think the similar situation to our customer.

I think they have a they don't have a current plan yet. In terms of a CPO potential, yeah, I still very optimistic.

It's a design dependency, also manufacturing design dependency. Beyond 400-gig, beyond 400-gig, I think CPO is a must to adopt.

I and comment on the MediaTek invest one of our partner, I don't think there's a any competition between us and MediaTek. We still willing, we still we will still doing the tape-out for this particular customer.

During the design, I don't think Nvidia has MediaTek has involved for design activity. They probably they have they have a partnership for for other strategic reason.

Got it. Let's say if you continue to win 1.4-nanometer and that one will adopt the optical I/O die for the CPO, it would be Alchip provides the design services?

Charlie, we cannot comment on particular project here. I can only tell you, first of all, you probably can see the press release from Ayar.

Not only MediaTek, Alchip Technologies is also the investor for this Series E round. We have been partner with Ayar for long term.

Ayar is our partner and is also our customers. We are working together on some projects.

In the future, we think these two company, Alchip and Ayar, will keep on close relationship no matter how. The same thing, I will say the same thing for MediaTek.

MediaTek invest in Ayar, and I would say MediaTek will also be a participant in the ecosystem, for sure.

Got you. That's very fair.

Thank you.

Thank you. Laura, please.

Citi Group.

Yes. Hi, can you hear me?

Yes.

Yeah.

Yes, hi. Good afternoon, Johnny and Daniel.

My question is also about the future chip designs, as Johnny mentioned that this becoming more complicated with different kind of chiplets designs going forward. I'm just wondering that for Alchip, you still handle the full chip integration in the future, or you might also kind of do the partial design and tape-out and work with other partner, potentially like a MediaTek or other peers in the industry?

I think customer has a related resource to prepare on the architecture, I don't think for back-end implementation, we have any limitation. If a customer willing to adopt the commercially available I/O chiplet, we can also doing integration.

For right now, the most of a design we are doing for N2 chiplet is all done by us, including back-end. Eventually, if available solution appear, yeah, I think that's also a possible case.

Sure. In the near term, maybe in a two years' perspective, so far our project is still fully handled by ourselves, right?

Yes.

Thank you.

Even the customer decide to get the I/O chiplet by themselves, but that will be the consigned die, similar model to HBM. We will take the die, do the final integration and also the production.

Thank you, that's very clear. Also, my second question is that aside from your biggest customers in US right now, are you also working with other CSPs for the next-gen AI accelerators and which we may see potential contribution in two years?

Yes, of course. We talk with everyone.

Right, but

just like the scheduling we are talking about for the 3-nanometer or 2-nanometer, for now, actually if you want to have production revenue contribution, probably you have to win now,

and you can

get revenue after one and a half and two years. I would say this way: the trend I talked to investors two years, three years ago is actually realizing.

We told two years, three years ago that the CSPs, especially those big ones, they have very strong incentive to go for ASIC. It is realizing, right?

Another trend I would say we are also seeing the trend is ongoing right now is those CSPs are trying to lower their cost, because the CapEx is getting unrealistically high. Any saving to them will be quite significant.

We still believe, under this trend, as long as we are capable of doing those most leading-edge process node design and meet the customer's needs, our position is very good.

Yes. Given that we see various different kind of inference or training perspective, now your product mainly focus on training or big model, the potential project you are now engaging with your customers, are they a new market or focus you are looking for which may contributes in the next two, three years?

We do have some applications from some customers we consider would be a jackpot to us in next two to three years. We do have those projects.

Okay. Looking forward to that.

Thank you.

I'm

back to the queue. Thank you.

Thank you. Okay.

Jeffrey, Joey Xu, Joey Xu, please. You can unmute your mic.

Hi. Can hear me?

Yes.

Yes.

Okay. Thanks, Johnny and Daniel, for taking my question.

My first question is want to understand that I think for the current ASIC design, the chips are getting more complicated. I think previously, you have discussed that your customer adopting the COT business model, might be, although Alchip do all the design service, but the actual wafer start could be a split between you and your customer.

Can you give more color on what you are seeing for this year's project and also perhaps for the N2 as well? How should we expect the allocation on this front?

That's my first question.

Okay. Like I said, we are not allowed to talk about a specific project into details.

I would say again, like we talked to the investors in previous meeting, when we talk with the customers, there are many consideration. The gross margin, secondly, the skill we can handle for the production revenue, because like I mentioned, the production turnaround time is very long, the working capital requirement is high.

We will evaluate every elements of the project in order to talk with the customer for a proper business model. That's what I can push to the boundaries for you for answering your question.

The further detail, probably I may not be able to share here.

Also the allocation thing.

Allocation.

Got it. Then just to follow up on the 2-nanometer, I think in the prepared remarks, you mentioned that you have multiple other projects.

Aside from your largest customer, can you also comment a little bit about those other projects? What are the end customers, and when should we expect to see revenue contribution?

Thank you.

Actually, various of type of customers. We understand that the N2 project, the N2 process node is a very, very expensive process node.

However, since in the North American market, for some emerging accounts, they are funding very, very well, because all the capital in the market flows to the AI sector. As long as they have strong team and innovative ideas, probably to do a 2-nanometer project is not a problem for them.

For our 2-nanometer process node projects, we have emerging accounts, and we also have some traditional networking companies in North America. For N2, I think obviously, the use are very limited.

It's all AI-related application, either in the networking or in accelerator side. I hope we answer your question.

Okay. What is the rough timing to see revenue contribution for these emerging accounts or traditional networking companies?

Actually, the revenue was already there. The NRE kick off already.

That means that mass production could happen after your main customer's tape-out? Is that correct expectation?

Got it.

Yes.

Thank you. Lastly, on the automotive side, can you also give us some color, how should we expect for revenues this year and also perhaps into next year as well?

Thank you.

Sorry, actually, the TSE warn us specifically asking not to say numbers in the earnings call. I can just tell you, like we described, for this year, we are shooting for record-high revenue performance.

The potential for the AI accelerators growth is quite significant. Our CEO Johnny also mentioned we are expecting our growth to match up with the industry growth or even better.

For auto business, I think yeah, for sure, that will be our number two customer in terms of revenue this year.

Thank you. I'll be back to queue.

Charlie, please. Oh, Hass, Haas, please.

Hass, please. It's Hass turn.

Oh,

yeah. Thanks Johnny and Danny Daniel.

Thanks Johnny and Daniel. I just have two quick follow-up questions.

I think the first one is just regarding your value-add on the chiplet on 2-nanometer projects, because it seems that there are going to be multiple tape-outs on different nodes. I understand that on the back-end side, it is going to be pretty complicated.

The reality is that there are going to be more of the chiplets or the tiles coming from the other part of the design service partners or ecosystems. I'm just wondering if you could share the margins profile for the upcoming 2-nanometer projects, whether it is going to be as high as the one that you are going to ramp pretty soon in the following quarters.

Thank you.

Various type of form is possible for the 2-nanometer process node. In general, we cannot comment on a given project.

For example, we can do the top die physical design, and we can do the integration for top die and the I/O die if the I/O die is a consigned type of business model. Of course, we can also do the physical design for the I/O die and do the integration for I/O die and top die.

Any kind of the business model, we will be capable of doing so. For I/O die, I think so far, like I mentioned before, most of integration and production are handled by us.

Also in terms of size and die price, I/O die is much cheaper than the compute die. If in the future, more I/O die play more significant role, then the model I think will be similar to HBM.

If it happened, we get the I/O die in, and we count out this portion of revenue, just similar to HBM, and maintain our gross margin.

Yeah. That's pretty clear.

Then just a follow-up on the CPO, and I will be back in the queue, is that I saw that you and Ayar Labs at TSMC's OIP Symposium last year's December, that you actually would provide ASIC and also the networking switch

to integrate

with Ayar Labs PIC. Would you be able to comment about this, which nodes that you are running on?

Second thing is that it seems that the networking switch that you are able to provide to integrate with Ayar Labs PIC it's actually not simple at all. I was just wondering regarding the die size for that networking switch and also the ASIC, whether it is actually going to be another significant opportunity for you outside of the core AI accelerator business?

Haas, first of all, your voice is breaking up a little bit. I try my best to guess your question.

For Ayar Labs, please consider it is a partnership, just pure partnership. Ayar is our customer, and we do projects with them.

As long as for what kind of project, ASIC, PIC, whatever, we cannot disclose this kind of information in earnings call. We both company's management committed to each other to the future design for those chips requiring high-speed transmission.

I'm sorry that we cannot disclose into such detail for a given company or a given project. Okay.

Thank you so much, Johnny and Daniel.

Thank you. Next one will be Charlie, Charlie, please.

I'm fine if you want to let a new caller to ask question, or maybe I do it quickly, okay? Thank you.

I remember you sort of have some involvement in LPU design, and I think that company recently was so-called acquire-hired by Nvidia. I'm not sure if customer still want to tape out that LPU.

Also I'm wondering, because that design includes SRAM, right, I'm not sure is that the same foundry for the SRAM production? Thank you.

For the project we are doing with Groq, currently it is a pause. I would say the decision will be made by its new owner, Nvidia.

If they want to continue the business with us, we are more than happy to do so. If they want to do it by themselves, of course, they paid for our work.

They already paid. We cannot say a word on it.

I cannot give you a firm answer, but the current status is the project is in a pause. As the supplier relationship between us and Nvidia are different.

It's kind of a debating situation who's to handle in production if they go to.

I see. Thank you.

Also another very, very big US customer opportunity, I'm referring to the 2-nanometer US automotive and potential robots chip design, right? Is that a reasonable target for Alchip sometime in 2028 or 2029?

Of course, any big company in US with big volume is our target. We are shooting for, I would say, everyone.

Actually, we are engaging with almost everyone in North American market like Microsoft, Google, those kind of CSPs, or other big names. We are happy to do business with them, for sure.

Okay. If you look at the current so-called 3-nanometer project, I think it's done by your industry peer, GUC.

Do you believe there is a level of so-called level playing ground when you compete for 2-nanometer?

I would say GUC is a respectable competitor and industry peer for us. I think the market is very big, and we compete.

Okay. Last one, I think it's a little bit more strategic discussion.

Johnny, wanted to get your view because recently, as you know that, the AI already start to transform or even disrupt the software industry. Some of your EDA partners like Cadence, Synopsys, they got some doubts from investor whether it's also disrupted by the AI.

I'm not sure to Alchip, right, this kind of AI automation for design flow, validation, whatsoever,

is

that a long-term positive or negative to Alchip? I think positive argument is that your productivity will increase, but negative is that whoever, maybe not with a very long experience, they can use the AI tools

to

design a chip for customers.

Okay. I think that this is very big question.

Actually, my personally, I'm a I am a AI believer. I think sooner or later, most of the work can be replaced by AI gradually.

I think the But right now, we are also working with all the EDA vendor very closely, Synopsys and Cadence. Their tool also improved quite a bit using this kind of inference scheme.

What I understand, currently AI still statistic approach. If you have enough reference on the on specific process node, you can they can anticipate all the timing problem, electrical problem, in order to shorten the turnaround time.

For most leading-edge technology, there's no database yet. They don't have this kind of experience.

From statistical point of view, AI doesn't work. That's why including us and also our competitor, when they are doing a leading-edge technology like N2 process, multiple N3, they need more than 100 people.

If you go back to like a 28-nanometer, 40-nanometer, or 16-nanometer, in usual cases, within 10 people, we can do most of the work. I think that step-and-step, I think AI is the power getting bigger and bigger.

Maybe ultimately, they can do something. Right now, for the most leading-edge technology, including us, including our customer and industry peer, they need more people.

That's the reality.

That's super helpful. I think even back-end design, there are several stages, right?

Like place-routing, and as you said, right, there's no database.

You need to

based on customer's PDK, based on your experience. For some so-called steps, right, like validation, I think it's pretty labor-intensive, very tedious.

Would that kind of chip validation be gradually migrated to the AI?

I think for some point work, we can see the AI really help. Also, most of our work is done by using the server-type CPU.

For some specific case, and we are working with the vendor to use the GPU, as the GPU performance for the point task is much, much faster than the CPU. Those kind of improvement can reduce not only the design resource, but the design turnaround time.

I think that's also very important. AI is gradually get involved for all design activities, almost everywhere.

Got it. Thank you.

Thanks for you're sharing.

Thank you.

Thank you very much.

Because of the limited time, we answer the last three questions, and I would say after that, we will conclude our earnings call this time. Mr.

Sethanan? Sethanan?

Thanks for taking my question. I just wanted to clarify.

OpenAI and Amazon have signed like a 2-gigawatt worth Trainium order, right? 2 gigawatts is a lot of capacity.

You're saying 2026, there's not a lot of room for orders to change. I want to clarify whether there can be upside to what you guys are forecasting for 2027, or should I interpret this 2-gigawatt upside will come in Trainium4?

That's my first question, yeah.

I'm sorry that we don't answer the specific project or specific company. I would say this way: for our major product, the 3-nanometer accelerator chip, even we place the order today, the chip will come out in very late this year.

Any incident happens, or any upside surprise happens, most likely will be next year, 2027. However, for 2027, I cannot give investor a number because the allocations is a variable, the demand is variable, and those industry dynamics is not very clear yet.

I cannot give you a very firm answer for 2027, but definitely, we will enjoy a pretty good growth in 2027 for this project, for sure.

Right. I understand that there'll be growth.

What I'm trying to understand is that relative to what you thought, say, five, I don't know, five days or 10 days back prior to this announcement, in your mind, is the upside higher in 2027? I think related to that question is, Nvidia and Broadcom are saying they've locked up all capacity—memory, ABF substrate, front-end capacity—for their requirements till 2028, right?

Your peer Marvell is also saying that. Even if there is upside, will you be able to capture it?

I just wanted your sense on this.

Again, we cannot comment on specific news or events. Honestly, I would say, for your question, you're supposed to ask

AWS, OpenAI, not us, right?

I know, but it really depends on whether you guys will be able to secure the supply, necessary, right? You're getting upside in orders, but then you have to ready the supply chain, right?

You have to place orders at TSMC, you have to coordinate the supply chain, right? There is a lot of shortages all across the supply chain, right.

I'm just trying to figure out whether, even if there is upside, will you guys be able to see it, because every one of your peers is saying they've locked down capacity, they've locked down supply. I'm trying to understand whether you guys have also done it, and will you be able to enjoy this OpenAI upside, right?

Honestly, I don't think those so-called locked-up is a real thing for 2027 or 2028. The current, like I said, the current capacity for 2-nanometer and the 3-nanometer would be very, very tight in 2027.

The negotiation or the talk between the customer and the TSMC is not there yet. How can they locked up the capacity?

I am sorry I cannot give you an answer for that. I'm sorry.

We have to speed up.

Yeah. Cool.

Thanks.

If you have further question, please welcome to mail me or call me anytime you want. Next one is Jennifer Shin, please.

Thanks Johnny and Daniel for taking my questions. I have two questions.

About the CPU projects for the CSPs, they are now becoming quite large in size, even though the margin could be possibly lower. Do you think at this large scale, it makes sense for Alchip to start engaging in some of this CPU projects?

Do we have any potential progress on this? This is my first question.

Honestly, we are not ruling out to take this kind of so-called production-only project. However, we do worry about the margin can go very, very low.

It is not a very easy equation, because we have to consider a lot of the elements into it. For example, if we want to take project with such low margin, the purpose is not trying to make money.

The purpose is trying to break through into the supply chain. However, we still think that through providing value, it is the best way to secure a customer.

To do the production-only business is not that valuable to customer, and it usually ends up with a pricing war. I cannot give you a firm answer, but I can only say we are not ruling out taking those projects.

However, it will be a lot of consideration into it.

Understood. Another follow-up is on the networking customer.

You have the 2-nanometer project with the US networking customer you've mentioned before. Could it be possible to become the second biggest customer of yours in, say, 2027 or 2028 once the 2-nanometer tape-out goes into production?

Can you give us some color on the upside?

Yeah. That's hard to judge.

It's hard to judge because we do have high expectation for this project, because the customer is a quite a big name. However, we also don't rule out the possibility for some emerging accounts to become very big, because in the AI era, as long as your product is very innovative and being very efficient, suddenly the sales could be go up very quickly.

Of course, we consider the conclusion from a networking project we are currently doing can bring us some revenue.

Sure. The larger revenue mainly happen in 2028 or maybe 2029 in your view?

Pardon?

For the 2-nanometer production, do you think it will possibly come in 2028 or maybe longer, in 2029?

Yeah, 2028, definitely. The 2-nanometer project will be in production in 2028, for sure.

Understood. Thank you.

Thank you. Thank you.

The last one would be for Laura of

Citi Group. Thank you very much for taking my question.

Thank you very much for taking my questions again. Just a quick one, actually quick two.

I'm not sure if Alchip has done some study of Intel's EMIB packages. As we see that some of the US CSP, they're kind of being asked or encouraged to do more of the production in United States.

We see some of the CSP, they're also kind of working with Intel on the EMIB packaging. I'm not sure if there's also the possibility that Alchip to work on with Intel on their advanced packaging process?

Yes, it is possible. It depends on customer's decision.

Actually, we did EMIB for packaging before. We are actually familiar with this EMIB.

Do you see any progress or any schedule you potentially aiming for?

The previous design we using the EMIB, I think it's already in production for two years ago. A

few years ago.

We have fully familiar with the team. You can consider Intel is our customer, right?

They acquired one of our customer. We've been working with them, the entire infrastructure team, very closely.

Again, the decision is still made by customer, not us. We don't feel a thing.

We are okay to work with Intel for EMIB. As TSMC CoWoS capacity is not an issue, and I think not too many customer decide the big portion using EMIB.

Understood. Thank you.

The next question is more like a housekeeping. We understand you already kind of explained that Q1 will be similar to Q4 in terms of the revenue, and there will be less NRE in Q1.

Can you give us kind of indication about the gross margin, because Q4 was really strong in gross margin? Should we expect that Q1 or first-half margin to back to a Q3 level last year, or how should we think about this year's gross margin?

I would say the first quarter the first quarter will be very similar, the gross margin would be also high, I think. I would say for the first quarter this year, last quarter would be a very good benchmark.

For the second quarter, it is kind of a mix, because the revenue is picking up because of the contribution from the 3-nanometer production.

The the

the growth is mainly because of the production, which is a lower gross margin business comparing to our NRE. Obviously, the second quarter's gross margin will be lower to the first quarter, but however, still higher than the third quarter or the second half.

That's what we see. I cannot give you the numbers.

Very clear. Thank you very much.

Thank you.

Thank you. Thank you, Laura.

I guess it conclude today's earnings call. Thank you very much for participate into our fourth-quarter '25 earnings call.

See you next time. Thank you.

All right,

thank you very much. Thank you.