KINSUS Technology (3189.TW) held an earnings call on April 7, 2026, where spokesperson Mu Xianjue noted that the company's revenue has been growing steadily since early 2025, primarily driven by demand for high-layer-count ABF substrates due to AI high-performance computing (HPC) needs. However, the company faces challenges from material shortages (e.g., glass fiber cloth, copper foil, drill bits) and rising costs, limiting potential revenue growth by about 10-15%. Gross margin improvements are mainly due to increased capacity utilization rather than product price hikes.

The core driver of performance growth is AI-related applications, including high-layer-count ABF substrates required for high-performance computing chips such as CPUs, GPUs, and ASICs. The company has initiated expansion plans at its sixth plant, focusing on these products to meet market demand. In contrast, demand for smartphones, PCs, and consumer electronics remains weak with no significant recovery in sight. Memory demand is indirectly driven by AI, with an optimistic outlook, but other areas like automotive electronics (FPGA) are expected to see significant growth only after AI applications expand to the inference stage.

In terms of business highlights, KINSUS's subsidiary, Jinshuo (contact lens business), has performed strongly, with high gross margins and continuous new product launches, becoming a key profit contributor to the group. Regarding capacity planning, the company and peers (e.g., Ibiden, Unimicron, Zhen Ding) are expanding high-layer-count ABF substrate capacity, with new capacity expected to come online gradually after 2027. Management anticipates the market will remain balanced, avoiding severe oversupply.

Looking ahead, management expects the AI trend to continue through 2030, with demand gradually shifting from the training stage to inference applications, driving long-term growth. Capital expenditure is focused on expanding high-layer-count ABF substrate capacity, but short-term attention is needed on material shortages and cost pressures. The company remains optimistic about revenue growth in 2026, though the increase is constrained by supply chain limitations.

Risks for investors to monitor include material shortages potentially suppressing revenue growth, costs eroding gross margins, and a slowdown in AI end-demand affecting the upstream supply chain. Opportunities lie in AI-driven structural demand, the company's precise expansion strategy, and the high-profit contribution from subsidiary Jinshuo. Overall, KINSUS is on an industry growth trajectory but must overcome short-term supply chain challenges.

Financial Performance

• Revenue has been growing steadily since early 2025, with Q1 2026 (January-March) revenue showing fluctuations: January and March were similar, February slightly lower, but the overall trend is upward.
• Gross margin is gradually improving, primarily driven by increased capacity utilization rather than product price hikes (price increases are offset by rising raw material costs).

Business/Product Segment Analysis

• High-Layer-Count ABF Substrates (AI-related): Strong demand, used in AI CPUs, GPUs, ASICs, and other high-performance computing chips, serving as the main engine for revenue growth. The company is expanding capacity for these products at its sixth plant.
• Low/Mid-Layer-Count ABF Substrates (PC, Consumer Electronics): Weak demand, excess capacity, with no expansion plans by the company.
• Memory Substrates: Indirectly driven by AI demand, with an optimistic outlook, but management is cautious about the 'five-year shortage' narrative.
• Subsidiary Jinshuo (Contact Lenses): Rapid growth over the past decade, high gross margins, continuous launch of new hydrogel products and expansion into beauty brands, contributing significantly to group profits.
• Other Applications: Automotive electronics (FPGA) demand has not seen significant growth yet, expected to take off only after AI inference applications become widespread.

Key Operational Metrics

• Capacity Expansion: Focused on high-layer-count ABF substrates, with expansion underway and new capacity expected to come online in 2027.
• Material Shortages: Glass fiber cloth (t-glass) shortage of about 10-15%, with other materials like copper foil and drill bits also in short supply, limiting potential revenue growth.
• Cost Pressures: Rising costs of raw materials (e.g., MCC glass fiber cloth up 38%), labor, and utilities eroding gross margins.
• Pricing Dynamics: Limited price increases to customers, mainly reflecting cost rises, not due to substrate capacity shortages.

Company Official Guidance

• Revenue Growth: Expected to continue in 2026, primarily driven by AI high-performance computing demand, but growth limited by material shortages of about 10-15%.
• Capacity Planning: Expanding high-layer-count ABF substrate capacity (sixth plant), with new capacity expected in 2027, and further expansions planned to meet long-term demand.

Management Qualitative Comments

• Industry Trends: AI demand will shift from the training stage to inference applications, driving growth through 2030; memory demand is optimistic, but recovery timelines for other consumer electronics are uncertain.
• Market Supply-Demand: With peers expanding capacity, the market is expected to remain balanced after 2027, avoiding severe oversupply or shortages (unlike the frenzy in 2022).
• Risk Monitoring: Need to monitor whether AI capital expenditure slows, progress in material supply improvements (e.g., glass fiber cloth capacity coming online in 2027), and geopolitical impacts on consumer electronics demand.
• Technology Development: Over the next three years, advanced packaging will be dominated by CoWoS structures, driving ABF substrates to higher layer counts and larger sizes; other technologies (e.g., CoA-P) are costlier and not expected to be mainstream in the short term.