Taiwan Morning Briefing

Overview

Index is set to reboundtoday following overnight market. However, as AI server plays mostly pulledback in August, Taiex is likely to conclude the month with a decline from lastmonth. Rising interests are seen in non AI server plays. For Sep, factors tohelp Index to challenge 17000 pts again will be stabilizing US market (no ratehike), Nvidia share price to new high, or other tech giants eg. Apple, Tesla,AMD etc to regain momentum. News highlight for today include: Domesticmonitoring indicator showed blue light for the 9th month but decline inmanufacturing and trade narrowed and recovery in financial showed, NDCprojected exit from blue light in Q4; Hon Hai founder Terry Gou announced tojoin 2024 presidential election bid; Brokers endorsed Aspeed and Mediatek.

Research Highlight

* UMC (2303 TT): Marketchatter about UMC to expand silicon interposer capacity for Nvidia, fromcurrent 3kwpm to 10kwpm by year end, which is more aggressive than previouscorporate guidance in analyst meeting in late July about expansion from current3kwpm to 6kwpm in mid 2024. 10kwpm also means same scale with TSMC. Yet 6kwpmis a small contribution compared with foundry capacity of 600kwpm, more of atopic than real contribution. Company also mentioned that GM of siliconinterposer is similar to corporate average and hence the business won't be anegative impact to blended GM. Flow wise, we noticed that local assetmanagement has been accumulating the stock, the major reasons should beattractive valuation and dividend yield in addion to AI. Based on our 2023/24EPS forecast $4.5/$5.3, 2023/24 P/E is at 10X/8X level. Assuming 65% dividendpayout, dividend yield is above 6%. (Sarena Hsu)

* MTK (2454 TT): Metaintroduced Llama 2 and announced cooperation with Microsoft and Qualcomm toapply AI model to cloud and smartphone products. Currently every 5G SoC of MTKis equipped with APU and multiple generative AI function, such as AI-NR noise reduction,AI-SR super resolution etc. New chip Dimensity 9300 will debut by year end, newgeneration flagship chipset will adopt Meta Llama 2 model. AIGC application islikely to help smartphone market regain momentum. We project 2023/24 EPS at$42.45/$54.49. Reiterate L-T Buy and TP $800. (Chelsey Su)