World Advanced Earnings Call: Q3 Capacity Utilization Reaches 90%, Q4 to Be Even Stronger, Full-Year AI Revenue to Double

World Advanced (5347-TW) held its earnings conference today (4th) and released its second-quarter financial report. Quarterly net profit rose to NT$2.975 billion, the highest in 15 quarters, with earnings per share (EPS) reaching NT$1.56. Looking ahead to Q3, the company expects volume and pricing to increase, with overall capacity utilization rising to 90%. Q4 is expected to be even stronger, and AI-related revenue for the year is projected to double year-on-year.

For Q3, World Advanced forecasts wafer shipments to increase by 1% to 3% quarter-on-quarter, with average selling prices (ASP) rising 2% to 4%. Assuming an average NT-dollar to USD exchange rate of 32, gross margin is expected to range between 32.5% and 34.5%.

CFO Hui-Lan Huang noted that customer demand for power management products continues to grow in Q3. However, due to current bottlenecks in certain equipment and capacity, wafer shipments are expected to increase only 1% to 3% quarter-on-quarter. Average selling prices are expected to rise 2% to 4% driven by improved product mix.

Regarding order visibility, Chairman Frank Fang stated that thanks to growing demand from AI servers, power management products, and seasonal factors, order visibility remains at around four months. Q3 capacity utilization is expected to rise further from Q2 to 90%, with Q4 potentially exceeding 90%.

CEO Chi-Shi Yu said customer demand remains very strong, and the limited shipment growth in Q3 is not due to weak demand, but rather the company’s current capacity being unable to fully meet customer needs. The company is actively sourcing available equipment and increasing supply capacity through debottlenecking and equipment upgrades.

World Advanced still has unused space at its Fab 5 in Taiwan and its 8-inch facility in Singapore. The main short-term gap is production equipment, which is still available in the market. The company is actively coordinating delivery timelines with suppliers to keep pace with growing customer demand.

In addition to adding new equipment, World Advanced is upgrading some coarse-line-width process capacity to fine-line-width processes to meet customer demand for high-end power management and AI-related products, while continuously optimizing its product mix.

In terms of process structure, as demand for AI server power management products grows significantly, the revenue share of 0.18-micron and more advanced processes will continue to increase. From a product platform perspective, the share of power management products in total revenue is also expected to rise further.

AI-related products accounted for a single-digit percentage of World Advanced’s revenue in the first half of the year, but this has risen to double digits in the second half, driving full-year AI revenue share into double digits, with related revenue nearly doubling year-on-year.

Looking ahead to 2027, the company expects AI-related revenue contribution to grow even more significantly. For AI server peripheral power products, discrete components will continue to rely primarily on 8-inch wafers over the next one to two years, and the company’s existing 8-inch process technology can support high-performance requirements.

Regarding non-AI markets, World Advanced stated that industrial application demand has begun to recover, while automotive demand remains largely flat but is expected to gradually rebound. Although end-market growth for smartphones, laptops, and traditional servers is limited, the semiconductor content per device continues to increase, driving overall wafer demand upward.

World Advanced’s Q2 revenue reached NT$14.245 billion, up 13.7% quarter-on-quarter and 21.8% year-on-year. Gross margin was 32.3%, up 3 percentage points quarter-on-quarter and 4.3 percentage points year-on-year. Operating margin was 20.4%, up 3.7 percentage points quarter-on-quarter and 4.2 percentage points year-on-year. Net profit attributable to owners of the parent company was NT$2.975 billion, up 32.4% quarter-on-quarter and 45.6% year-on-year. EPS was NT$1.56.

By product category, Q2 revenue was still dominated by power management ICs, increasing their share to 77%. Large-panel driver ICs declined to 12%, small-to-medium panel driver ICs accounted for about 7%, and others about 4%.