Jiaze Financial Briefing: Q3 Gross Margin Expected to Stabilize, Optimistic on Volume Growth from New Platforms and Products

Connector manufacturer Jiaze (3533-TW) held its financial briefing today (13th). Due to elevated raw material costs, the company expects its gross margin in the third quarter to remain flat compared to the second quarter. However, with SO CAMM and QD now entering mass production and new platforms from Intel and AMD gradually being introduced, volume shipments are expected to begin ramping up from Q4 onward, with further growth anticipated in the first half of next year. The company remains optimistic about its future outlook.

Jiaze reported second-quarter revenue of NT$9.569 billion, up 2.59% sequentially and 14.78% year-over-year. Gross margin stood at 45.47%, down 4.08 percentage points sequentially and 5.53 percentage points year-over-year. Operating profit was NT$2.103 billion, down 22.36% sequentially and 19.08% year-over-year. Operating margin was 21.97%, a decline of 7.06 percentage points sequentially and 9.20 percentage points year-over-year. Net profit after tax reached NT$1.984 billion, down 17.19% sequentially but up 164.94% year-over-year. Earnings per share were NT$17.67.

For the first half of 2023, Jiaze recorded revenue of NT$18.896 billion, up 17.35% year-over-year. Gross margin was 47.48%, down 3.74 percentage points year-over-year. Operating profit was NT$4.811 billion, down 4.71% year-over-year. Operating margin was 25.46%, down 5.90 percentage points year-over-year. Net profit after tax was NT$4.381 billion, up 44.83% year-over-year. Earnings per share were NT$39.04.

Jiaze explained that the decline in gross margin during Q2 was primarily due to rising prices of three key raw materials—gold, copper, and plastic. Additionally, low-cost inventory was fully depleted in Q1, meaning current results now directly reflect higher input costs. The company expects gross margin to remain stable in Q3. However, pricing for new platforms and products can be set based on current material costs, allowing for better cost pass-through. Combined with learning curve improvements, this is expected to support gross margin stabilization and potential recovery.

On the product front, Jiaze noted that volume ramp-up for new platforms this year has been constrained by supply chain component shortages, limiting customers’ motherboard production volumes. However, finished goods inventory levels at customer sites remain very low, and clients have indicated they can ship immediately upon availability, indicating strong underlying market demand. The main bottleneck currently lies in supply chain component availability.

Jiaze pointed out that component shortages in the server market extend beyond CPUs, affecting memory, PCBs, and active/passive components, with memory shortages being the most severe. Recently, some customers have begun downgrading specifications—such as shifting from DDR5 to DDR4 or reducing memory capacity—which could help alleviate constraints on server motherboard production volumes in 2024.

Regarding Intel, the Eagle platform remains dominant, accounting for nearly 50% of Intel Server CPU shipments in Q2. Meanwhile, a new platform’s share has rapidly increased to around 40%. The company expects this new platform to surpass 50% by 2027, with certain high-end segments potentially reaching 60–70%. For AMD, the SP5 platform remains the primary driver, while Venice penetration is still below 3%. However, next year could see penetration exceed 30%, possibly reaching around 40%.

On new products, QD officially entered mass production in July and is rapidly expanding capacity. It accounted for approximately 1% of July revenue. If expansion proceeds smoothly, its revenue contribution could rise to 2–3% in the second half. Although QD’s gross margin is below the company average, its high unit price provides positive contributions to both revenue and earnings per share. SO CAMM has also officially entered mass production, with current capacity utilization exceeding 90%.