Nan-Chun International's Server Component Shortage Eases, Q2 to Be Yearly Low; VR and ASIC Slides to Ramp in Q3

Nan-Chun International (6584-TW), a manufacturer of server slide rails, participated in the TPEx earnings presentation today (27). Acting spokesperson and Assistant to the General Manager, Chung-Jen Jen, stated that thanks to the gradual alleviation of component shortages in the general-purpose server supply chain, coupled with the mass production launch of NVIDIA's Vera Rubin series slide rails and ASIC slide rails for U.S.-based CSP clients in Q3, Q2 operations have been confirmed as the annual low point, with sequential quarterly growth expected to resume thereafter.

Jen mentioned that earlier, NVIDIA's GB series faced delays in new product introduction and certification compared to peers, while general server shipments were constrained by component shortages, limiting Q2 deliveries and market share. However, the development timeline for the next-generation Vera Rubin series slide rails has now fully caught up, with small-volume shipments starting in August and mass deliveries to top-tier cloud providers commencing in September. As the proportion of high-end AI server slide rail shipments increases, this will further drive upward momentum in average selling prices and gross margins.

Regarding capacity allocation, Jen noted that the two Eagle Stream production lines at the leased Vietnam factory remain fully loaded, while the Birch Stream line continues automation improvements, with dedicated lines for 4U storage racks and concealed slide rails scheduled for introduction in Q4. The company's self-built Vietnam plant is currently undergoing construction permit applications, with completion expected by the end of next year, expanding the total production line capacity to 20 lines.

Jen highlighted that due to major customers implementing non-Taiwan and non-China production policies, Vietnam's contribution to consolidated revenue reached 20% in Q2 and is expected to exceed 30% in Q3. Leveraging local material costs that are 20–30% lower than Taiwan's, along with favorable exchange rates, the company has effectively supported gross margin performance.

In response to competition, Jen stated that Nan-Chun has established a rigorous intellectual property management system, with dedicated engineers forming three teams that monitor peer patent activities monthly. Any similar designs are first reviewed by external patent firms to ensure infringement risks are avoided. To significantly accelerate new product introduction timelines, the company has narrowed the development gap with peers in the VR generation to within one quarter.

On pricing, GB300 slide rails are quoted between $60 and $70, while the next-generation VR slide rails range from $70 to $80. Compared to past delays in GB series development, the company has now built over 30 cross-sectional specifications and a robust patent portfolio for the VR generation, shortening customized development timelines by three to six months. A dedicated line at the Yunke III plant has been established to accelerate mass production.

In terms of product mix, Nan-Chun International achieved an EPS of nearly NT$6.5 in the first half of the year. Server products accounted for 70% of total revenue in the first half, with pure GB series contributing approximately 5%. Including switches and other AI-related products, the broader AI-related segment accounted for 15% to 20% of revenue.