NVIDIA's large orders have overwhelmed Jingyuan Electronics, with order visibility extending to 2026, fully attacking AI testing, and gross margins looking promising

As NVIDIA secures over 70% of TSMC's (2330) advanced CoWoS-L packaging capacity this year, its main testing partner, King Yuan Electronics (2449), sees a surge in orders. This wave of orders is expected to extend visibility all the way to 2026, making it another major winner. King Yuan Electronics will also phase out its lower-margin packaging business, reallocating all manpower and resources to its higher-margin testing business to boost operations. Industry insiders point out that NVIDIA's Blackwell architecture chips are gaining strong momentum, with orders for AI chips like GB200/B300 already filled through the end of this year. The latest RTX 50 series graphics chips for consumer use have also become hot commodities, recently experiencing shortages and significant price increases for end products, reflecting a "hard-to-get" situation. As a result, NVIDIA is expanding orders along the supply chain and hopes to have partners provide more capacity. In response to NVIDIA's large orders, TSMC has outsourced the WoS (Wafer on Substrate) capacity within its CoWoS advanced packaging. Not only has ASE Technology Holding Co., Ltd. (3711) taken on a substantial amount of advanced packaging and testing orders, but King Yuan Electronics has also secured a large number of front-end wafer testing (CP) and back-end final chip testing (FT) orders from high-performance computing customers, filling all of King Yuan Electronics' existing capacity. King Yuan Electronics is the largest professional chip testing factory in Taiwan and has some packaging business. As King Yuan Electronics sees a significant increase in testing orders, the supply chain has recently revealed that the company has issued a notice to clients about ending its packaging business, planning to cease operations in this area by June 30 of this year. King Yuan Electronics confirmed that it indeed plans to phase out its packaging business, with all personnel in the packaging-related business group remaining and being fully transferred to the testing-focused department. Industry analysts believe that King Yuan Electronics' exit from the packaging business is a strategy to fully undertake the massive testing orders for NVIDIA's Blackwell architecture chips. Since testing orders have better margins than packaging, King Yuan Electronics is simultaneously pushing for growth in operations. According to sources, King Yuan Electronics currently has about 10% of its revenue coming from packaging capacity, primarily focused on lower-margin memory card chip packaging. If it can redirect related manpower and resources towards the higher-margin testing business, it will positively impact profitability and bring at least double-digit revenue contributions to the company. Informed sources revealed that King Yuan Electronics' notice to clients about exiting the packaging business is primarily a strategy to respond to the influx of large testing orders from American clients, aiming to shift all manpower and resources from the relatively lower-margin packaging business to the more profitable testing business. With a significant increase in orders, King Yuan Electronics' capital expenditure plans for this year are indicative. The company plans to spend NT$23.3 billion in capital expenditures in 2025, setting a historical high and increasing by 70% compared to last year, while also applying for NT$14 billion in bank syndication loans, demonstrating strong confidence in future orders