Semiconductor test factory KYEC recently benefited from the strong momentum of demand for artificial intelligence (AI) chips and announced better-than-expected financial results for the third quarter of 2025. According to a foreign-invested Citi research report, KYEC's gross profit margin reached 36% in the third quarter, and its net profit was NT$2.3 billion, an increase of 6% from the second quarter, exceeding Citigroup and market expectations of 17% to 22%.
KYEC expects this strong AI momentum to continue into the fourth quarter. It expects fourth-quarter revenue to increase by approximately 6% to 8% quarter-on-quarter, and there is room for further improvement in gross profit margin. Citigroup is optimistic that KYEC will continue to benefit from the strong shipments of two major AI chips, GPU and ASIC, so it reiterates its "buy" rating and significantly raises the target price from NT$164 to NT$271.
KYEC expects that overall GPU revenue will grow by more than 60% in 2026, thanks to the stabilization of AI demand and the lengthening of chip testing time. In addition, on the main NVIDIA side, due to the longer testing time of the next-generation Rubin GPU, NVIDIA's revenue contribution is expected to further increase from 40% in the second half of 2025 to more than 50% in 2026. Also, NVIDIA CEO Jen-Hsun Huang mentioned at the latest GTC conference that Blackwell+Rubin GPU shipments are expected to reach 20 million units in 2025 and 2026.
In addition to the promising prospects of GPUs, KYEC will also benefit from the strong momentum of AI ASIC, especially the demand for TPU and ARM architecture CPUs from Google. Although the current testing time of AI ASIC is shorter than that of GPU, it is expected that with the increase of more advanced process nodes and burn-in demand, this trend will continue to support KYEC's operations until 2027.
Citi pointed out that KYEC’s gross profit margin is expected to show an upward trend. There are two main reasons. The first is the longer test time, which lengthens the terminal test time. In addition, wafer-level test outsourcing is increasing, including AI ASIC wafer-level test outsourcing from TSMC. The current revenue contribution from wafer-level testing accounts for approximately 30% of KYEC’s total revenue.
Based on the above factors, Citigroup has raised its profit forecast for KYEC and expects revenue to achieve strong annual growth of 42% in 2026, and gross profit margin and operating profit margin are expected to reach 38% and 30% respectively. The company's capital expenditure target for 2025 remains at NT$37 billion, and is expected to be revised upward in 2026.