Trainium 3 begins volume ramp, Trainium 4 progressing well; maintain Overweight on Alchip Technologies
AI summary card
Trainium 3 begins volume ramp, Trainium 4 progressing well; maintain Overweight on Alchip Technologies
J.P. Morgan believes Alchip Technologies will benefit from the 2H26 ramp of AWS Trainium 3, on-schedule progress of Trainium 4, and large CSPs shifting toward CoT/CoWoS models, maintaining its NT$6,000 target price.
- May revenue declined 9% month over month, but Trn3 started small-volume shipments in late May; the report expects June revenue to grow more than 70% month over month and continue ramping in 2H26.
- The N2 Trn4 project is expected to tape out before the end of 2026 and enter mass production from late 2027 to early 2028, with Alchip Technologies seen as the sole backend design service partner.
- For N2 projects, ASP is expected to be 2-3x higher than N3 projects due to the 2nm compute die, 3nm I/O die, larger package area, and 3D SoIC complexity.
- Large CSPs are shifting toward CoT/semi-CoT models to reduce procurement costs, and more chip designs are migrating to CoWoS, which could bring new medium-term business to Alchip Technologies.
Report interpretation
Overview
This report covers Alchip Technologies (世芯科技, 3661.TW). J.P. Morgan maintains an Overweight rating and a target price of NT$6,000. The core thesis is that Trainium 3 has begun ramping, Trainium 4 is progressing well, and adoption of CoT and CoWoS among large CSPs is likely to expand the company's medium-term opportunities.
Core views
The report's core views include: first, although May revenue was slightly weaker due to a slower ramp in ADAS projects and a high NRE base in April, Trn3 has already begun shipping and is expected to accelerate meaningfully in June and 2H26; second, the N2 Trn4 project is progressing on schedule, with Alchip Technologies' role in backend design services becoming clearer; third, CSPs are gradually adopting the CoT model to reduce procurement costs, while advanced packaging migration is also increasing demand for backend design support; fourth, valuation is based on 25x 12-month forward P/E, with the target multiple below the historical five-year average.
Analysis framework
The report mainly combines supply chain checks, company data, J.P. Morgan forecasts, and project progress tracking to analyze the Trn3 ramp timeline, Trn4 tape-out and mass production schedule, changes in TSMC wafer procurement arrangements, and CoT/CoWoS adoption trends, while valuing the stock on 12-month forward P/E.
Methodology notes
25x 12-month forward P/E
The June 2027 target price of NT$6,000 is based on 25x 12-month forward P/E, a multiple below the historical five-year average.
Trainium 3 ramp and Trainium 4 tape-out checks
The report uses downstream supply chain observations and project progress to judge whether Trn3 shipments are accelerating and whether Trn4 can complete tape-out before the end of 2026.
Customer owned tooling and advanced packaging adoption
The report compares the cost differences among CoT, semi-CoT, and turnkey models, and assesses whether large CSPs and advanced packaging migration will increase demand for Alchip Technologies' backend design services.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Alchip Technologies (世芯科技, 3661.TW)Core covered name, benefiting from AI ASIC, Trainium projects, and CoT and CoWoS trends.
- Strengths
- Trn3 has already begun shipping, and the Trn4 project is progressing on schedule; the company is seen as the sole backend design service partner for Trn4 and has a track record of CoWoS chip mass production.
- Weaknesses
- May revenue was slightly weak, and ADAS project ramp was slower; the company also has high dependence on AWS projects and the pace of advanced-node/foundry packaging capacity.
- Comparison
- Compared with the traditional turnkey model, the CoT model carries a lower cost markup, and if large CSPs accelerate adoption, design service partners may gain more participation opportunities.
- Risks
- Potential equity dilution from share issuance, shipment constraints on the Li Auto autonomous driving project, insufficient wafer and packaging capacity, and CoT discussions that have not yet converted into confirmed project wins.
Key data
- Current priceNT$4,250.00Price date is 2026-06-15.
- Target priceNT$6,000.00Target price horizon is June 2027.
- RatingOverweightJ.P. Morgan maintains a bullish rating.
- Implied upsideapproximately 41.2%Calculated based on the NT$6,000 target price and NT$4,250 current price.
- Valuation method25x 12-month forward P/EThe report states this multiple is below the historical five-year average.
- May revenue performancedown 9% month over monthThe report attributes this to a high NRE base in April and production disruptions in automotive projects.
- June revenue expectationmore than 70% month-over-month growthJ.P. Morgan estimates the rapid Trn3 ramp will drive a sharp increase in June.
- Potential Trn3 lifetime shipment volumeup to approximately 5 million unitsDepends on AWS's ability to secure wafer and packaging capacity.
- Trn4 timelinetape-out before the end of 2026, mass production from late 2027 to early 2028The report believes the N2 project is still progressing on schedule.
- N2 project ASP change2-3x higher than N3Driven by the more complex 2nm/3nm chip combination, larger package area, and 3D SoIC packaging.
- CoT cost comparisonCoT markup of about 10-20%, semi-CoT about 40%+, turnkey about 60-70%+The report believes large CSPs will increase CoT or semi-CoT adoption to reduce costs.
Impact & implications
If Trn3 continues to ramp through 2H26 as the report expects, and Trn4 tapes out on schedule and moves into subsequent mass production, Alchip Technologies' revenue visibility and the market's understanding of its role in the supply chain could improve. Over the medium term, CSP adoption of CoT and greater design migration to CoWoS may expand the company's opportunities in AI ASIC backend design services; however, working capital, equity dilution, constraints in specific automotive projects, and wafer/packaging capacity remain key constraints.
Risks
- New share issuance to supplement working capital for N3 projects could lead to equity dilution.
- The Li Auto autonomous driving project faces shipment restriction risk.
- Production disruptions in automotive projects may continue for another 1-2 months.
- Trn3 lifetime shipment volume depends on AWS's ability to secure wafer and packaging capacity.
- The market worries Trainium could be delayed by memory shortages, although the report says no scheduling changes have yet been observed in the downstream supply chain.
- CoT-related discussions are still at an early stage, and final project wins cannot yet be confirmed.
What to watch
- Whether June revenue achieves the report's estimated month-over-month growth of more than 70%.
- Whether Trn3 monthly revenue reaches a peak in the later part of 3Q26 and remains strong through year-end.
- Whether Trn4 can complete tape-out on schedule before the end of 2026.
- Whether the N2 project enters mass production from late 2027 to early 2028.
- Whether TSMC aligns wafer procurement more directly with customers or key design service partners, thereby reducing supply chain noise.
- Whether large CSP CoT or semi-CoT discussions convert into confirmed projects.
- The pace of CoWoS adoption in CPU and ASIC designs.
- Follow-up developments on potential share issuance, working capital needs, and Li Auto project constraints.