New ASIC project win opens upside for GCE; Goldman Sachs maintains Buy

Overview

This report is based on Goldman Sachs' meeting with GCE at Taiwan Computex & Corporate Day, focusing on GCE's new ASIC project, switch orders, 1.6T technology upgrade, gross margin trend, and future capacity expansion. Goldman Sachs maintains a positive view on GCE, believing the company has a solid position in the fast-growing cloud PCB market.

Core views

The core view is that GCE has for the first time announced winning a new ASIC project from a major CSP customer, with shipments expected to begin in 4Q26, and that the more than 30-layer PCB design will bring higher ASP and gross margin; strong momentum in 400G/800G switch orders supports near-term demand visibility; the 1.6T switch remains in the R&D stage and is expected to begin small-volume production by the end of 2026; and a higher revenue mix from AI servers will drive sequential gross margin improvement through 2026.

Analysis framework

Goldman Sachs combines management feedback from company meetings, project specifications, AI PCB model forecasts, cloud PCB industry demand growth, capacity expansion plans, and the P/E valuation method to assess GCE's upside in revenue, gross margin, and valuation.

Methodology notes

• Valuation methods22x 4Q26E-3Q27E P/E

  12-month target price methodology

  Goldman Sachs' 12-month target price of NT$1,585 is based on 22x 4Q26E-3Q27E P/E, a multiple in line with the valuations of leading AI PCB names over the past three years.

• factor frameworkGS Factor Profile

  comparison of growth, financial returns, valuation multiples, and composite factors

  This framework compares a stock's growth, financial returns, valuation multiples, and composite score against the coverage universe and peers to provide investment context.

• M&A frameworkM&A Rank

  scoring of the probability of becoming an acquisition target

  Goldman Sachs discloses that it uses an M&A rank from 1 to 3 to assess the probability that a covered company becomes an acquisition target; this report does not provide a specific M&A score for GCE.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• GCE (2368.TW)

  Report subject; Goldman Sachs maintains a Buy rating and assigns a target price of NT$1,585.

  Strengths

  Won ASIC project from a major CSP customer, strong 400G/800G switch orders, AI project gross margin above company average, solid position in the cloud PCB market, proactive capacity expansion.

  Weaknesses

  FX factors are the main near-term pressure mentioned by management; ramp-up of new capacity may bring cost pressure.

  Comparison

  GCE's valuation is above its own historical average P/E level, driven by AI server demand, but still below the average level of Taiwan AI server-related companies.

  Risks

  AI server demand weaker than expected, delays in qualification certification for Nvidia OAM/UBB products, HDI demand weaker than expected, and higher-than-expected ramp-up costs for new capacity.

Key data

• New ASIC project shipment timing4Q26From a major CSP customer; first announced project win, with PCB specifications of more than 30 layers.
• New ASIC project PCB TAMapproximately USD$10bnGoldman Sachs estimates this project's TAM at about 1.7x GCE's 2027E revenue.
• Average gross margin of AI projects40-50%Higher than the company's current average gross margin of about 35%, and could further improve with better pricing or yield improvement.
• Cloud PCB demand growth15% 2024-26E CAGRGoldman Sachs expects the cloud PCB market growth rate to be significantly higher than the overall RPCB+HDI market's roughly 5% 2024-26E CAGR.
• GCE cloud PCB market share20%+ in 2022The report states that GCE is a key global supplier of cloud server and switch PCBs.
• 1.6T switch PCB specifications46-52 layers, M9 grade CCL, low-DK2 glass fiberThe company is in the R&D stage and is expected to begin small-volume production by the end of 2026.
• Thailand plant average monthly capacity value3Q26 NT$1.3bn vs. 2Q26 NT$600mnMainly driven by the ramp-up of phase two.
• Overall average monthly capacity value3Q26 NT$8.4bn vs. 2Q26 NT$7.5bnCapacity expansion at the Thailand plant is the main incremental source.
• Capacity expansion plan2027 second Thailand plant, 2028 second Suzhou plant, 2029 new Taiwan plantTo meet strong AI demand, the company plans to add three new plants over the next three years.
• Target priceNT$1,585Based on 22x 4Q26E-3Q27E P/E.

Impact & implications

If the new ASIC project enters mass production smoothly and secures a meaningful share, GCE's revenue base, product mix, and gross margin could all improve. Upgrades from 400G/800G to subsequent 1.6T switches will also increase PCB layer count and specifications, lifting value per unit. Meanwhile, investors need to watch whether AI server demand, qualification certifications, HDI demand, and the cost of ramping new capacity meet expectations.

Risks

• AI server market demand weaker than expected.
• Delays in qualification certification for the company's Nvidia OAM/UBB products.
• HDI demand weaker than expected.
• Ramp-up costs for added capacity higher than expected.
• FX volatility is the main recent headwind to gross margin.

What to watch

• Whether the new ASIC project begins shipments as planned in 4Q26.
• GCE's actual share and mass-production yield in the ASIC project.
• Visibility on 400G/800G switch orders and progress toward small-volume production of 1.6T switches by end-2026.
• Whether gross margin improves sequentially through 2026 and whether the revenue mix from AI servers continues to rise.
• The ramp-up of Thailand phase two capacity and the construction pace of future new plants in Thailand, Suzhou, and Taiwan.