Asia technology tracker: AI supply chain strength continues, but DDIC, autos, and supply bottlenecks are driving sector divergence

Overview

This is a J.P. Morgan Asia Technology Tracker covering Asia technology, semiconductors, PCB/HDI, DDIC, and China autos, with additional updates on Japanese and European companies. The core of the report is 2Q26 earnings previews, supply chain feedback, and investor marketing feedback, emphasizing that AI data center demand remains strong, but pricing, share, supply, and earnings upgrade momentum are clearly diverging across sub-sectors.

Core views

The core views include: first, TSMC is driven by data center AI demand, with 2Q26 revenue reaching the high end of guidance and gross margin expected to exceed guidance, supported by high utilization of N3/N5, hot run order premiums, and efficiency gains. Second, DDIC demand lacks AI-side support and consumer electronics remain weak, leaving limited recovery catalysts in 2H26, but supply chain price increases are improving ASP and gross margin. Third, the AI server PCB/HDI supply chain may see phase changes in leadership, with Unimicron likely to gain share while Victory Giant's short-term share may be affected by technical issues. Fourth, China auto stock performance is more correlated with earnings upgrades, with preference in 2H for Geely, NIO, and BYD. Fifth, Nokia and STMicroelectronics are supported by AI, Cloud, and Optical demand, but supply and gross margin guidance still need close attention.

Analysis framework

The report combines investor meeting feedback, supply chain checks, company earnings previews, comparisons of revenue and gross margin guidance, and tracking of market performance and earnings expectation revisions to form cross-industry, multi-company, and multi-region investment judgments.

Methodology notes

• Supply chain validationSupply Chain Checks

  Assess share, supply-demand, and pricing changes through supply chain research

  The report uses supply chain checks to assess share changes for Unimicron and Victory Giant in AI server compute tray boards, as well as the transmission of price increases across DDIC foundry, OSAT, and fabless segments.

• Earnings previewEarnings Preview

  Use revenue, gross margin, orders, and guidance changes to forecast earnings risk-reward

  The report evaluates whether there may be upside surprises, guidance upgrades, or gross margin uncertainty around 2Q26 earnings and FY26 guidance for TSMC, Nokia, STMicroelectronics, China auto companies, and others.

• Earnings revision momentumEarnings Revision Momentum

  Use consensus earnings upgrade trends to explain and predict stock performance

  In the China auto section, the report argues that Sinotruk, Geely, and Nio, which performed relatively well in 1H26, were all accompanied by earnings upgrades, and stock selection in 2H should continue to focus on earnings upgrade potential.

Asset mapping & comparison

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

• TSMC

  Core beneficiary of AI data centers and advanced process technologies

  Strengths

  2Q26 revenue reached the high end of guidance, gross margin is expected to exceed guidance, N3/N5 utilization is high, and tight supply-demand conditions may continue.

  Weaknesses

  N2 ramp-up and overseas fabs may dilute gross margin.

  Comparison

  Compared with the weak-demand DDIC chain, TSMC benefits more directly from AI compute demand.

  Risks

  Advanced process capacity expansion, overseas fab costs, customer demand cadence, and easing supply-demand imbalance.

• Novatek

  Representative DDIC fabless company

  Strengths

  Price increases and a better SoC mix should help improve FY26 gross margin.

  Weaknesses

  DDIC demand in 2H26 remains weak, consumer electronics are soft, and there is no AI demand pull-through.

  Comparison

  Compared with AI beneficiary segments such as TSMC, Novatek has weaker short-term demand momentum.

  Risks

  DDIC shipment declines, insufficient price pass-through, and weaker-than-expected progress in 4nm AI ASIC.

• Chipbond

  DDIC OSAT and potential SiPh beneficiary

  Strengths

  OSAT price increases support gross margin, and SiPh gold-bumping opportunities may provide upside catalysts.

  Weaknesses

  Core DDIC demand remains weak, and the stock is currently kept at Neutral.

  Comparison

  Relative to ChipMOS, the report believes Chipbond is slightly ahead in advancing SiPh qualification.

  Risks

  SiPh certification progress, delayed DDIC demand recovery, and customer order volatility.

• Unimicron

  Potential beneficiary of share gains in AI server PCB/HDI

  Strengths

  Expected to gain about 40% share in next-generation compute tray boards, while PCB/HDI supply is already very tight.

  Weaknesses

  Tight supply may limit delivery flexibility.

  Comparison

  Relative to current leader Victory Giant, Unimicron may regain leadership in the next cycle.

  Risks

  Share recovery falling short of expectations, changes in AI server project timing, and capacity allocation pressure.

• Victory Giant

  Important current participant in the AI server PCB/HDI supply chain

  Strengths

  Currently in a leading position in the present generation.

  Weaknesses

  Short-term share may decline temporarily due to minor technical issues.

  Comparison

  The report expects its share may temporarily converge with new suppliers, while Unimicron's share rises.

  Risks

  Progress in resolving technical issues, customer qualification, and next-cycle share changes.

• Geely

  One of the preferred China auto names for 2H

  Strengths

  Relatively better performance in 1H26 with support from earnings upgrades, and the report lists it as the top pick for 2H.

  Weaknesses

  The industry as a whole is underperforming the broader market, and competition and earnings volatility remain.

  Comparison

  The report ranks Geely first, followed by NIO, then BYD.

  Risks

  Failure of earnings upgrades to materialize, price competition, and changes in demand or policy.

• NIO

  One of the preferred China auto names for 2H

  Strengths

  Although down in 1H26, it outperformed the sector relatively and was accompanied by consensus earnings upgrades.

  Weaknesses

  It still has negative return performance, and pressure to deliver earnings remains high.

  Comparison

  It ranks behind Geely and ahead of BYD in the report's 2H preferences.

  Risks

  Delivery, gross margin, expense control, and earnings expectation revision risk.

• BYD

  China auto name to watch in 2H

  Strengths

  It is still included in the 2H preferred list.

  Weaknesses

  Relative to Geely and NIO, the report ranks its upside later.

  Comparison

  The report prefers the earnings upgrade momentum of Geely and NIO.

  Risks

  Intensifying competition, downward earnings revisions, and export and policy risks.

• Nokia

  Beneficiary of AI, Cloud, and Optical orders

  Strengths

  Q2 Cloud and AI orders are expected to be strong, and there is room for upgrades to full-year IP and Optical growth guidance.

  Weaknesses

  Whether FY26 guidance is raised depends on supply availability.

  Comparison

  Like STMicro, it benefits from AI and optical communications demand, but Nokia's key variable is more supply-related.

  Risks

  Supply constraints, order delivery timing, and 2H seasonal execution.

• STMicroelectronics

  Name to watch for AI revenue upgrades and 3Q guidance

  Strengths

  FY26 AI revenue guidance was raised to about $1bn, and Q3 revenue guidance is expected to be better than normal seasonality.

  Weaknesses

  Gross margin trajectory remains the key uncertainty.

  Comparison

  Compared with Nokia, STMicro's key variable is more concentrated on how AI revenue affects quarter-on-quarter gross margin trends.

  Risks

  Gross margin guidance below expectations, AI revenue delivery, and cyclical demand volatility.

Key data

• Number of investor meetingsover 50 investorsJ.P. Morgan met with more than 50 investors in Hong Kong last week to summarize Asia technology investor focus areas and feedback.
• TSMC June revenueNT$443bnJune revenue increased 6% month-on-month and 68% year-on-year.
• TSMC 2Q26 preliminary salesNT$1,270bn2Q26 preliminary sales rose 12% quarter-on-quarter and 36% year-on-year, reaching the high end of 2Q26 US dollar revenue guidance.
• TSMC 2Q26 GM estimate69.5%JPMe estimates gross margin at 69.5%, above the guided range of 65.5%-67.5%.
• TSMC revenue growth forecast37%/34%/23% YoY in 2026/27/28Forecast year-on-year revenue growth in US dollar terms, driven by larger die size, chiplet adoption, and ASIC growth.
• Unimicron expected share40%Unimicron is expected to regain leading share in next-generation major AI server compute tray boards.
• Novatek FY26 GM estimate39.5%Expected to improve by about 2 percentage points year-on-year, benefiting from price increases and a better SoC mix.
• China autos YTD performance-17%Measured by the MSCI China auto index, weaker than MXCN's -10%.
• STMicro FY26 AI revenue guidanceabout $1bnThe company raised its FY26 AI revenue guidance from previously nicely above $500m to about $1bn.
• Nokia possible IP and Optical growth guidanceup to 28%The current midpoint guidance is 19%; if supply is available, there is potential for full-year guidance upgrades in Network Infrastructure.

Impact & implications

The investment implication is that AI infrastructure remains the strongest core theme in the technology chain, but investments should distinguish between beneficiary segments and pressured segments. TSMC, AI server PCB/HDI, optical communications, and some cloud network equipment have relatively strong fundamental support; DDIC and consumer electronics-related chains lack short-term demand catalysts and can only rely on price increases and cost pass-through to improve profits; China auto stocks require close tracking of earnings upgrades rather than just sales or sector beta.

Risks

• Insufficient supply of AI servers and optical communications may limit revenue and guidance upgrades.
• DDIC demand may remain weak in 2H26, and price increases may be insufficient to offset shipment declines.
• Weak consumer electronics demand may drag on display drivers, semiconductors, and related hardware chains.
• Changes in PCB/HDI share may be affected by technical issues, certification progress, and customer project timing.
• If earnings upgrades in China's auto industry do not materialize, stock performance may remain under pressure.
• TSMC gross margin may be diluted by N2 ramp-up and overseas fab costs.
• STMicroelectronics gross margin guidance remains uncertain.

What to watch

• Whether TSMC's official 2Q26 gross margin is above guidance and whether 67%+ gross margin can be sustained over the next few quarters.
• Changes in N3/N5 utilization, hot run order premiums, and AI ASIC/CPU demand.
• The actual shares of Unimicron, Victory Giant, and new suppliers in next-generation AI server compute tray boards.
• Whether price increases by DDIC fabless, foundry, and OSAT players can continue to pass through to gross margin.
• Progress of Novatek's 4nm AI ASIC and Chipbond's SiPh qualification pipeline.
• Whether 2Q26 earnings season and full-year consensus expectations for China auto companies continue to be revised upward.
• Whether Nokia raises FY26 Network Infrastructure, IP, and Optical revenue guidance.
• STMicroelectronics Q3 revenue and gross margin guidance.