17 March 2024 | 4:47PM CST

Aspeed (5274.TWO)
Earnings upcycle awaits; AI acceleration to drive further BMC demand
Buy

boom; Initiate at Buy with TP of NT$3,800

5274.TWO 12m Price Target: NT$3,800.00 Price: NT$2,770.00 Upside: 37.2%

Evelyn Yu
+886(2)2730-4187 | evelyn.yu@gs.com
Goldman Sachs (Asia) L.L.C., Taipei Branch

Aspeed is the leading server BMC supplier, with 70% of global Bruce Lu
+886(2)2730-4185 | bruce.lu@gs.com
market share. We expect an earnings upcycle for Aspeed especially Goldman Sachs (Asia) L.L.C., Taipei Branch

from 2025, with revenue/earnings CAGRs rising to 58%/75% in Allen Chang

+852-2978-2930 | allen.k.chang@gs.com
2024-26E, driven mostly by AI. We also see more business Goldman Sachs (Asia) L.L.C.

opportunities for Aspeed from server architecture changes to Verena Jeng

+852-2978-1681 | verena.jeng@gs.com
support its multi-year growth. We initiate at Buy with 12m TP of Goldman Sachs (Asia) L.L.C.

NT$3,800 (32x FY26E discounted P/E) implying 37% upside. Our Key Data __________________________________
2025/26E EPS are 4%/11% above consensus as we believe the Market cap: NT$104.7bn / $3.3bn
Enterprise value: NT$101.0bn / $3.2bn
market has yet to fully appreciate the BMC demand upside from AI 3m ADTV: NT$1.2bn / $38.5mn
Taiwan
servers, especially in DPUs, which we view as the key upside Taiwan Semiconductor
M&A Rank: 3
potential that investors have overlooked. We also see Nvidia’s Leases incl. in net debt & EV?: Yes
upcoming GTC event as a near-term catalyst for AI sentiment. GS Forecast ________________________________
12/22 12/23E 12/24E 12/25E
Revenue (NT$ mn) 5,210.1 3,130.4 4,593.5 7,086.8
In this report, we provide in-depth proprietary TAM analysis. Overall, EBITDA (NT$ mn) 2,689.2 1,385.0 2,212.7 3,666.0
we note: 1) AI servers need more than double the BMC usage vs EPS (NT$) 55.72 26.66 44.11 75.99
P/E (X) 39.1 103.9 62.8 36.5
general servers, and 2) Aspeed’s total dollar content per server P/B (X) 18.4 27.3 22.3 16.8
Dividend yield (%) 2.1 0.8 1.3 2.2
should rise to c.US$36 in 2026E (vs US$19 in 2023) with TAM N debt/EBITDA (ex lease,X) (1.1) (2.6) (2.2) (1.4)
growing to US$505mn in 2026E (vs US$205mn in 2023). CROCI (%) 90.6 37.8 118.8 129.9

2aeb9e8b174644998c7303f5a989d953
FCF yield (%) 2.7 2.4 1.9 1.5

Aspeed has underperformed Taiex by 21% YTD, which we believe 9/23 12/23E 3/24E 6/24E
EPS (NT$) 7.16 8.20 8.00 9.87
has largely priced in investor concerns on AI servers cannibalizing
demand for general servers in 2024. Share prices for more GS Factor Profile ____________________________
Growth
immediate AI beneficiaries, ie, Nvidia and other Taiwan downstream
Financial Returns
AI plays, are up 200-500%+ since 2023, vs Aspeed at only 64%.
However, we believe Aspeed’s earnings outlook will soon catch up Multiple

as we forecast 24%/35% of its 2025/26E revenue will come from Integrated

the structural server changes and AI-related demand. We expect

Percentile 20th 40th 60th 80th 100th
investors to look past 2024 weakness and focus on its value under
wider AI mega trends. 5274.TWO relative to Asia ex. Japan Coverage
5274.TWO relative to Taiwan Semiconductor

Downside risks: Softer server market recovery, slower BMC Source: Company data, Goldman Sachs Research estimates.
See disclosures for details.
penetration in AI servers, and intensifying competition.

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.

skcu8995@skl.com.tw Mark Chen 03/17/24 12:13:29 PM Shin Kong Life Insurance

Goldman Sachs Aspeed (5274.TWO)

Aspeed (5274.TWO) Income Statement (NT$ mn) _______________________________

Buy Rating since Mar 17, 2024 Total revenue
12/22
5,210.1
12/23E
3,130.4
12/24E
4,593.5
12/25E
7,086.8
Cost of goods sold (1,819.0) (1,122.5) (1,639.6) (2,527.2)
SG&A (314.5) (299.7) (327.4) (387.2)
Ratios & Valuation _______________________________________ R&D (627.7) (628.9) (688.2) (759.3)
12/22 12/23E 12/24E 12/25E Other operating inc./(exp.) -- -- -- --
P/E (X) 39.1 103.9 62.8 36.5 EBITDA 2,689.2 1,385.0 2,212.7 3,666.0
P/B (X) 18.4 27.3 22.3 16.8 Depreciation & amortization (240.3) (305.7) (274.4) (252.9)
FCF yield (%) 2.7 2.4 1.9 1.5 EBIT 2,448.9 1,079.3 1,938.3 3,413.1
EV/EBITDAR (X) 29.6 72.9 45.2 27.2 Net interest inc./(exp.) 28.8 72.8 71.4 43.2
EV/EBITDA (excl. leases) (X) 29.6 72.9 45.2 27.2 Income/(loss) from associates -- -- -- --
CROCI (%) 90.6 37.8 118.8 129.9 Pre-tax profit 2,614.9 1,195.2 2,029.7 3,496.3
ROE (%) 52.4 24.2 39.1 52.6 Provision for taxes (509.3) (188.1) (361.3) (622.3)
Net debt/equity (%) (63.0) (95.1) (102.2) (80.0) Minority interest -- -- -- --
Net debt/equity (excl. leases) (%) (63.0) (95.1) (102.2) (80.0) Preferred dividends -- -- -- --
Interest cover (X) 879.6 93.2 96.9 110.2 Net inc. (pre-exceptionals) 2,105.6 1,007.1 1,668.4 2,874.1
Days inventory outst, sales 19.5 59.4 57.2 49.1 Post-tax exceptionals -- -- -- --
Receivable days 64.0 117.6 97.7 97.4 Net inc. (post-exceptionals) 2,105.6 1,007.1 1,668.4 2,874.1
Days payable outstanding 136.8 594.7 698.2 473.3 EPS (basic, pre-except) (NT$) 55.72 26.66 44.11 75.99
DuPont ROE (%) 46.9 26.3 35.5 46.1 EPS (diluted, pre-except) (NT$) 55.35 26.66 44.11 75.99
Turnover (X) 0.9 0.4 0.5 0.7 EPS (basic, post-except) (NT$) 55.72 26.66 44.11 75.99
Leverage (X) 1.3 2.1 2.0 1.7 EPS (diluted, post-except) (NT$) 55.35 26.66 44.11 75.99
Gross cash invested (ex cash) (NT$) 2,751.4 1,594.4 1,577.8 3,181.3 DPS (NT$) 45.03 21.32 35.29 60.79
Average capital employed (NT$) 1,613.8 923.4 42.5 572.3 Div. payout ratio (%) 80.8 80.0 80.0 80.0
BVPS (NT$) 118.66 101.29 124.10 164.80
Balance Sheet (NT$ mn) __________________________________
Growth & Margins (%) ____________________________________ 12/22 12/23E 12/24E 12/25E
12/22 12/23E 12/24E 12/25E Cash & cash equivalents 2,829.0 4,742.9 5,896.6 6,085.3
Total revenue growth 43.2 (39.9) 46.7 54.3 Accounts receivable 994.6 1,022.6 1,437.3 2,343.2
EBITDA growth 43.7 (48.5) 59.8 65.7 Inventory 400.4 618.3 821.5 1,086.2
EPS growth 45.5 (52.2) 65.5 72.3 Other current assets 555.2 572.1 572.1 572.1
DPS growth 28.4 (52.6) 65.5 72.3 Total current assets 4,779.1 6,955.9 8,727.6 10,086.9
EBIT margin 47.0 34.5 42.2 48.2 Net PP&E 217.6 198.9 139.7 106.5
EBITDA margin 51.6 44.2 48.2 51.7 Net intangibles 757.0 588.0 452.8 313.2
Net income margin 40.4 32.2 36.3 40.6 Total investments 0.0 62.1 62.1 62.1
Other long-term assets 173.2 151.3 151.3 151.3
Price Performance _______________________________________ Total assets 5,927.0 7,956.2 9,533.5 10,719.9
5274.TWO (NT$) Taiwan SE Weighted Index Accounts payable 858.9 2,799.0 3,473.6 3,080.6
Short-term debt -- 1,100.0 1,100.0 1,100.0
4,500 24,000
Short-term lease liabilities -- -- -- --
4,000 22,000 Other current liabilities 525.9 185.7 225.7 265.7
Total current liabilities 1,384.8 4,084.7 4,799.3 4,446.3
3,500 20,000
Long-term debt -- -- -- --
3,000 18,000 Long-term lease liabilities -- -- -- --
2,500 16,000 Other long-term liabilities 54.4 40.6 40.6 40.6
Total long-term liabilities 54.4 40.6 40.6 40.6
2,000 14,000 Total liabilities 1,439.2 4,125.3 4,839.9 4,486.9

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Preferred shares -- -- -- --
Apr-23 Jul-23 Oct-23 Jan-24
Total common equity 4,487.8 3,830.9 4,693.6 6,232.9
3m 6m 12m Minority interest -- -- -- --
Absolute (10.6)% (1.6)% 4.1% Total liabilities & equity 5,927.0 7,956.2 9,533.5 10,719.9
Rel. to the Taiwan SE Weighted Index (19.8)% (15.4)% (18.6)% Net debt, adjusted (2,829.0) (3,642.9) (4,796.6) (4,985.3)
Source: FactSet. Price as of 15 Mar 2024 close.
Cash Flow (NT$ mn) ______________________________________
12/22 12/23E 12/24E 12/25E
Net income 2,105.6 1,007.1 1,668.4 2,874.1
D&A add-back 240.3 305.7 274.4 252.9
Minority interest add-back -- -- -- --
Net (inc)/dec working capital (52.2) 1,694.2 56.6 (1,563.5)
Other operating cash flow 15.9 (429.1) -- --
Cash flow from operations 2,309.6 2,577.9 1,999.4 1,563.4

Capital expenditures (120.4) (92.8) (40.0) (40.0)

Acquisitions -- -- -- --
Divestitures -- -- -- --
Others (54.6) 6.6 -- --
Cash flow from investing (175.0) (86.2) (40.0) (40.0)

Repayment of lease liabilities -- -- -- --

Dividends paid (common & pref) (1,202.4) (1,701.9) (805.7) (1,334.7)
Inc/(dec) in debt -- 1,100.0 -- --
Other financing cash flows (80.7) 24.1 0.0 0.0
Cash flow from financing (1,283.1) (577.9) (805.7) (1,334.7)
Total cash flow 851.5 1,913.9 1,153.8 188.7
Free cash flow 2,189.2 2,485.2 1,959.4 1,523.4

Source: Company data, Goldman Sachs Research estimates.

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skcu8995@skl.com.tw Mark Chen 03/17/24 12:13:29 PM Shin Kong Life Insurance

Goldman Sachs Aspeed (5274.TWO)

Table of Contents
PM summary 4

Key investment thesis in six charts 5

Unveiling Aspeed’s BMC’s silicon content value within AI server market 6

A closer look at BMC demand within Nvidia’s AI GPU systems 8

Accessing Aspeed’s BMC TAM fueled by AI demand trends 10

More TAM expansion to be driven by new business opportunities 13

Valuation: Initiate at Buy with TP at NT$3,800 17

Financial tables 21

Company profile 23

Investment Thesis, Price Target Risks and Methodology 24

Disclosure Appendix 25

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Goldman Sachs Aspeed (5274.TWO)

PM summary

Aspeed is a leading Taiwan-based IC (integrated circuit) design company, specializing in

BMC (baseboard management controller) SoCs (system on a chip), which is used to
remotely monitor the physical state of a server. The company is the largest BMC
supplier with c.70% of the global BMC market share, and 90% of its total revenue
comes from BMCs.

Expecting server market to gradually recover from inventory correction

From a top-down industry point of view, our house view is now forecasting the global
server market to recover by growing 8% YoY in 2024E, from a 13% decline in 2023,
thanks to general server recovery driven by a new product cycle (Intel Eagle stream,
AMD Genoa) and strong AI server ramps, which should more than double in 2024E.
Specifically, we forecast high-powered AI servers to see global shipments at 558k /
872k / 981k units in 2024 / 25 / 26E.

We are just at the beginning of BMC demand boom, driven by AI

We expect to see more significant revenue growth for its BMC segment, driven by AI
demand beyond 2024, thanks to Aspeed’s leading global position and incremental BMC
content value due to architecture changes for AI servers. We estimate BMC’s content
value per server to at least double in AI servers vs general servers (see Exhibit 2). We
also see more upside potential for Aspeed from Nvidia’s Bluefield-3 DPUs (data
processing unit) adoption within AI servers (see Exhibit 12). Moreover, the ongoing
technology migration also helps lift its ASP. Together with the rising ASP and incremental
BMC demand driven by AI servers, we estimate Aspeed’s traditional BMC revenue
TAM to show a 24% CAGR over 2023-2026E to US$343mn in 2026E (vs US$179mn
in 2023 and a ~10% in the past 8 years) (see Exhibit 20).

2aeb9e8b174644998c7303f5a989d953
Clear new product roadmap to further drive up TAM expansion within server market
Aspeed has a clear product roadmap with new business opportunities, given: 1) new
specifications / requirements for servers, and 2) structural demand driven by AI servers.
As well as the traditional BMC business, Aspeed also continues to expand its product
portfolio within the server market. Product lines include 1) Mini-BMC (Bridge IC [BIC]),
which has started shipping at end-2022, 2) PFR (Platform Firmware Resilience) IC,
expected to enter mass production by end-2024, and 3) I/O (input/output) expanders,
which are expected to ramp in 2026. Net net, we estimate that Aspeed’s combined
TAM will accelerate by a 35% CAGR from US$205mn in 2023E into US$505mn in
2026E, vs a ~12% CAGR in the past 8 years (Exhibit 32).

Initiate with Buy and TP of NT$3,800

Our 12-month TP of NT$3,800 is based on a target P/E of 32x (in line with its long-term
historical trading average) to our 2026E EPS, and discounted back to 2025E at 13.2%
CoE. Our key assumptions for CoE include: (1) 1.5x beta (sourcing BBG), (2) 4.0%
risk-free rate, and (3) a market risk premium at 6.25% (in line with GS house view).

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Goldman Sachs Aspeed (5274.TWO)

Key investment thesis in six charts

Exhibit 1: Global AI server demand on the rise Exhibit 2: Aspeed’s BMC shipment TAM to accelerate starting 2025
as more AI server demand emerges

25,000
(k unit)

20,000

15,000

10,000

5,000

-
2025E

2030E
2023E

2024E

2026E

2027E

2028E

2029E
2016

2017

2018

2019

2020

2021

2022

General servers HPC servers AI servers

Source: IDC, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Exhibit 3: Aspeed has a clear product roadmap with incremental Exhibit 4: We see strong TAM expansion for Aspeed during
dollar content within servers 2024-26E
Total ASP Aspeed could generate per server Aspeed’s total TAM (US$mn)

50 600 60%
(US$) (US$mn)
45 $40-44 505
40 500 50%
$34-37 $7-8
407
35
$27-29 $7-8 400 40%
30 $9-9.5
25 300 268 30%
$9-9.5 $9-9.5 $6-6.5
20 $18-19.5
205
189
15 $6-6.5 $6-6.5 $6-6.5 200 20%
$12-13 148
115 119 129
10 $18-20 92 100
5 $10-10.5 $12-13 $12-13 $12-13 100 10%

0
2020-2021 2022-2023 2024-2025 2026-2027 2028-2029 - 0%
2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E
BMC Mini BMC PFR IC I/O expander I/O expander PFR IC Mini BMC Traditional BMC YoY (%) (RHS)

2aeb9e8b174644998c7303f5a989d953
Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Exhibit 5: We expect Aspeed’s revenue to accelerate into 2024-26E Exhibit 6: Clear OPM expansion trend as revenue accelerates

14,000 (NT$mn) 80% 14,000 55%

12,000 60% 12,000 50%

10,000 40% 10,000 45%

8,000 20% 8,000 40%

6,000 0% 6,000 35%

4,000 -20%
4,000 30%
2,000 -40%
2,000 25%
0 -60%
- 20%
2023E

2024E

2025E

2026E
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2024E

2025E

2026E
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

I/O expander PFR IC Mini BMC Traditional BMC

Revenue (NT$mn) OpM (%, RHS)
Others PC/AV extension YoY (%, RHS)

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

Unveiling Aspeed’s BMC’s silicon content value within AI server market

The structural change of server architectures to meet AI demand

Currently, servers used in data centers are still mostly equipped with traditional
computing architectures including un-accelerated CPUs with basic networking
infrastructure. Driven by growing traditional computing requirements and new
applications such as generative AI demand, the traditional architectures of CPUs alone
are no longer sufficient to meet the accelerated computing demand. These new
scenarios rely on GPU-based hardware acceleration for optimal performance.
Additionally, high-speed networking devices such as DPUs (data processing units) are
essential due to the large volume of data involved. This helps in optimizing CPU
resources, I/O connectivity, etc, in order to achieve the best workload performance and
total cost of ownership (TCO).

Exhibit 7: The architecture difference between traditional servers vs AI servers

AI server (right hand side) nowadays equipped with GPUs and sometimes also DPUs

2aeb9e8b174644998c7303f5a989d953
Source: Company data

BMC demand at least double in an AI server vs general server

Due to the architecture differences, we see incremental new opportunities for Aspeed’s
BMC business. Within a general server, normally the server system requires only 1
BMC placed on the server mainboard (motherboard; MB), however, given the new
architecture design in optimizing the computing power within servers, AI servers are
now equipped with at least 1 GPU. Other than the original 1 BMC on motherboard,
we see demand for at least 1 additional BMC on GPU/compute tray for AI servers.
While linking a DPU to the AI server system is still optional nowadays, some DPUs (i.e.
Nvidia’s Bluefield-3 DPU) are embedded with 1 integrated BMC. Notably, Nvidia’s
Bluefield-3 DPU, released in mid-2023, is equipped with an integrated Aspeed
AST2600 BMC. The BMC serves as a dedicated processor to monitor the physical state
of the DPU board.

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 8: Aspeed’s BMC placed on server MB Exhibit 9: AI server structural change to drive more BMC demand

Source: Company data Source: Company data

Exhibit 10: The demand for BMCs at least double (from 1 to 2) for AI Exhibit 11: Nvidia’s bluefield-3 DPU is with an integrated BMC
server systems (Aspeed’s AST2600)

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

A closer look at BMC demand within Nvidia’s AI GPU systems

We conduct an in-depth analysis below to compare the BMC demand between general
servers vs three kinds of Nvidia AI server systems.

Exhibit 12: BMC demand overview in different Nvidia AI server architecture

*Assuming 1 grace-hopper superchip per compute tray. **Grace-Hopper is placed on an integrated board.

Source: Company data, Goldman Sachs Global Investment Research

DGX/HGX H100/H200/B100/B200 systems: 1 BMC per motherboard design remains;

however, incremental BMC demand comes from GPU/DPU. Under the GPU tray
structure, the GPU tray now requires also 1 BMC on the host interface board (HIB) side
(see Exhibit 13). Moreover, we note that in Nvidia’s reference design for its Bluefield-3
(BF-3) DPUs, each BF-3 DPU is embedded with 1 Aspeed AST2600 BMC. With Nvidia’s
strong promotion of its BF-3 DPU, we see more BMC demand upside potential coming
from the adoption of BF-3.

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Exhibit 13: Overview of building components on a GPU tray
1 BMC sits on HIB

Source: OCP, Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

MGX GH200 system: Nvidia’s MGX is an open, multi-generational accelerated

computing reference architecture built to allow rapid time-to-market adoption of key
platform technologies including CPUs, GPUs, and DPUs. It promotes the modular server
design for easier data center builds. Under the MGX architecture, system providers
(such as Supermicro) can design server structures based on Nvidia’s reference
architecture. We note that currently, the MGX system equipped with GH200 is normally
equipped with 1 Nvidia Grace Hopper superchip that contains 1 BMC per compute tray.
There are also more than 1 PCIe 5.0 x16 slots that allows users to connect BF-3 DPUs
(which has 1 BMC per BF-3 DPU), and we are assuming at least 1 DPU will be used for
the GH200 system from a longer term perspective.

Exhibit 14: Nvidia’s Grace Hopper superchip Exhibit 15: Overview of Nvdia’s Grace Hopper Superchip chip
design

Source: Company data Source: Company data

Exhibit 16: Example of one Gigabyte MGX GH200 server’s block diagram

2aeb9e8b174644998c7303f5a989d953

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

DGX GH200 AI supercomputer system: The DGX GH200 AI supercomputer system is

equipped with 256 chips with 256 compute trays. Each compute tray contains one
Nvidia GH200 Grace Hopper Superchip with 1 BMC, and each superchip is paired with 1
Nvidia Bluefield-3 DPU, directly connected to the Grace CPU root complex. Meaning
that there will be 2 BMCs in each compute tray, therefore the total BMC usage will be
up to 512+ in a DGX GH200 AI supercomputer system.

Exhibit 17: Overview of Nvidia’s DGX GH200 AI supercomputer system

Source: Company data

Accessing Aspeed’s BMC TAM fueled by AI demand trends

We conduct our proprietary BMC TAM (total addressable market) analysis below. We list
the TAMs from 3 key segments, including 1) general/HPC servers, 2) AI servers, 3)
storage & switches.

2aeb9e8b174644998c7303f5a989d953
1) General/HPC servers: For this segment, our key assumptions are that there is 1
BMC per motherboard, with incrementally more BMC demand coming from HPC
servers.

We have divided AI servers into high-power and non-high-power servers:

2) High-power AI servers: For high-power AI servers, our house view defines as those
using Nvidia’s H100-powered or equivalent chips to power AI servers (including GH200
superchips). We see stronger BMC demand upside coming from growing DPUs usage
per AI server.

2) Non-high-power AI servers: For non-high-power AI servers, we define as those AI

servers equipped with only a few GPUs. We assume the overall system contains at
least 2 BMCs per server, with more upside coming from more DPUs usage.

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 18: Overview of Aspeed’s BMC shipment TAM under 3 applications - 1) general/HPC servers, 2) AI servers, 3) storage & switches
Traditional BMC shipments TAM 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E
1) General/HPC serverss
General servers shipments (k unit) 9,494 10,180 11,754 11,655 12,172 12,741 13,813 11,589 12,236 12,655 12,912
HPC servers shipments (k unit) - - - - 495 799 1,086 1,041 1,051 1,139 1,230
Total shipments (k unit) 9,494 10,180 11,754 11,655 12,668 13,540 14,899 12,630 13,287 13,794 14,142
BMC penetration (%) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Avg. BMC count per server 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.1 1.2 1.3
BMC shipments TAM (k unit) 9,494 10,180 11,754 11,655 12,668 13,540 14,899 12,630 14,616 16,552 18,384

2) AI servers
Higher power AI servers
AI serverss (high power) shipments (k unit) 6 62 272 558 872 981
BMC penetration (%) 100% 100% 100% 100% 100% 100%
Avg. BMC count per server 2.0 2.0 2.0 2.5 3.0 3.5
BMC shipments TAM (k unit) 12 123 543 1,395 2,617 3,435

Non-high power AI servers

AI serverss (non-high power) shipments (k unit) 93 251 536 880
BMC penetration (%) 100% 100% 100% 100%
Avg. BMC count per server 2.0 2.0 2.0 2.5
BMC shipments TAM (k unit) 186 501 1,071 2,201
Total BMC shipments TAM from AI servers (k unit) 12 123 730 1,896 3,688 5,636
Aggregated implied avg. BMC usage per AI servers 2.0 2.0 2.0 2.3 2.6 3.0

3) Storage & switches

Total servers shipments (k unit) 9,494 10,180 11,754 11,655 12,668 13,546 14,960 12,995 14,096 15,202 16,004
% of servers shipments 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20%
Total shipments of storage & switches (k unit) 1,899 2,036 2,351 2,331 2,534 2,709 2,992 2,599 2,819 3,040 3,201
BMC penetration (%) 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80%
Avg. BMC count per device 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
BMC shipments TAM (k unit) 1,519 1,629 1,881 1,865 2,027 2,167 2,394 2,079 2,255 2,432 2,561

Source: IDC, Company data, Goldman Sachs Global Investment Research

Ongoing technology migration to support ASP growth

Other than the higher adoption rate of BMCs per server, we also see Aspeed benefiting
from process node upgrades with more built-in functionalities. We note that each
generation of Aspeed’s BMC products enjoys 20-50%+ ASP increases.

Exhibit 19: ASP change between each BMC generation

2aeb9e8b174644998c7303f5a989d953

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

Accelerating TAM CAGR into 2026E

Together with the rising ASP per BMC as well as the incremental BMC volume increase
driven by AI servers, we estimate that Aspeed’s traditional BMC revenue TAM will
grow by 23%/26%/23% YoY to US$221mn/US$278mn/US$343mn in
2024/2025/2026E (vs US$179mn in 2023E), representing a 24% CAGR over
2023-2026E, vs 10% in the past 8 years from 2016 to 2023E. Notably, the contribution
from AI servers will grow to 10%/16%/21% in 2024/2025/2026E, from 5% in 2023E.

Exhibit 20: Summary of Aspeed’s traditional BMC TAM

Summary of Aspeed's BMC TAM 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E
BMC shipments TAM (k unit)
General/HPC servers 9,494 10,180 11,754 11,655 12,668 13,540 14,899 12,630 14,616 16,552 18,384
AI servers - - - - - 12 123 730 1,896 3,688 5,636
Storage & switches 1,519 1,629 1,881 1,865 2,027 2,167 2,394 2,079 2,255 2,432 2,561
Total BMC shipments TAM (k unit) 11,013 11,809 13,634 13,520 14,695 15,719 17,416 15,439 18,767 22,673 26,581
YoY (%) 7% 15% -1% 9% 7% 11% -11% 22% 21% 17%
Aspeed's BMC shipments 4,615 6,820 7,902 8,600 11,222 12,894 14,774 7,010 9,391 12,908 17,781
Implied market share 0.4191 58% 58% 64% 76% 82% 85% 45% 50% 57% 67%

BMC revenue TAM (US$mn)

BMC ASP (US$) 8.4 8.5 8.4 8.8 8.8 9.4 10.9 11.6 11.8 12.3 12.9
General/HPC servers 80 86 99 102 111 128 162 146 172 203 237
AI servers - - - - - 0 1 8 22 45 73
Storage & switches 13 14 16 16 18 20 26 24 27 30 33
Total BMC revenue TAM (US$mn) 92 100 115 119 129 148 189 179 221 278 343
YoY (%) 9% 15% 3% 9% 15% 27% -5% 23% 26% 23%
Aspeed BMC revenue (GSe) 39 58 67 75 99 122 160 81 110 159 229
Implied market share 42% 58% 58% 64% 76% 82% 85% 45% 50% 57% 67%

TAM breakdown by segments 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E
Shipemnt/revenue breakdown
General/HPC servers 86% 86% 86% 86% 86% 86% 86% 82% 78% 73% 69%
AI servers 0% 0% 0% 0% 0% 0% 1% 5% 10% 16% 21%
Storage & switches 14% 14% 14% 14% 14% 14% 14% 13% 12% 11% 10%

Potential for market share loss?

We believe Aspeed will dominate the BMC market in the next 2-3 years at least, thanks
to 1) long R&D development roadmaps for BMC chips, which normally take 2+ years,
and which need to be 1-2 years ahead of platform launches in terms of specs, 2) BMC’s

2aeb9e8b174644998c7303f5a989d953
low % of total cost per server, making it less attractive for customers to make extra
R&D efforts to use cheaper solutions.

After the acquisition of the BMC Pilot™ product line from Emulex Corporation, which
was a subsidiary of Broadcom, in 2016, Aspeed has been enjoying steady market share
at around 70-75% of the global server BMC market. Currently, the key remaining
competitor is Nuvoton (4919.TW) with around 15-20% of global BMC market share, with
some other OEMs having in-house solutions, such as HP, Huawei, etc. Nuvoton
specializes in MCUs, with BMCs as only a by-product and accounting for less than 5%
of its total revenue. Moreover, from a total cost point of view, an AI server in total costs
up to US$100k-240k+, 15-32x higher vs a general server. The BMC total cost accounts
for below 0.05% of this, even if we calculate based on 4 BMCs per AI server, as per our
estimates. Total % of BMC cost within a general server is also less than 0.5%. We
believe most of Aspeed’s clients will still mostly follow the market leader, given
Aspeed’s BMC solution has proven its high and stable quality over time.

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 21: Global BMC server market market share breakdown

In-house solutions
(i.e. HP, Huawei)
10%

Nuvoton
15-20%

Aspeed
70-75%

Source: Company data, Goldman Sachs Global Investment Research

More TAM expansion to be driven by new business opportunities

We think Aspeed has a clear product roadmap with new business opportunities, given 1)
new server specifications, and 2) new demand driven by AI servers. Other than the
BMC business, Aspeed also continues to expand its product portfolio for server
applications, which we believe will also be riding on the growing computing power
demand trend, with product lines including 1) Mini-BMC (Bridge IC [BIC]), 2) PFR
(Platform Firmware Resilience) IC, and 3) IO expander.

Exhibit 22: Increasing dollar content growth per server

50
(US$)
45 $40-44

2aeb9e8b174644998c7303f5a989d953
40
$34-37 $7-8
35
$7-8
30 $27-29
$9-9.5

25
$9-9.5 $9-9.5
$6-6.5
$18-19.5
20

15 $6-6.5 $6-6.5 $6-6.5

$12-13

10 $18-20
$10-10.5 $12-13 $12-13 $12-13
5

0
2020-2021 2022-2023 2024-2025 2026-2027 2028-2029

BMC Mini BMC PFR IC I/O expander

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 23: Overview of Aspeed’s product roadmap with incremental dollar content growth within servers

Source: Company data, Goldman Sachs Global Investment Research

1) Mini BMC (Bridge IC [BIC]): Mini BMC is a small processor with memory and
storage built in, firstly specifically designed as per Meta’s spec requirements. It
collaborates with the BMC under the Open Compute Project (OCP) framework (OCP is
a collaborative community focused on redesigning hardware technology to efficiently
support the growing demands on compute infrastructure) to extend BMC management

2aeb9e8b174644998c7303f5a989d953
functions. BIC can share the traditional BMC’s management burden and improve
operational efficiency, becoming the local agent of BMC, according to Aspeed.

The OCP Yosemite V3 server multi-node architecture (released in 2021) defines that 1
BMC at least would pair with 2-4 BICs. Aspeed already started its shipments of mini
BMCs (product name: AST1030) in 4Q22 to 1 customer — the product uses 55nm
process node, with 35-45% lower ASP (US$6.5/unit) vs Aspeed’s traditional BMC
AST2500/AST2600 at US$10/US$12 per unit. We believe the shipment volume will
increase sharply into 2026E driven by more design wins from new customers and AI
server demand. In fact, Aspeed has said it will be adding 2 new customers in 2024.

Net net, we forecast Aspeed’s revenue from mini BMCs will grow at a 74% CAGR over
2023-2026E, and rise to account for 10% of its total revenue in 2026E vs 7% in 2023E,
and 13% of total BMC segment mix from 8% in 2023E.

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skcu8995@skl.com.tw Mark Chen 03/17/24 12:13:29 PM Shin Kong Life Insurance

Goldman Sachs Aspeed (5274.TWO)

Exhibit 24: Aspeed’s Mini BMC revenue growth Exhibit 25: AI server architecture change to drive more business
opportunity in BIC (mini BMC)

1,200 140%
1,101

1,000 120%

100%
800
674
80%
600
60%
411
400
40%
211
200 20%
98

0 0%
2022 2023E 2024E 2025E 2026E

Mini BMc revenue (NT$mn) YoY (RHS, %)

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Exhibit 26: OCP Yosemite V3 BIC structure - class 1 Exhibit 27: OCP Yosemite V3 BIC structure - class 2

Source: OCP Source: OCP

Exhibit 28: Overview of Aspeed’s mini BMC TAM

Mini BMC (BIC) TAM 2022 2023E 2024E 2025E 2026E
General servers

2aeb9e8b174644998c7303f5a989d953
General servers shipments (k unit) 13,813 11,589 12,236 12,655 12,912
HPC servers shipments (k unit) 1,086 1,041 1,051 1,139 1,230
Total shipments (k unit) 14,899 12,630 13,287 13,794 14,142
Mini BMC penetration (%) 3% 8% 13% 15% 16%
Avg. mini BMC count per server (unit) 1.0 1.0 1.0 1.0 1.5
Mini BMC shipments TAM (k unit) 447 1,010 1,727 2,124 3,479
Aspeed ASP (US$) 6.5 6.5 6.4 6.4 6.3
Mini BMC revenue TAM (US$mn) 2.9 6.5 11.1 13.5 22.0

AI servers
High power AI servers shipments (k unit) 62 272 558 872 981
Non-high power AI servers shipments (k unit) 93 251 536 880
Total shipments (k unit) 62 365 809 1,408 1,862
Mini BMC penetration (%) 15% 20% 25% 30% 35%
Avg. mini BMC count per server (unit) 2.0 3.0 3.0 3.5 4.0
Mini BMC shipments TAM (k unit) 19 219 606 1,478 2,606
Aspeed ASP (US$) 6.5 6.5 6.4 6.4 6.3
Mini BMC revenue TAM (US$mn) 0.1 1.4 3.9 9.4 16.5
*Note: Aspeed’s mini BMC line only started since 4Q22

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 29: Summary of Aspeed’s mini-BMC TAM

Summary of Aspeed's mini-BMC TAM 2022 2023E 2024E 2025E 2026E
shipments TAM (k unit)
General/HPC servers 447 1,010 1,727 2,124 3,479
AI servers 19 219 606 1,478 2,606
Total BMC shipments TAM (k unit) 465 1,229 2,334 3,603 6,085
YoY (%) 164% 90% 54% 69%
Aspeed Mini BMC shipments (unit) 480 1,040 2,054 3,415 5,606
Implied market share 103% 85% 88% 95% 92%

Revenue TAM (US$mn)

General/HPC servers 3 7 11 14 22
AI servers 0.1 1 4 9 17
Total BMC shipments TAM (k unit) 3.0 8.0 15 23 39
YoY (%) 163% 88% 53% 68%
Aspeed mini BMC revenue (GSe) (US$mn) 3 7 13 22 36
Implied market share 103% 85% 88% 95% 92%

TAM breakdown by segments 2022 2023E 2024E 2025E 2026E

Shipemnt/revenue breakdown
General/HPC servers 96% 82% 74% 59% 57%
AI servers 4% 18% 26% 41% 43%
Source: Company data, Goldman Sachs Global Investment Research

2) PFR (Platform Firmware Resilience) IC: Aspeed introduced its new product line,
PFR IC, in 2023, with the first generation IC named AST1060. The SoC is mainly used to
protect server platform firmware from malicious attacks. In 2018, The National Institute
of Standards and Technology (NIST) published the Platform Firmware Resilience (PFR)
guidelines. This standard specifies that the firmware on the hardware platform must
meet three criteria: protection, detection, and recovery. In general, every server
motherboard is expected to be equipped with at least 1 PFR IC.

Aspeed already sent samples to clients in 2H23, and we expect the product to enter
mass production in 4Q24E. In current Intel platforms, a PFR ICs is defined as a “nice to

2aeb9e8b174644998c7303f5a989d953
have” IC on a motherboard, however, in Intel’s Oak stream server platform in 2026,
the PFR IC will be a mandatory IC per motherboard. Aspeed will launch 2 versions of
PFR ICs: 1) embedding the PFR IC into its AST2600 BMC as a total solution, 2) selling
as a discrete PFR IC at an ASP of US$9-9.5/unit.

As for competition landscape, we believe Aspeed’s product looks very competitive in

terms of pricing. Currently, most of the PFR ICs are using FPGA structures, i.e. Intel and
Lattice, with ASPs up to US$20-25+/unit. Excluding those in-house solutions i.e. HP,
Microsoft, Amazon, and Dell, we believe Aspeed could eventually win over 40% of
global PFR market share in the coming years.

3) I/O expander: A I/O (input/output) expander is normally placed on a server

motherboard to help expand I/Os to add on more functions including keyboard, LED
controller, etc. Currently, the market solutions are Intel’s FPGA design, which has higher
cost vs Aspeed’s ASIC structure; we thus think Aspeed’s product could be more
competitive vs the current FPGA solutions. We expect Aspeed to send out the sample
in 1H24 with a more meaningful revenue contribution in 2026.

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 30: Aspeed’s PRF IC TAM overview Exhibit 31: Aspeed’s I/O expander IC TAM overview
PFR IC TAM I/O expander TAM
2023E 2024E 2025E 2026E 2024E 2025E 2026E
Total servers shipments (k unit) 12,995 14,096 15,202 16,004 Total servers shipments (k unit) 14,096 15,202 16,004
PFR IC penetration (%) 20% 20% 70% 80% I/O expander penetration (%) 15% 15% 20%
Avg. PFR IC count per server 1.0 1.0 1.0 1.0 Avg. I/O expander count per server 1.0 1.0 1.0
Total PFR IC shipemnt TAM (k unit) 2,599 2,819 10,641 12,803 Total I/O expander shipments TAM (k unit) 2,114 2,280 3,201
YoY (%) 8% 277% 20% YoY (%) 8% 40%
Aspeed PFR shipments (GSe) (k unit) 4 188 1,490 5,172
Aspeed I/O expander shipments (GSe) (k unit) 9 36 1,064
Implied market share 0% 7% 14% 40%
Implied market share 0.4% 2% 33%
Aspeed ASP (US$) 9.5 9.5 9.5 9.4
Aspeed ASP (US$) 8.0 8.0 8.0
Total PFR revenue TAM (US$mn) 25 27 101 120
YoY (%) 8% 276% 20%
Total I/O expander revenue TAM (US$mn) 17 18 26
YoY (%) 8% 40%

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

All in all, we expect the combined TAM from its 4 server management IC segments
including traditional BMC, mini BMC, PFR IC and I/O expander will accelerate to
US$505mn in 2026E (vs US$205mn in 2023). Moreover, we estimate that Aspeed’s
revenue contribution coming from AI demand (calculated from traditional BMC + mini
BMC demand from AI) and server architecture change (PFR IC + I/O expander)
combined will rise to 24%/35% in 2025/2026E vs 6%/13% in 2023E/2024E (see Exhibit
34).

Exhibit 32: Aspeed’s TAM would accelerate by 48% CAGR from 2023 into 2026E vs 10% in the past 8 years
Aspeed's server management IC revenue TAM
2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E
Traditional BMC 92 100 115 119 129 148 189 179 221 278 343
Mini BMC - - - - - - 0.1 1.4 3.9 9.4 17
PFR IC - - - - - - - 25 27 101 120
I/O expander - - - - - - - - 17 18 26
Total Aspeed TAM (US$mn) 92 100 115 119 129 148 189 205 268 407 505
YoY (%) (RHS) 9% 15% 3% 9% 15% 27% 8% 31% 52% 24%
Aspeed server mgmnt. IC rev (US$mn) 39 58 67 75 99 122 163 88 125 195 322
Implied market share 76% 82% 86% 43% 47% 48% 64%

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 33: Aspeed’s TAM expansion Exhibit 34: Aspeed’s revenue contribution from AI and server
structureal change

2aeb9e8b174644998c7303f5a989d953
600 60% 40%
(US$mn) 35%
505 35%
500 50%
30%
407
400 40% 25% 24%

20%
300 268 30%
15% 13%
205
189
200 148 20% 10%
115 119 129 6%
92 100
5%
100 10% 1%
0%
2022 2023E 2024E 2025E 2026E
- 0%
2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E Revenue mix driven by server architecture change (PFR IC + I/O expander)
Traditional BMC Mini BMC PFR IC I/O expander YoY (%) (RHS) Revenue mix driven by AI (from traditional BMC + mini BMC)

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Valuation: Initiate at Buy with TP at NT$3,800

Our 12-month TP of NT$3,800 is based on a target P/E of 32x (in line with its long-term
historical trading average) to our 2026E EPS, and discounted back to 2025E at 13.2%

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Goldman Sachs Aspeed (5274.TWO)

CoE. Our key assumptions for CoE include: (1) 1.5x beta (sourcing BBG), (2) 4.0%
risk-free rate, and (3) a market risk premium at 6.25% (in line with GS house view). The
32x multiple is 23% higher vs Aspeed’s fabless peer group’s average P/E (26.1x FY25E)
to reflect Aspeed’s historical premium and the company’s higher prospects for growth
over the coming years.

Our TP implies 50x 2025E P/E, a 17% valuation premium to its 5-year historical trading
average, which we believe is justified given its strong revenue growth outlook,
specifically for its BMC segment, as we see a high correlation between its BMC
revenue growth and forward PE.

Our TP also indicates PEGs of 1.3/0.7 for 2024E/2025E, which are in line with Aspeed’s
yearly average PEG range of 0.5-2.0 during 2013-2022 (excluding 2023, which was a
down-year given semi industry inventory correction), and is below its average of 1.4

Exhibit 35: Fabless peer comparison table

PX TP Upside Market cap EPS growth Trading PE Trading P/B ROE Div Yield
Company Ticker GS Ratings (LCY) (LCY) (%) (US$bn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026 2024E 2025E 2026E 2024E 2025E 2026E
Aspeed 5274.TWO Buy 2,770.0 3,800.0 37% 3.3 65% 72% 77% 62.8 36.5 20.6 27.3 22.3 16.8 39.1% 52.6% 66.7% 1.3% 2.2% 3.9%
Parade 4966.TWO Neutral 1,075.0 1,020.0 -5% 2.8 64% 40% NA 25.7 18.4 NA 4.2 3.8 3.3 15.2% 18.9% NA 1.9% 2.7% NA
Silergy 6415.TW Neutral 378.0 355.0 -6% 4.6 178% 112% 59% 69.6 32.9 20.7 4.8 4.5 4.0 6.5% 12.7% 17.8% 0.4% 0.9% 1.4%
uPI 6719.TW Neutral 270.0 255.0 -6% 0.7 975% 83% 28% 40.3 22.0 17.1 2.6 2.4 2.3 6.5% 11.0% 13.5% 1.3% 2.3% 3.0%
ASMedia 5269.TWO NC 2,260.0 NA NA 5.0 77% 55% NA 39.7 25.6 NA 8.0 7.8 6.8 22.0% 28.2% NA 1.4% 2.2% NA
Nuvoton 4919.TW NC 122.5 NA NA 1.6 10% 39% 3% 19.3 13.9 13.5 3.1 3.0 2.7 16.9% 19.0% 19.5% 3.9% 5.0% 4.9%
Lattice LSCC NC 77.9 NA NA 10.5 -27% 30% 9% 56.8 43.6 39.8 15.5 15.5 12.2 24.3% 29.8% 31.3% NA NA NA
Microchip MCHP Neutral 88.6 77.0 -13% 48.1 -19% -59% 56% 19.2 46.3 29.7 7.6 7.3 8.6 28.6% 8.9% 21.4% 1.9% 0.6% 2.2%
NXP NXPI Neutral 237.5 240.0 1% 33.7 -7% 9% 14% 20.6 18.9 16.6 7.2 6.8 6.4 32.7% 33.6% 35.6% 1.9% 2.1% 2.4%
On semi ON Buy 74.9 91.0 22% 33.7 -18% 19% 23% 17.7 14.8 12.0 4.2 3.7 3.2 20.1% 21.5% 23.2% 0.0% 0.0% 0.0%
Average 130% 40% 34% 37.2 27.3 21.3 8.4 7.7 6.6 21.2% 23.6% 28.6% 1.6% 2.0% 2.6%
Median 37% 39% 26% 32.7 23.8 18.9 6.0 5.7 5.2 21.1% 20.2% 22.3% 1.4% 2.2% 2.4%

*Price as of 15 March 2024.

Source: Bloomberg, Goldman Sachs Global Investment Research

Exhibit 36: Aspeed’s historical P/E trading range during 2013-2023 Exhibit 37: Aspeed’s fwd P/E vs BMC segment revenue growth

80.0 80 75

70.0 70
65
60.0 60
55
50
50.0

2aeb9e8b174644998c7303f5a989d953
44.4x 40 45
40.0
30
31.9x 35
30.0
20
20.0 19.5x 25
10
10.0 - 15
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18

3Q20
1Q21
3Q21
1Q22
3Q22
1Q23
3Q23
1Q13
3Q13
1Q14

1Q19
3Q19
1Q20

1Q24E
3Q24E

3Q26E
1Q25E
3Q25E
1Q26E
-
May-13 May-15 May-17 May-19 May-21 May-23

Fwd P/E Average +1 stdev. -1 stdev. BMC revenue (US$m) Aspeed fwd PE (x, RHS)

Source: Bloomberg Source: Bloomberg, Goldman Sachs Global Investment Research

An AI laggard, we expect share price will soon catch up

Aspeed has underperformed Taiex by 21% YTD, which we believe has priced in investor
concerns on AI servers cannibalizing demand for general servers in 2024. We note that
share prices for more immediate AI beneficiaries i.e. Nvidia and other Taiwan AI
downstream players, are up more than 500%/200% since 2023, respectively, vs Aspeed
at only 64%. However, with a clear structural change and visibility of AI demand ahead,
we expect Aspeed’s earnings growth contributed by AI will catch up with peers beyond
2024. We thus believe it is time for investors to look beyond the near-term weakness
and to focus on Aspeed’s real value under the wider AI mega trend.

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 38: Share price performance of Taiwan AI plays since 2023

500%

450% 435%

400%
353%
350%
306%
300%
256%
250% 235% 231%
214% 214%
197% 194%
200% 176% 175% 168%
142% 141%
150%
106%
100%
68% 64%
50%

0%

*Note: share prices as of 15 March 2024.

Source: TEJ, Data compiled by Goldman Sachs Global Investment Research

Where are we different vs consensus?

Our 2024E revenue/EPS estimates are 1.9%/5.3% lower vs consensus as we factor in
the downside from AI servers cannibalizing demand for general servers, while our
2025/2026E revenue estimates are 5.4%/5.6% higher vs consensus with EPS
estimates also 3.7%/10.9% higher vs market expectations as we believe the market has
yet to fully appreciate the demand upside from the incremental BMC dollar content
within AI servers.

2aeb9e8b174644998c7303f5a989d953
Exhibit 39: GSe vs Consensus
2024E 2025E 2026E
(NT$mn) Cons. GS %Diff Cons. GS %Diff Cons. GS %Diff
Revenue 4,681 4,593 -1.9% 6,726 7,087 5.4% 10,864 11,471 5.6%
Gross profit 2,993 2,954 -1.3% 4,332 4,560 5.3% 6,889 7,415 7.6%
Op. income 2,001 1,938 -3.1% 3,196 3,413 6.8% 5,605 6,103 8.9%
Net income 1,764 1,668 -5.4% 2,780 2,874 3.4% 4,574 5,083 11.1%
EPS (NT$) 46.59 44.11 -5.3% 73.25 75.99 3.7% 121.23 134.39 10.9%
GM 63.9% 64.3% 0.4% 64.4% 64.3% -0.1% 63.4% 64.6% 1.2%
OpM 42.7% 42.2% -0.6% 47.5% 48.2% 0.6% 51.6% 53.2% 1.6%
NM 37.7% 36.3% -1.4% 41.3% 40.6% -0.8% 42.1% 44.3% 2.2%

Source: Bloomberg, Goldman Sachs Global Investment Research

We assign an M&A rank of 3 to Aspeed, given the company’s niche market segment
(with already 70% of global market share), strong growth momentum and insiders /
management owning ~20% of shares. As such, we do not include an M&A valuation in
deriving our target price.

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Goldman Sachs Aspeed (5274.TWO)

Key downside risks

1) Softer server market demand recovery: Our house view is looking at the server
market to grow by 8%/8% in 2024/2025E, with strong ramp from AI servers. We believe
weaker-than-expected macro economic growth would directly affect the overall server
market outlook with lower spending from CSPs (cloud service providers). Any further
delays on the server demand recovery would pose downside risks to our revenue
forecasts.

2) Slower than expected BMC penetration within AI servers: We expect a

meaningful BMC demand ramp within AI servers starting 2025E, considering higher
adoption rate of AI servers and the incremental higher BMC demand used within
servers, especially from DPUs. A slower-than-expected BMC penetration in AI servers
would result in a lower BMC shipment forecasts for Aspeed and negatively impact its
topline and its margins due to operating deleverage.

3) Intensifying market competition: Aspeed has long enjoyed high market share at
around 70% within the global BMC server market, and we do not see immediate
threats to its market share in the next 2-3 years given the long development and product
cycle. However, any potential new-comers joining the market would result in pricing
pressure for Aspeed and potentially impact its market share outlook.

Exhibit 40: Taiex vs Aspeed’s share price Exhibit 41: Aspeed’s forward P/E

22,000 4,100 5,000

4,500
3,600
18,000 4,000 70x
3,100
3,500
2,600 55x
14,000 3,000

2,100 2,500
40x
10,000 2,000
1,600
1,500 25x
1,100
6,000 1,000
10x
600 500

2aeb9e8b174644998c7303f5a989d953
0
2,000 100
May-13 May-15 May-17 May-19 May-21 May-23
May-13 May-15 May-17 May-19 May-21 May-23
Taiex (LHS) Aspeed (NT$, RHS) Price (NT$)

Source: TEJ Source: TEJ, Goldman Sachs Global Investment Research

Exhibit 42: Aspeed’s forward P/B Exhibit 43: Aspeed’s P/B vs. ROE

5,000 60% 35.0

30x
50% 30.0
4,000
25x 25.0
40%
3,000 20x 20.0
30%
15x 15.0
2,000
20%
10x 10.0
1,000 10% 5.0

0 0% 0.0
May-13 May-15 May-17 May-19 May-21 May-23 May-13 May-15 May-17 May-19 May-21 May-23 May-25

ROE (LHS) Fwd P/B (RHS)

Price (NT$)

Source: TEJ, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

Financial tables
Exhibit 44: Aspeed P&L summary (Qly)
1Q23 2Q23 3Q23 4Q23 1Q24E 2Q24E 3Q24E 4Q24E 1Q25E 2Q25E 3Q25E 4Q25E
P&L
Revenue 669 680 797 984 899 1,069 1,259 1,367 1,246 1,545 2,035 2,260
Gross profit 430 446 498 633 585 681 812 875 805 994 1,312 1,449
Operating expense (221) (231) (235) (241) (241) (249) (260) (266) (261) (277) (300) (308)
Operating profit 209 215 263 392 344 432 552 610 544 716 1,012 1,141
Net income 186 240 270 310 303 373 472 520 465 606 847 955
EPS (NT$) 4.93 6.37 7.16 8.20 8.00 9.87 12.49 13.75 12.30 16.03 22.41 25.25
Gross profit -43.2% -52.0% -41.1% -26.3% 36.1% 52.6% 62.9% 38.3% 37.6% 45.9% 61.5% 65.5%
Operating expense 4.5% -1.4% -7.1% -0.7% 9.1% 7.6% 10.6% 10.1% 8.6% 11.4% 15.2% 15.9%
Operating profit -61.6% -69.0% -55.6% -36.5% 64.4% 101.1% 109.7% 55.6% 57.9% 65.7% 83.4% 87.2%
Net income -60.2% -57.3% -54.8% -34.9% 62.4% 55.4% 74.7% 67.7% 53.8% 62.3% 79.4% 83.7%
EPS -63.9% -57.2% -54.8% -34.9% 62.3% 55.0% 74.5% 67.7% 53.8% 62.3% 79.4% 83.7%

QoQ (%)
Revenue -49.5% 1.6% 17.2% 23.5% -8.7% 18.9% 17.8% 8.6% -8.8% 24.0% 31.7% 11.1%
Gross profit -50.0% 3.8% 11.7% 27.1% -7.6% 16.4% 19.2% 7.8% -8.0% 23.4% 32.0% 10.5%
Operating expense -9.3% 4.9% 1.6% 2.7% -0.3% 3.4% 4.5% 2.2% -1.7% 6.1% 8.1% 2.8%
Operating profit -66.0% 2.6% 22.5% 48.8% -12.1% 25.5% 27.7% 10.5% -10.8% 31.8% 41.3% 12.8%
Net income -60.8% 29.0% 12.5% 14.6% -2.4% 23.4% 26.5% 10.1% -10.5% 30.3% 39.8% 12.7%
EPS -60.8% 29.2% 12.4% 14.5% -2.4% 23.4% 26.5% 10.1% -10.5% 30.3% 39.8% 12.7%

Margins (%)
Gross margin 64.2% 65.6% 62.6% 64.3% 65.1% 63.7% 64.5% 64.1% 64.6% 64.3% 64.4% 64.1%
Opex ratio 32.9% 34.0% 29.5% 24.5% 26.8% 23.3% 20.7% 19.4% 21.0% 17.9% 14.7% 13.6%
Operating profit margin 31.3% 31.6% 33.0% 39.8% 38.3% 40.4% 43.8% 44.6% 43.6% 46.4% 49.7% 50.5%
Net margin 27.8% 35.3% 33.9% 31.5% 33.7% 34.9% 37.5% 38.0% 37.4% 39.2% 41.6% 42.3%

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 45: Aspeed P&L summary (Yly)

(NT$mn) 2020 2021 2022 2023 2024E 2025E 2026E
P&L
Revenue 3,064 3,638 5,210 3,130 4,593 7,087 11,471
Gross profit 1,936 2,376 3,391 2,008 2,954 4,560 7,415
Operating expense (665) (723) (942) (929) (1,016) (1,147) (1,313)
Operating profit 1,271 1,652 2,449 1,079 1,938 3,413 6,103
Net income 1,005 1,313 2,106 1,007 1,668 2,874 5,083
EPS (NT$) 29.38 38.30 55.72 26.66 44.11 75.99 134.39

2aeb9e8b174644998c7303f5a989d953
YoY (%)
Revenue 23.3% 18.7% 43.2% -39.9% 46.7% 54.3% 61.9%
Gross profit 23.2% 22.7% 42.8% -40.8% 47.1% 54.4% 62.6%
Operating expense 18.2% 8.7% 30.3% -1.4% 9.4% 12.9% 14.5%
Operating profit 26.0% 30.0% 48.2% -55.9% 79.6% 76.1% 78.8%
Net income 20.9% 30.7% 60.4% -52.2% 65.7% 72.3% 76.8%
EPS 20.5% 30.3% 45.5% -52.2% 65.5% 72.3% 76.8%

Margins (%)
Gross margin 63.2% 65.3% 65.1% 64.1% 64.3% 64.3% 64.6%
Opex ratio 21.7% 19.9% 18.1% 29.7% 22.1% 16.2% 11.4%
EBIT margin 41.5% 45.4% 47.0% 34.5% 42.2% 48.2% 53.2%
Net margin 32.8% 36.1% 40.4% 32.2% 36.3% 40.6% 44.3%

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 46: Aspeed’s balance sheet

(NT$mn) 2020 2021 2022 2023E 2024E 2025E 2026E
Balance sheet
Cash & equivalent 1,549 1,977 2,829 4,743 5,897 6,085 8,282
Net receivables 517 831 995 1,023 1,437 2,343 3,925
Inventory 166 158 400 618 822 1,086 1,370
Other current asset 443 542 555 572 572 572 572
Total current assets 2,675 3,509 4,779 6,956 8,728 10,087 14,148
Net PP&E 144 189 218 199 140 106 88
Net intangibles 748 650 757 588 453 313 169
Total investments 0 0 0 62 62 62 62
Other long-term assets 143 209 173 151 151 151 151
Total assets 3,711 4,557 5,927 7,956 9,533 10,720 14,618

Account payables 277 505 859 2,799 3,474 3,081 4,156

Short-term debt 0 0 0 1,100 1,100 1,100 1,100
Other current liabilities 313 426 526 186 226 266 306
Total current liabilities 590 931 1,385 4,085 4,799 4,446 5,561
Long-term debt 0 0 0 0 0 0 0
Other long-term liabilities 117 79 54 41 41 41 41
Total long-term liabilities 117 79 54 41 41 41 41
Total liabilities 707 1,010 1,439 4,125 4,840 4,487 5,602

Total common equity 3,004 3,546 4,488 3,831 4,694 6,233 9,016

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 47: Aspeed’s cahs flow statement

(NT$mn) 2020 2021 2022 2023E 2024E 2025E 2026E
Cash flow statement
Net income 1,005 1,313 2,106 1,007 1,668 2,874 5,083
D&A add-back 207 219 240 306 274 253 243
Minorities add-back 0 0 0 0 0 0 0
Net(inc)/dec working capital 7 (77) (52) 1,694 57 (1,564) (790)
Other operating cash flow (42) 234 16 (429) (0) 0 (0)
Cash flow from operations 1,177 1,689 2,310 2,578 1,999 1,563 4,536

Capital expenditures (87) (93) (120) (93) (40) (40) (40)

(Acquisitions)/divestitures 0 0 0 0 0 0 0
Others (225) (281) (55) 7 0 0 0

2aeb9e8b174644998c7303f5a989d953
Cash flow from investments (312) (374) (175) (86) (40) (40) (40)

Dividend paid (common & pref) (753) (892) (1,202) (1,702) (806) (1,335) (2,299)
Inc/(dec) in debt 0 0 0 1,100 0 0 0
Share repurchase/issue 0 0 (125) 0 0 0 0
Other financing cash flows (24) (24) (26) (20) 0 0 0
Cash flow from financing (777) (916) (1,353) (622) (806) (1,335) (2,299)
Total cash flow 88 398 781 1,870 1,154 189 2,196
Free cash flow 1,090 1,595 2,189 2,485 1,959 1,523 4,496

Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

Company profile

Founded in 2004 and headquartered in Hsinchu, Taiwan, Aspeed is a leading

Taiwan-based IC (integrated circuit) design company specializing in BMC (baseboard
management controller) SoCs used to monitor the status of servers. The company is the
largest BMC supplier globally, enjoying around 70% of the global BMC market share,
with 90% of total revenue coming from the BMC segment. The company also
generates 10% of its revenue from segments including 1) PC/AV extension SoCs
(system on chips), for application scenarios such as PC-to-TV, and 2) Cupola 360 SoCs,
used in 360-degree panoramic cameras.

Exhibit 48: Overview of company key milestones

Year Milestones
2004 Established in Nov 2004
2005 Strategic alliance with Quanta Computer Inc.
Introduced the 1st gen BMC – AST2000/1000
2006 Allied with Avocent (now Vertiv) as a Software Partner
2007 Introduced the 2nd gen BMC – AST2100/2050/1100
2008 Introduced the 3rd gen BMC – AST2200/AST2150
2009 Launched AST1500 PC & AV Over-LAN Extension Processor
Launched AST1600 PC & AV Over-CAT5 Extension Processor
2010 Launched virtual desktop processors – AST1150/AST1160/AST1170/AST1180
Introduced the 4th gen BMC – AST2300/AST1300/AST1050
2011 Received funding from Intel Capital
2012 Listed on Taiwan OTC market
Introduced 5th gen BMC – AST2400/1400/1250
2013 Listed on Taipei Exchange
2014 Introduced 6th gen BMC – AST2500
2016 Acquired the BMC Pilot™ product line from Emulex Corporation, a subsidiary of Broadcom
2017 Allied with industry leaders to provide OpenBMC compatible solution
2018 Introduced the 1st gen of Cupola360 SoC: AST1220 360-degree Spherical Image Processor
Formally joined the Open Compute Project (OCP)
2019 Launched AST1530/AST1620 8K PC/AV extension controller
Introduced 7th generation of BMC – AST2600
Allied with Byosoft as a Software Partner
2021 Launched the first Bridge IC (BIC) or mini BMC SoC – AST1030
2022 Launched 1st gen of Platform firmware resiliency (PFR) IC – AST1060

2aeb9e8b174644998c7303f5a989d953
Source: Company data, Data compiled by Goldman Sachs Global Investment Research

Exhibit 49: Aspeed’s shareholding structure Exhibit 50: Revenue per employee, Aspeed is among the highest
within TW IC design space

60.0 25,000

21,899
50.0
20,000
Others Chairman
19% 18% 40.0
Dealer holding Other insider 15,000
1% 2% 30.0

Fund holding 10,000

10% 20.0
6,828
5,000
10.0 3,253
Foreign invest. 106 1,493
50% - 745 0
Aspeed Novatek Parade MediaTek Silergy Realtek

Revenue per employee (NT$mn) Net income per employee (NT$mn)

Emplyee count (RHS)

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

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Goldman Sachs Aspeed (5274.TWO)

Exhibit 51: Aspeed’s revenue growth outlook Exhibit 52: Aspeed’s revenue breakdown

400 370 80% 100%

90% 2%
350 60%
7%
80%
300 1% 6%
40% 8% 13%
70%
250 228 9%
20% 60% 10%
200 175
159 0% 50%
95% 93% 91%
150 130
104 101 40% 80%
81 -20% 68%
100 71 30% 63%
63 58%
31 42 -40%
50 20 28 20%

0 -60% 10%

2026E
2023E

2024E

2025E
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022
0%
2020 2021 2022 2023E 2024E 2025E 2026E

Total revenue (US$mn) YoY (%, RHS) Traditional BMC Mini BMC PFR IC I/O expander PC/AV extension Others

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Investment Thesis, Price Target Risks and Methodology

Investment Thesis - Aspeed (5274.TWO)

Aspeed is a leading Taiwan-based IC (integrated circuit) design company specializing in
BMC (baseboard management controller) SoC, which is used to remotely monitor the
physical state of servers. The company is the largest BMC supplier, with c.70% of the
global BMC market share, and 90% of its total revenue comes from the BMC segment.

We like Aspeed as we expect its revenue/earnings CAGRs to further accelerate to

58%/75% in 2024-2026E (vs 25%/32% during 2018-2022), driven mostly by AI server
demand, especially starting 2025. Furthermore, we also expect server architecture
changes will bring more business opportunities to Aspeed to drive up its TAM expansion
within the server market. The company is now trading at the higher end of its historical
P/E range; however, with more TAM expansion and more dollar content growth within

2aeb9e8b174644998c7303f5a989d953
the AI theme, we continue to see upside potential to its revenue and earnings growth.
We have a Buy rating on the name.

Price Target Risks and Methodology - Aspeed (5274.TWO)

Valuation: Our 12-month TP of NT$3,800 is based on a target P/E of 32x (in line with its
long-term historical trading average) to our 2026E EPS, and discounted back to 2025E at
13.2% CoE. Our key assumptions for CoE include: (1) 1.5x beta (sourcing BBG), (2)
4.0% risk-free rate, and (3) a market risk premium at 6.25% (in line with GS house
view).

Key downside risks: 1) A softer server market demand recover, 2) Slower than
expected BMC penetration within AI servers, 3) Intensifying market competition.

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Goldman Sachs Aspeed (5274.TWO)

Disclosure Appendix
Reg AC
We, Evelyn Yu, Bruce Lu, Allen Chang, Verena Jeng and Lynn Luo, hereby certify that all of the views expressed in this report accurately reflect our
personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be,
directly or indirectly, related to the specific recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.

GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.

M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.

Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

Disclosures
The rating(s) for Aspeed is/are relative to the other companies in its/their coverage universe: ASE Technology Holding, ASE Technology Holding
(ADR), Aspeed, Chipbond Technology Corp., Delta Electronics, GlobalWafers Co., King Yuan Electronics Co., Lotes, MediaTek, Novatek
Microelectronics, Parade Technologies Ltd., Realtek Semiconductor Corp., Silergy Corp., TSMC, TSMC (ADR), United Microelectronics Corp., United
Microelectronics Corp. (ADR), Vanguard International Corp., Win Semiconductors Corp., uPI

2aeb9e8b174644998c7303f5a989d953
Company-specific regulatory disclosures
The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered
by Goldman Sachs Global Investment Research and referred to in this research.
Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be
aggregated under US securities law) as of the month end preceding this report: Aspeed (NT$2,770.00)
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Aspeed (NT$2,770.00)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Aspeed (NT$2,770.00)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 48% 35% 17% 62% 55% 43%

As of January 1, 2024, Goldman Sachs Global Investment Research had investment ratings on 2,961 equity securities. Goldman Sachs assigns stocks
as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage universe and related definitions’ below. The Investment
Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.

Regulatory disclosures
Disclosures required by United States laws and regulations
See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or
co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed

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Goldman Sachs Aspeed (5274.TWO)

public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs trades or may trade as a
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Ratings, coverage universe and related definitions

Buy (B), Neutral (N), Sell (S) Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or

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Goldman Sachs Aspeed (5274.TWO)

Sell on an Investment List is determined by a stock’s total return potential relative to its coverage universe. Any stock not assigned as a Buy or a Sell on
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This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we
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Goldman Sachs Aspeed (5274.TWO)

The views attributed to third party presenters at Goldman Sachs arranged conferences, including individuals from other parts of Goldman Sachs, do not
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