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Taiwan chipmaker thrives on growing AI demand

ASPEED controls 60% of global market in specialist chips

A Google data center in Iowa. The US tech group is one of ASPEED's customers   © AP

HSINCHU, Taiwan -- Chipmaker ASPEED Technology is in the pink, as growing demand for artificial intelligence fuels the expansion of data centers powered by its chips

A little-known name outside the tech world, Taiwan's ASPEED controls 60% of the global market in remote server management chips, known in the industry as baseboard management controller integrated circuits. These crucial components require high durability and help operators monitor and operate data centers remotely.

Google, Amazon, Facebook, Baidu, Tencent Holdings, Alibaba Group Holding and most major cloud service providers worldwide use ASPEED's chips in their data centers. The company also counts server makers such as HP and Dell as customers.

"We are seeing a great deployment of data centers, especially by all the major cloud service providers, in the first half of 2018," Chris Lin, ASPEED's chairman, told the Nikkei Asian Review in a recent interview.

"It's very promising that the rapid and developing needs to handle complicated and massive data to enable artificial intelligence features, and the future's smarter cars, will continue to drive data center demand," Lin said. It was likely that ASPEED would see another year of 30% sales growth in 2018, he added.

Chris Lin

ASPEED's revenue of 1.89 billion New Taiwan dollars ($64.7 million) in 2017 was up more than 40% from the previous year. Net profit climbed 19% to NT$531 million while its gross margin was 57.9%. Shares of ASPEED have risen fivefold since it went public on the Taipei Exchange in 2013, making it one of the most expensive issues on the bourse, with a closing price of NT$863 on April 12. In 2016 ASPEED bought Broadcom's remote server management chip unit, Emulux, a smaller rival, to expand its market share.

Lin said ASPEED's rapid growth should continue because some 90% of servers in use around the world are manufactured by Taiwanese companies such as Quanta Computer, Hon Hai Precision Industry, and Inventec, and his company would benefit from the complete local business ecosystem.

Founded in late 2004, the company is still small in terms of headcount, with just 85 employees, although it is looking to grow. Lin said ASPEED was very selective and offered competitive salary packages of more than $100,000 a year, on average, to attract top talent. The company is also expanding into new markets, making chips for consumer electronics products, such as 360-degree cameras.

However, Lin cautioned that China's plans to pump massive funds into its semiconductor industry to reduce its heavy reliance on foreign suppliers is a long-run concern. "We are watching closely whether [Chinese] regulators could demand that their data center operators adopt products developed by domestic players," said Lin.

"We would not rule out the possibility of teaming up with Chinese partners to together grow business there, if they adopt such protectionist methods in the future," he added.

Danny Ho, an analyst at IDC, said the market for cloud services is likely to keep growing at double-digit rates through 2021. Strong demand for such services is coming from e-commerce platforms, online gaming companies and streaming services, according to Ho.

"However, growth could slow down," Ho said. "We are still a bit concerned whether the market can find enough killer applications for AI soon to continue driving demand for data centers in the years to come."

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