AT&S expands in Malaysia to meet strong demand for AI and supercomputer components

Key Concepts

• Investment in Malaysia: Significant capital expenditure by ATNS in Malaysia, focusing on high-end manufacturing.
• Talent Gap: Concerns about the availability of skilled workers in Malaysia for high-tech roles.
• Growth Drivers: Substrates for supercomputers are a major contributor to ATNS's double-digit growth.
• Geopolitical Uncertainty: Impact of US foreign and trade politics on investment decisions.
• Resilience Strategies: Diversification of production and market strategies (e.g., "China for China").
• Technological Catch-up: China's progress in mainstream technology versus high-end applications.

Investment and Expansion in Malaysia

ATNS is experiencing rapid market growth, with a strong demand for products manufactured in Malaysia. The company has already fully utilized its first plant and is planning a second stage of investment.

• Current Investment: Over €1.2 billion has been invested in Malaysia to date.
• Future Commitment: An additional commitment of approximately €500 million is planned, with a portion already implemented and the remainder slated for the near future.
• Profitability: ATNS is currently profitable on an EBIT (Earnings Before Interest and Taxes) basis, generating positive cash flow to fund further investments in Malaysia and other high-end sites. Malaysia is identified as a central hub for upcoming investments.

Talent Gap and Workforce Development

A significant concern for ATNS is the potential talent gap in Malaysia, particularly regarding skilled workers for high-tech roles.

• Current Workforce: ATNS employs 2,100 people in Malaysia, with roughly one quarter in high-skill positions, including white-collar jobs, technical support, and development.
• Recommendations for Growth: To foster growth in the high-tech sector, ATNS emphasizes the need for enhanced high-end education in Malaysia, starting from early schooling to foster interest in technology, mathematics, and engineering. The development of high-class universities, ideally located near investment hotspots, is also crucial.

Growth Drivers and Financial Outlook

ATNS anticipates maintaining its double-digit growth trajectory, primarily driven by specific product lines.

• Strongest Growth Segment: Products manufactured in Malaysia, particularly substrates for supercomputers, are experiencing year-over-year growth exceeding 20%. This trend is expected to continue.
• Revenue Projection: For the next fiscal year, ATNS expects revenue to be in the range of €2.1 billion to €2.4 billion.

Navigating Geopolitical Uncertainty and Resilience Strategies

The primary concern keeping ATNS leadership awake at night is the uncertainty surrounding US foreign and trade politics. While direct tariffs on products sold to the US are not a major issue as customers integrate products within Asia, the broader uncertainty impacts investment location decisions.

• Impact of Uncertainty: The uncertainty regarding where products should be produced and where to invest is a significant challenge.
• Resilience Measures: ATNS is implementing strategies to adapt and remain resilient:
  • Agility: The company can react quickly to increased demand from countries like Malaysia, which remains highly accepted.
  • Diversification: ATNS maintains a subsidiary in Austria for specific product lines.
  • "China for China" Strategy: A dedicated sales and technology team has been established in China to gather customers and cater to the local market.

Technological Advancement in China

The timeline for China to catch up technologically varies depending on the technology segment.

• Mainstream Technology: China is expected to catch up relatively quickly in mainstream and volume technologies.
• High-End Technology: It will likely take longer for China to achieve parity in absolute high-end supercomputing and artificial intelligence.

Conclusion

ATNS is strategically investing heavily in Malaysia due to strong market demand and its role as a manufacturing hub for high-growth products like supercomputer substrates. While the company is financially robust and projecting continued double-digit growth, it faces challenges related to the availability of skilled talent in Malaysia and the broader geopolitical uncertainties impacting global investment decisions. ATNS is proactively addressing these challenges through diversification and localized market strategies, such as its "China for China" initiative, to ensure continued resilience and growth.