MSI: RTX Spark New Products to Mass Produce in Late Q3, Accelerating AI Server Expansion

(Central News Agency, reporter Wu Chia-hao, Taipei, June 11) Gaming giant MSI's Chairman, Hsiang Hsu, stated in an interview after the shareholder meeting today that the overall DIY (Do-It-Yourself) PC market is underperforming expectations. As this is one of MSI's primary markets, the company has set a goal for this year to defend its market share in key segments, maintain stable gross margins, and simultaneously accelerate the growth of new products such as Artificial Intelligence (AI) servers, the AI Internet of Things (AIoT), and in-vehicle solutions to compensate for the decline in the DIY market.

Regarding the progress of new computers equipped with NVIDIA's next-generation AI chip, the RTX Spark, Hsu revealed that MSI's progress is quite good. Mass production is expected to begin at the end of the third quarter of this year, in line with NVIDIA's production schedule. MSI is among the leading group in the first wave of product launches and will introduce new laptop and desktop computer models.

However, he also cautioned that the unit price of RTX Spark products is relatively high, primarily targeting the professional market of high-end designers and engineers. The subsequent market acceptance remains to be seen.

MSI's revenue for the first quarter of this year reached NT$56.257 billion, an increase of approximately 5% year-over-year. Gross margin improved significantly, rising from about 11% in the same period last year to 15%.

Hsu explained that the main reason for the gross margin increase was the significant price hike of components like DRAM and SSDs starting from the end of the third quarter of last year. Although prices could not be reflected in the fourth quarter of last year due to the market being in a destocking phase, after inventory was cleared in the first quarter of this year, manufacturers brought product prices back to reasonable levels.

He further pointed out that NVIDIA products also faced some memory shortages, with allocation volumes decreasing by 20% to 30% compared to the normal peak season. This led to a 'reluctance to sell' in the market, which also helped the overall gross margin return to a more normal level.

Discussing the shortage of Central Processing Units (CPUs), Hsu indicated that thanks to the efforts of Intel and AMD, relief has been seen in the second quarter of this year. Due to the very high overall server demand in Q2, manufacturers were caught off guard and initiated production increases. They have promised to gradually prioritize the supply of PC-related products. It is expected that by the third quarter, Intel's CPU production will increase, minimizing the impact on the peak season.

Regarding the progress of non-PC products, Hsu pointed out that the introduction and customer validation of new products like AI servers, in-vehicle solutions, and AIoT are proceeding smoothly. However, customers require individual validation and adoption, which will start with small volumes and increase in batches. It is unlikely to explode overnight. He expects the production volume and revenue contribution of these products to gradually increase in the second half of the year.

He revealed that MSI's AI server revenue contribution remains in the mid-single-digit percentage range (about 5%). This is mainly because MSI entered the related field relatively late, requiring time to recruit engineers, design products, and obtain NVIDIA certification.

Hsu also mentioned that the field, including servers, still faces the challenge of memory shortages, which involves overall supply and demand issues. Manufacturers can only notify supply volumes on a monthly basis, and the situation for the next quarter is not yet visible, with prices also uncertain. This will have some impact on MSI's quoting or order acquisition, and customers are mostly adopting a wait-and-see attitude towards new quotes for the second quarter.

Regarding capacity planning, Hsu stated that MSI had previously moved new products to Taiwan or Vietnam to diversify external risks. However, this required going through trial production and mass production ramp-up phases again, lengthening production time and causing the company to miss the initial boom of new product launches. With the relevant disruptions now over, most of MSI's production has returned to factories in China, maintaining the advantage of an integrated R&D, design, and production chain.

For servers, MSI currently has some production capacity in the United States and is cooperating with customer validation. The company is producing L10 (system assembly) and L11 (complete server system) products. (Editor: Pan Yi-jing) 1150611