Key Power Clients Expand Rapidly in Texas; Songchuan May Further Raise Capex to Expand Mexico Plant

Strong AI demand has prompted major Taiwan-based power industry manufacturers to urgently increase investments in Texas, USA, accelerating their localization through 'Made in America' initiatives. They aim to provide end-to-end services locally in the United States. As local demand in the U.S. is expected to grow rapidly, Songchuan Precision (7788-TW), a relay supplier for AI data centers, is not ruling out a second upward revision of its annual capital expenditure to accelerate production capacity expansion at its Mexico plant, in response to the need to build a supply chain ecosystem.

Songchuan Precision reported record-high revenue and profits in the first quarter of 2026. Net profit after tax reached NT$178 million, up 59.83% quarter-on-quarter and 22.48% year-on-year, with earnings per share at NT$2.22. Due to the significant market demand growth for applications such as AI servers, Songchuan is accelerating investment in new production capacity. The company plans to invest over NT$400 million this year to expand capacity in Mexico and Vietnam. However, this expenditure does not include the capacity needed to meet the demand from its key power clients following their expansion.

Originally established to support the automotive electronics supply chain logistics for the U.S. electric vehicle 'Gigafactory' in Texas, Songchuan Precision executives indicated that, given the massive demand in the power market and clients' accelerated expansion, the company may again revise its annual capital expenditure upward to align with power plant setup progress and production needs.

Songchuan Precision completed expansions at its Chiayi, Taiwan, and Vietnam alliance plants at the beginning of 2026 and is currently adding new production capacity in Mexico and Vietnam. Its capital expenditure plan for this year has already been raised to over NT$400 million. However, to further integrate into Taiwan's power supply ecosystem, the company plans to further expand its Mexico plant, which still has 50% room for production capacity growth, in line with key customers' requirements and production schedules.

Global cloud service providers continue to expand capital expenditures, turning the AI race into an arms race. Taiwan's Lite-On (2301-TW) and Delta Electronics (2308-TW) are also accelerating plans to invest NT$40–50 billion to acquire land in Texas, USA, and further expand power supply capacity.

Songchuan Precision's operations are on an upward trajectory. With the consolidation of former Tai Hsing Electronics' revenue, monthly revenue continues to hit new highs, surpassing the NT$800 million mark for the first time. Songchuan Precision announced today (8th) that its June 2026 revenue reached NT$828 million, up 13.35% month-on-month and 65.66% year-on-year. In addition to Songchuan's active investment in expanding production capacity, the company notified customers of relay product price adjustments in April, with the benefits contributing to revenue and profit starting from the second quarter.

Songchuan Precision reported its latest revenue for the second quarter at NT$2.26 billion, another record high, up 21.68% quarter-on-quarter and 40.28% year-on-year. Revenue for January to June totaled NT$4.116 billion, up 27.32% year-on-year.

Regarding the benefits of product price increases, May 2026 revenue was NT$731 million, another record high, up 4% year-on-year. The company self-reported monthly net profit after tax at NT$102 million, up 2.61 times year-on-year, with monthly earnings per share at NT$1.27, clearly reflecting the benefits of expanded production economies of scale and cost pass-through. Starting in the second half of the year, Songchuan will see profitability from newly developed DC800V relays and new part numbers for major AIDC power suppliers.