Sold Out at the Bottom of the BOM

Sold Out at the Bottom of the BOM

On June 12, the TAIEX bounced 1,019 points (+2.36%) to reclaim 44,169, ostensibly on Trump cancelling the Iran strike plan and a memory rally led by TSMC (2330, +2.67% to NT$2,310) and MediaTek. Foreign investors, after six straight sessions and NT$35.7B of net selling, partially covered. But the real news this week is not the index print. It is that the bottom of the bill of materials — MLCC, transformers, test sockets, TVS diodes, power converters — all flashed sold-out at the same time.

Start with Walsin Technology (2492-TW). At its AGM the chair said book-to-bill had moved from 1.2–1.3 up to 1.3–1.4 with "no overbooking." AI hyperscaler demand will keep MLCC tightness in place past 2027, and Walsin is lifting capacity 10–15% in 2026. MLCC is always the last thing to arrive in a tightening cycle and the last thing to loosen. Walsin's framing implies the loosening is at least 18 months away.

Hwa Chong (1519-TW), the Taiwan transformer maker, gave a sharper number. Its AGM disclosed AIDC (AI data center) backlog had crossed NT$20B (~US$620M), with FY26 AIDC guidance of NT$4.5–5B, or 15% of sales. The arithmetic is brutal: the backlog is roughly four years of AIDC shipments. You cannot energize a data center without the transformer on the pad — this is not a "next quarter" line, it is a "2030 line-up" line. On the distribution/UPS side, Allis Electric (1514-TW) disclosed backlog north of NT$13B (~US$420M) and guided 30% growth in semiconductor orders for 2026, naming semis, AI and grid resilience as its three pillars. The MOSFET and auto-memory subindices on the TPEx printed +7.01% and +6.55% on the same day; GlobalWafers (6488) surged +9.92%. The discrete power layer — the part nobody is supposed to care about — got a violent bid.

The most policy-revealing print came from DeMicro. With the EU's 6–9 month grace period on China's Yangjie Electronics expiring in Jun–Jul, DeMicro can substitute up to 80% of Yangjie's power-diode/TVS volume. The chairman said the order book is "full through end-2027." Note the source: this is not "AI demand is good." This is regulation plus AI power redesign jointly creating an 18-month booking window. The same structure shows up at Winway, the test-socket specialist. On June 10 Morgan Stanley reiterated Overweight with a NT$15,000 target (74% upside from NT$8,610). Sockets are consumables that must be remade every time a new chip lands, and in a cycle where AI chip generations turn every six months, sockets become the bottleneck.

Meanwhile the top of the cycle — phones and tablets — is cracking. Counterpoint reported Q1 global smartphone AP-SoC shipments fell 8% YoY on memory shortage. MediaTek held the lead at 32%, but absolute volumes shrank. MM Research forecast Japan tablet shipments will drop 16.3% in FY26, the first contraction in three years, driven by the memory price surge. NAND and DRAM are being absorbed by AI servers, so consumer endpoints cannot get the parts.

This is where the asymmetry of this cycle shows up. In every prior cycle, when smartphones rolled over, capacity cooled off, and the passive/power backlog unwound with it. Not this time. Enterprise SSD Q1 revenue jumped +86% QoQ to a record US$18.46B (TrendForce). TPEx-listed semiconductor revenue for the first five months crossed NT$1.5T for the first time, +69% YoY. Taiwan's May machinery exports hit a record US$3.5B — 16 straight months of growth. China's May IC exports rose +110.9% YoY. TSMC's May revenue held above NT$400B at NT$416.9B (+30.1% YoY). The top of the cycle is breaking, but the middle (AI servers, power, thermal) is accelerating — and the bottom of the BOM that supports that middle is sold out.

CBC Governor Yang Chin-long's mid-week comment fits the same pattern. He told lawmakers the central bank is monitoring an "abnormal deposit-loan spread" where banks pay TSMC higher rates on its NT$3T+ cash pile. Translation: TSMC's capex pace is so fast that the financial system is adapting backward — TSMC has become a giant deposit account banks borrow from to re-lend into other fab and data-center projects. Where does that money end up? Hwa Chong's transformer line. Allis's switchgear. Walsin's MLCC capacity hike. The boring stuff.

Two risks remain. First, CPO delay. SemiAnalysis warned co-packaged optics mass production may slip to 2028–2029; five Taiwan optical-comm names hit limit-down on June 11. Morgan Stanley reaffirmed its CPO thesis on seven beneficiaries (TSMC included) but cut its 2027 optical engine forecast. The optical layer is decelerating while the power/passive layer accelerates — a widening gap between two tracks. Second, foreign selling. NT$11B came out of TSMC alone on June 11. When foreigners press the index, the index hides things — and what it hides this week is the BOM-layer signal.

The trade is straightforward. This week's bottom-of-BOM sell-out creates at least 18 months of order visibility. Delta (2308-TW) on power and thermal, ASE (3711-TW) on the back-end, GlobalWafers (6488) on the non-AI wafer step — each holds a piece of that 18-month book. A cycle where smartphone SoC ships -8% while components sell out is unprecedented. That is what makes this cycle different.

Key Sources: - Walsin Tech sees AI-driven MLCC tightness past 2027, lifts capacity 10-15% in 2026 (cnyes, 2026-06-12) - Hwa Chong AIDC backlog tops NT$20B; FY shipments seen at NT$4.5-5B (cnyes, 2026-06-12) - Taiwan's DeMicro Books Orders Through End-2027 on EU Sanctions and AI Power Redesign (technews, 2026-06-11) - Morgan Stanley reiterates Overweight on Winway, lifts target to NT$15,000 on AI socket demand (technews, 2026-06-10) - Q1 Smartphone SoC Shipments Fall 8% YoY on Memory Shortage (technews, 2026-06-11) - plus 12 more