Record-high precious metal prices upstream are tightening cost pressure across the passive components industry, but the impact on protection components has so far been contained. Thinking Electronic Industrial said silver prices have surged since 2025, yet supply-demand dynamics have limited immediate price pass-through, allowing product prices to stabilize after a prolonged period of decline.
The company said it has gradually shifted raw material cost pressure downstream, helping arrest price erosion even as demand from consumer electronics and automotive customers has clearly softened. Against this backdrop, Thinking Electronic is increasingly pinning its growth outlook on AI-related applications, targeting around 10% revenue growth in 2026 and a gross margin of roughly 40%.
AI-driven demand is expected to build gradually. As new products such as platinum-grade temperature-pressure integrated sensors ramp up, AI-related revenue could account for 5% to 10% of total sales within three to five years, the company said.
To manage rising precious metal costs, Thinking Electronic has avoided across-the-board price hikes, instead adopting what it described as a dual-track strategy. Raw material cost fluctuations are being passed through to customers to offset routine annual or quarterly price reductions, while internal efforts focus on improving automation, yields, and manufacturing efficiency to keep margins near current levels.
Competitive pressure in the global protection components market remains intense, with limited price increases seen among Chinese and Japanese peers. As a result, the company said pricing discipline remains fragile despite some stabilization.
Asked about Yageo's acquisition of Japan's Shibaura Electronics, aimed at strengthening its presence in AI server and automotive sensor markets, Thinking Electronic said overlaps exist in NTC thermistor products, but customer bases differ significantly. Any competitive impact, it noted, will take time to materialize.
Chairman Sui Tai-chung said the company is actively pursuing AI server opportunities, particularly as 800V high-voltage direct current architectures gain traction. Higher-power server designs are expected to drive demand for more precise temperature and pressure sensing, an area where Thinking Electronic is working closely with domestic partners and expanding cooperation with liquid-cooling system suppliers.
A single AI server, including its rack and cooling system, may require between 40 and 80 protection components such as thermistors and varistors, with total component value reaching up to US$300, the company said. Platinum-grade protection components have already entered sampling and project initiation stages, with related opportunities expected to emerge from 2026 and accelerate AI-related shipments.
Capacity utilization across product lines currently averages about 80%, with surface-mount varistors running above 90% amid stronger demand. Orders and capacity are broadly balanced, the company said. Construction of a new plant in Vietnam and a second-phase facility in Zhongshan, Guangdong, is under way, with peak capacity expected to come online in 2027.
In the third quarter of 2025, Thinking Electronic Industrial reported consolidated revenue of NT$2.079 billion (US$66.6 million), up 1.2% quarter on quarter and 5.2% year on year. Gross margin reached 40%, down 1.3 percentage points sequentially but up 0.8 points from a year earlier. Operating margin stood at 26%, while net profit rose to NT$407 million, up 43.5% quarter on quarter and 10.7% year on year, lifting net margin to 20%.
Article translated by Levi Li and edited by Joseph Chen
