Expansion of SSD Adoption in U.S. AI Data Centers
First-Quarter Gross Profit Quadruples Compared to Previous Quarter
Pado, a semiconductor company specializing in data center solutions, achieved sales of 19.2 billion KRW in the first quarter of this year.
On May 12, Pado announced that its first-quarter revenue reached 19.2 billion KRW, a 734% increase compared to the same period last year (2.3 billion KRW). This surge is attributed to the expansion of high-performance enterprise solid-state drive (SSD) adoption by U.S. artificial intelligence (AI) data center companies since the second half of last year, which led to a significant increase in Pado’s supply of controllers to North American NAND flash memory customers.
Although there were concerns earlier this year about reduced investment from major U.S. data center companies due to U.S. tariff issues, these companies have recently announced plans to maintain or even expand their investments during their earnings releases. As a result, demand for high-performance, high-capacity storage is expected to remain robust.
Recently, following its entry into the U.S. data center market, Pado has been pursuing customer diversification and revenue growth in Asian markets such as China, Taiwan, and India by implementing new customer-tailored business strategies based on its Flex SSD solutions.
According to market research firm TrendForce, contrary to initial expectations at the beginning of the year, both the selling prices and demand for enterprise SSDs are expected to remain strong in the second quarter. Consequently, Pado’s controller and module business sales are also expected to continue their upward trend in the second quarter.
Although the company posted an operating loss of 11.9 billion KRW in the first quarter, the deficit was reduced by 54% compared to the previous quarter, showing signs of improvement. This improvement is attributed to two main factors: Pado proactively recognized a significant inventory asset valuation loss on obsolete inventory in the fourth quarter, thereby reducing financial burden, and the company also restructured its product portfolio to focus on the more profitable controller business, which led to a substantial increase in gross profit. Gross profit for the first quarter was 10.1 billion KRW, more than four times higher than the previous quarter. In addition, since the third quarter of last year, the scale of R&D expenses for the 'Gen6 controller' advanced development has decreased, which also contributed significantly to the reduction in selling and administrative expenses.
As is typical for fabless (semiconductor design) companies, labor costs account for about half of operating expenses, but this burden has also eased. Although the number of R&D personnel dedicated to new product development projects had steadily increased over the past two years, since the third quarter of last year, the headcount has remained at around 280. As sales increase, the labor cost-to-sales ratio is expected to decline, leading to further improvements in profitability.
A Pado representative stated, "Typically, fabless companies see an increase in engineering personnel and labor costs during the advanced development phase, but once sales begin in earnest, headcount growth slows and profitability improves rapidly. As the results of our new customer acquisition and new product development projects over the past two years are expected to start contributing to sales this year, we anticipate continued growth going forward."
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