AIDC, a key player in Taiwan's aerospace supply chain, is making a strategic move into the US market.
The company cited the American aerospace and defense industry's prioritization of domestic suppliers behind its expansion into the US. The company recently confirmed plans to establish a manufacturing facility in Arizona, operated by its wholly-owned US subsidiary.
During a recent earnings call, AIDC provided updates on the US factory project and discussed the company's second-quarter 2024 performance. The aerospace sector struggled in the second quarter due to supply chain disruptions, which delayed deliveries of advanced trainer aircraft.
Despite these setbacks, AIDC remains focused on its commitment to these aircraft, with teams working closely with suppliers to expedite deliveries. The company is optimistic about catching up with its delivery schedule by the fourth quarter and anticipates delivering 18 aircraft by year-end.
The situation underscores the importance of maintaining a robust local supply chain. Currently, 45% of the trainer aircraft components are imported, while 55% are sourced from domestic suppliers. While the local supply chain has met its commitments, delays have stemmed from shortages in foreign-sourced system components.
For the second quarter, AIDC reported revenue of NT$8.8 billion, a decline of 16.8% quarter-on-quarter and 7.7% year-on-year. The gross margin was approximately 11%, down over one percentage point from the previous year. Net profit after tax stood at NT$571 million, a 24% decrease year-on-year, bringing first-half net profit to NT$1.37 billion, marking a 6% growth compared to 2023.
AIDC highlighted the necessity of establishing a US factory to remain competitive in securing aerospace contracts, given the protectionist stance of the US industry. This move will enable closer collaboration with foreign system integrators, ensuring a more stable supply chain and improved cost efficiency. The company projects significant growth in US revenue within the next two years.
AIDC elaborated that the US facility will prioritize defense contracts, with civil aviation as a secondary focus, mainly to comply with the "Buy American Act" requirements. The initial phase will target certifications, with subsequent efforts to bolster the domestic supply chain. AIDC's existing clients are already engaged in discussions. The investment involves acquiring a facility in Arizona through AIDC's US subsidiary, with around US$10.25 million allocated for land and buildings.
AIDC's recent business expansion efforts have yielded substantial results. The company recently led its management team to the Farnborough Airshow in the UK, attracting interest from major European and American firms. AIDC has since signed long-term contracts for engine components and single-aisle commercial aircraft parts, expected to generate over NT$8 billion in orders, with revenue contributions starting in 2025.
In defense, AIDC has forged alliances with major international defense system manufacturers, focusing on anti-drone systems, F-16V external fuel tank maintenance, and joint helmet-mounted cueing systems. These initiatives span reconnaissance, defense, and attack capabilities, covering ground and aerial operations, intending to enhance national defense autonomy.
