KUALA LUMPUR: SkyeChip Bhd's expansion into artificial intelligence (AI) silicon and Arm-based compute platforms is expected to contribute limited revenue in the near term, UOB Kay Hian (M) Sdn Bhd said.
The firm said more meaningful earnings contributions are likely to emerge only after successful tape-out and volume production.
UOB Kay Hian said the initiatives could provide a second leg of growth for the semiconductor company from 2029 onwards.
"In the meantime, SkyeChip's established silicon intellectual property (IP) and custom application-specific integrated circuit (Asic) businesses should remain the key earnings drivers," it said in a note.
The firm said SkyeChip's recent engagement with Cerebras Systems for custom interface IP demonstrated the company's ability to participate in advanced AI computing platforms.
SkyeChip has also entered into a definitive agreement with the Malaysian Investment Development Authority for access to Arm's Flexible Access token, giving it access to Arm's comprehensive IP portfolio through an asset-light model.
The company is also targeting the finalisation of its Arm Compute Subsystems definitive agreement by financial year 2027 (FY27).
"These initiatives support its expansion into custom compute and AI hardware accelerators, including purpose-built Asics for specialised workloads such as tensor processing and data preprocessing, and high-performance central processing units and AI platforms for server and edge applications," it said.
UOB Kay Hian has raised its FY27 to FY29 earnings forecasts by two per cent following housekeeping adjustments.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB) said SkyeChip's quarterly earnings are likely to remain lumpy due to its milestone-based revenue recognition.
By segment, silicon IP contributed RM26.3 million, or 53 per cent of total revenue, while custom Asic revenue stood at RM23.3 million, accounting for 47 per cent.
Custom Asic revenue has strengthened over the past two quarters, supported by an RM78 million unbilled order book as at end-March 2026.
"Of this, RM48 million is expected to be recognised in FY27, with the remaining RM30 million spread across FY28-FY29," HLIB said.
By geography, the US emerged as SkyeChip's largest market in the first quarter of FY27, contributing RM27.1 million, or 55 per cent of revenue, ahead of China at RM20.9 million, or 42 per cent.
"While we do not expect this mix to be sustained for the full year, the scale of the step-up in US revenue is significant and underscores SkyeChip's efforts to diversify away from its China and Taiwan exposure," it said.
UOB Kay Hian downgraded SkyeChip to "Hold" with a rolled-over target price of RM2.93 from RM2.08, while HLIB maintained its "Hold" call with an unchanged target price of RM2.95.