The semiconductor sector in the A-share market has reached a historic high, reflecting not only the capital market’s recognition of the industry’s fundamentals but also the strategic opportunities and deep-seated momentum in China’s digital technology development. This milestone breakthrough is supported by policy backing, technological advancements, and industrial upgrades, indicating that China is accelerating its transition from a “major semiconductor consumer” to a “self-reliant technological powerhouse.”
1. Strategic Support Behind the Semiconductor New High
1. Accelerated Domestic Substitution Driven by Policy
The National Big Fund’s third phase, with 344 billion yuan allocated, focuses on critical areas such as lithography machines and EDA software, while local supporting policies, such as Shanghai’s goal of having over 70% of data center chips be domestically produced by 2027, create a collaborative effort between central and local governments.
For example, Zhejiang has established the first high-end photoresist resin production line, breaking Japan’s monopoly; SMIC’s 28nm mature process capacity utilization has reached 98%, and the yield for 14nm has surpassed 85%, approaching TSMC levels, with domestic equipment utilization exceeding 30%, showing a significant acceleration in the self-sufficiency of the entire industry chain.
2. Industrial Chain Restructuring Under Global Technological Competition
U.S. technology restrictions on China have forced the country to build a self-controllable system. Huawei’s Ascend 920 chip achieves 85% of NVIDIA’s H20 performance, with a new generation of products set to enter mass production; Cambricon’s stock price has surpassed Moutai, becoming the “king of stocks,” reflecting the market’s high expectations for domestic AI chips.
This mechanism of “pressure turning into motivation” is driving China to form differentiated competitive advantages in AI chips and advanced packaging.
3. Resonance of Emerging Demand Explosion and Capacity Expansion
The demand for AI computing power is driving the recovery of the semiconductor market, with global semiconductor sales expected to grow by 11% by 2025, and China’s growth rate reaching 14%.
SMIC’s three 12-inch wafer fabs in Beijing, Shenzhen, and Lingang are expected to exceed a monthly production capacity of 800,000 wafers by the end of 2025, while Hua Hong’s expansion project will add a monthly capacity of 40,000 wafers. Additionally, China accounts for three of the 18 new wafer fabs being built globally, providing solid support for technological implementation through capacity expansion.
2. Three Strategic Opportunities for Digital Technology Development
1. Deep Coupling of AI and Semiconductors
The exponential demand for computing power in AI model training is reshaping the semiconductor industry landscape. Domestic AI chip companies like Cambricon and Hygon have made breakthroughs in cloud training chip fields, and Huawei’s Ascend ecosystem has adapted to over 300 industry applications.
At the same time, the rise of edge AI demand is evident—Apple’s iPhone 17 plans to feature local AI processing capabilities, expected to drive a wave of AI smartphone upgrades, while the penetration rate of domestic chips in edge computing scenarios is anticipated to rise from 12% in 2024 to 35% by 2027.
2. Explosion of Automotive Electronics and Industrial Internet
The smartization of new energy vehicles is driving a surge in demand for automotive semiconductors. Companies like BYD and NIO are adopting domestic IGBT and silicon carbide chips, with Silan Microelectronics’ automotive-grade IGBT shipments expected to increase by 300% year-on-year in the first half of 2025; in the industrial internet sector, edge computing chips from companies like Huawei and Alibaba Cloud have a penetration rate of over 40% in smart manufacturing scenarios, promoting the digital transformation of industrial equipment.
3. Empowering Emerging Industries with Semiconductor Technology
– Quantum Computing: The team from the University of Science and Technology of China has developed a photonic quantum chip with an integration level exceeding 100, compatible with semiconductor processes at 85%;
– 6G Communication: Huawei and ZTE have achieved patent breakthroughs in terahertz communication chips, with the related market expected to exceed $100 billion by the time of commercialization in 2030;
– Metaverse: BOE and Visionox’s Micro-LED display chips have improved mass production yield to 90%, driving a 50% reduction in AR/VR device costs.
3. Deep-seated Momentum in China’s Digital Technology Development
1. Enhanced Vertical Integration Capability of the Industrial Chain
Companies like SMIC and Hua Hong Group have achieved a full-chain layout from “design-manufacturing-packaging and testing,” with Jiangsu Changjiang Electronics Technology’s advanced packaging technology (such as Chiplet) enhancing multi-chip integration computing power by 40%, effectively reducing external dependencies.
For instance, Northern Huachuang’s etching machines and thin-film deposition equipment have entered SMIC’s production line, with a target of achieving a 40% domestic equipment utilization rate by 2025, gradually breaking the monopoly of Applied Materials and Lam Research.
2. Collaborative Evolution of the Technological Innovation Ecosystem
The Institute of Microelectronics of the Chinese Academy of Sciences and Huawei are jointly tackling 2nm processes, with laboratory breakthroughs expected by 2027; companies like Cambricon and Horizon Robotics are collaborating with universities to establish AI chip joint laboratories, accelerating technology transfer. This closed loop of “basic research-application development-commercialization” is forming an innovation ecosystem similar to the U.S. “Silicon Valley-Stanford” model.
3. Reshaping Global Industrial Chain Position
China has already accounted for 28% of global capacity in mature processes, with export value exceeding 1 trillion yuan, and is expected to reach 39% by 2027.
In the third-generation semiconductor field, Tianyu Advanced and Luxshare Precision’s silicon carbide substrate market share ranks third globally, while the penetration rate of domestic IGBT modules in the new energy vehicle market has increased from 15% in 2020 to 45% in 2025, gradually shaking the dominance of international giants like Infineon and ON Semiconductor.
4. Challenges and Response Paths
1. Risks of Technological Lag and External Restrictions
Core equipment such as high-end lithography machines and EUV light sources still rely on imports. If the U.S. imposes a 300% semiconductor tariff on China, it could temporarily impact the supply chain. However, China is mitigating risks through a “dual circulation” strategy: on one hand, accelerating the validation of domestic equipment, with the 5nm etching machine from Shanghai Micro Electronics Equipment already validated by TSMC; on the other hand, expanding international cooperation, establishing a joint R&D center with the EU in the field of third-generation semiconductor materials.
2. Valuation Fluctuations and Market Differentiation Pressure
The current PE (price-to-earnings ratio) of the semiconductor sector is at 59.19%, within the historical 5-year percentile. Some design companies are overvalued. Investors need to focus on structural opportunities: AI chips (Cambricon, Hygon), automotive-grade semiconductors (Silan Microelectronics), and equipment materials (Shanghai Micro Electronics, Northern Huachuang) are more resilient in upward trends.
3. Balancing Capacity Expansion and Demand Matching
Global semiconductor capacity is expected to grow by 6.6% by 2025, and there is a need to be cautious of potential oversupply in certain areas (such as consumer electronics chips). China is responding with a “demand-driven supply” strategy, where emerging demands for AI servers and smart vehicles are driving storage chips (GigaDevice) and power devices (Silan Microelectronics) to maintain over 20% growth, forming a dynamic balance between supply and demand.
5. The Technological Development Landscape for the Next Decade
1. Three Major Leapfrogs in Semiconductor Technology
– Process Miniaturization: Achieving mass production of 2nm processes before 2030, using GAAFET transistors and CFET architecture, with chip performance improving by three times;
– Heterogeneous Integration: Chiplet technology will integrate chips of different process nodes, reducing costs by 40%, with companies like Huawei and AMD already making moves;
– New Material Applications: The commercialization of gallium oxide power devices will enhance the efficiency of electric drive systems in new energy vehicles by 15%.
2. Fusion Innovation in Digital Technology
– AI + Manufacturing: Foxconn’s “lighthouse factory” based on self-developed AI chips has improved production efficiency by 30%;
– Quantum + Communication: The Mozi quantum satellite combined with semiconductor quantum chips is constructing a secure communication network that integrates space and ground;
– Metaverse + Display: Micro-LED display chips are driving the weight of AR glasses down to below 50 grams, with consumer-grade products expected to launch in 2026.
3. Enhanced Global Technological Governance Discourse Power
The 5G-A standards led by China have been included in the 3GPP Release 18, with over 100 members in the 6G R&D alliance; in the RISC-V open-source architecture ecosystem, Chinese companies contribute over 30%, potentially breaking the ARM and x86 monopoly. This dual breakthrough of “technological standards + industrial ecosystem” will reshape the global technological competition rules.
Conclusion
The historic high of the A-share semiconductor market is an important milestone in China’s digital technology development process. This breakthrough is not only due to policy support and industrial upgrades but also indicates that China is transitioning from a “technology follower” to an “innovation leader.” In the next decade, with the deep integration of technologies such as AI, quantum computing, and 6G with semiconductors, China is expected to occupy a more central position in the global technology value chain.