The wave of AI is sweeping the globe, and the shortage of storage chips is intensifying, marking the gradual opening of a production expansion driven by demand. As major overseas manufacturers like Samsung, SK Hynix, and Micron shift their capital expenditures towards high-end storage products represented by HBM (High Bandwidth Memory), the supply-demand gap for traditional storage is expected to persist at least until next year. In this context, the urgency for domestic storage manufacturers to expand production is rising, and equipment, as a precursor to expansion, has become the focal point of market attention.
On November 10, the A-share semiconductor equipment sector performed strongly, with Tuojing Technology (688072.SH) reaching a historic high, with an annual increase of over 120%. Stocks in the sector collectively rose. Companies like Huahai Qingshi (688120.SH) and Zhongwei Company (688012.SH) achieved double-digit growth in revenue and net profit in the first three quarters, with inventory and contract liabilities continuing to climb, indicating robust orders and expected performance releases. As domestic equipment continues to break through in key processes such as etching and thin film deposition, a wave of localization driven by storage expansion is stirring the capital market.
Storage Shortages Drive Expansion Expectations
Each strong upward cycle of storage chips is generally driven by demand, and this cycle’s upward trend is primarily due to the explosive demand from AI servers and multimodal applications. The surge in demand has led to shortages and price increases for storage chips that were previously at normal inventory levels.
A report from China Merchants Securities indicates that in October, prices for various storage models accelerated their rise, with month-on-month increases ranging from approximately 40% to 100%. As November began, the price surge for storage showed no signs of weakening, with all major storage manufacturers clearly stating their price increases. This month, global storage chip leader SanDisk announced a significant 50% increase in NAND flash contract prices, driven by the dual forces of explosive demand from AI data centers and tight wafer supply, triggering a chain reaction in the storage industry chain.
Meanwhile, due to the stronger profitability of high-end server DRAM and HBM, and the limited capacity expansion on the supply side, international manufacturers are gradually withdrawing from the low-end market, shifting existing production lines to the high-end market, significantly reducing the supply of certain products. This move further disrupts the supply-demand pattern in the storage field, squeezing the production capacity of consumer electronics such as mobile phones and PCs, leading to a persistent structural shortage.
The price increases have directly heightened the urgency for domestic storage manufacturers to expand production, and the secondary market has thus opened a trading logic of “chip expansion, equipment first.” On November 10, the semiconductor equipment index rose by 1.46%, with Huahai Qingshi and Zhongwei Company both rising, and Tuojing Technology closing up 1.42%, reaching a new historic high, with an annual increase of 120.4%. Additionally, stocks like Shengmei Shanghai (688082.SH) and Huafeng Measurement Control (688200.SH) have annual increases exceeding 70%, showing significant sector characteristics.
It is noteworthy that two domestic storage leaders, Yangtze Memory Technologies and Changxin Memory Technologies, which are actively promoting their IPO processes, will have greater capacity expansion capabilities once they secure IPO fundraising, further driving expectations for domestic equipment growth. This is also one of the reasons supporting the strength of the semiconductor equipment sector.
The wind of demand has arrived, and the market has reached a consensus on the sustainability of storage shortages brought about by AI. Some institutions even point out that by 2026, the supply gap for high-end storage chip categories will further widen. The report from China Merchants Securities believes that unlike the temporary price increases brought about by production cuts and proactive price hikes from storage manufacturers in 2024, this round of the storage industry cycle is primarily driven by the explosive demand for storage in the AI era. The characteristics of this storage upcycle are stronger price increase sustainability and accelerated overall price trends, while supply-side capacity expansion remains limited. Therefore, it is expected that the supply-demand gap in the storage industry may further widen in the first half of 2026, and the price increase trend is likely to continue.
Domestic Equipment Shows Strong Q3 Performance
Behind the hot performance of semiconductor equipment in the secondary market is the solid support of Q3 earnings reports. The semiconductor component sector achieved a total revenue of 85.207 billion yuan in the first three quarters of 2025, an increase of 20.429 billion yuan or 31.54% year-on-year, with a total net profit attributable to shareholders of 12.055 billion yuan, an increase of 2.966 billion yuan or 32.63% year-on-year.
In terms of revenue and net profit, several equipment companies achieved rapid growth. For example, Tuojing Technology reported revenue of 4.22 billion yuan in the first three quarters, a year-on-year increase of 85.27%, with a net profit of 557 million yuan, an increase of 105.14%; Zhongwei Company reported revenue of 8.063 billion yuan, a year-on-year increase of 46.4%, with a net profit of 1.211 billion yuan, an increase of 32.66%; Changchuan Technology (300604.SZ) saw a year-on-year increase in net profit attributable to shareholders of 142.14%.
More noteworthy are the inventory and contract liability indicators, which are often seen as “leading indicators” for performance release. In terms of inventory, as of the end of Q3, Northern Huachuang’s inventory was 30.199 billion yuan, an increase of nearly 8 billion yuan since the beginning of the year; Zhongwei Company’s inventory reached 8.194 billion yuan, and Tuojing Technology’s was 8.069 billion yuan, both at historical highs and having increased by over 1 billion yuan compared to the beginning of the year. The contract liability indicator usually indicates that downstream customers have paid a large amount of advance payments to secure equipment delivery, providing high visibility for equipment manufacturers’ orders. The contract liability amounts for Tuojing Technology, Northern Huachuang, and Zhongwei Company exceeded 4 billion yuan at the end of Q3.
Among them, Tuojing Technology’s contract liabilities increased by 1.91 billion yuan or 64% compared to the beginning of the year. The company performed well in Q3, achieving revenue of 2.266 billion yuan, a year-on-year increase of 124.15%; the net profit attributable to shareholders was 462 million yuan, a year-on-year increase of 225.07%; and the net profit after deducting non-recurring gains and losses was 420 million yuan, a year-on-year increase of 822.50%. The significant increase in performance is mainly due to the continuous expansion of product process coverage and the entry of advanced process verification machines into large-scale production.
Domestic semiconductor equipment companies, after years of deep cultivation and development, have sharpened their technological “sword” and are standing at the historic opportunity brought by storage expansion. The cyclical prosperity of the equipment industry chain is the focus of market attention.
In high-end semiconductor equipment, thin film deposition equipment, lithography equipment, and etching equipment together constitute the three core devices for chip manufacturing. The production of storage chips, especially 3D NAND and advanced DRAM, is the crown of semiconductor processes, and its expansion will significantly drive the demand for these two core equipment categories.
High-end semiconductor equipment has gradually become the main battlefield for domestic equipment manufacturers. Leading stock Northern Huachuang has achieved the milestone of delivering the 1000th unit of both vertical furnaces and physical vapor deposition (PVD) equipment in the first half of this year, while the company has also released new products such as ion implantation equipment, electroplating equipment, and metal organic chemical vapor deposition equipment.
Plasma etching equipment and thin film deposition equipment are the main products of Zhongwei Company. In the first three quarters, the company’s etching equipment revenue reached 6.101 billion yuan, a year-on-year increase of approximately 38.26%, with ultra-high aspect ratio etching processes for advanced memory and logic devices achieving large-scale production. Newly developed thin film equipment such as LPCVD (Low Pressure Chemical Vapor Deposition) and ALD (Atomic Layer Deposition) have also successfully entered the market.
(This article is sourced from: Yicai)