Many people believe that the semiconductor industry is merely a growth sector; however, this is not the case. The semiconductor industry possesses both growth and cyclical attributes. Since 1978, the global semiconductor market size has been increasing year by year, with current global sales exceeding $600 billion. Even after more than forty years of development, the industry still exhibits strong growth characteristics.
According to the World Semiconductor Trade Statistics (WSTS), the market size is expected to reach $700.9 billion by 2025 (an 11.2% year-on-year growth), and is projected to exceed $1 trillion by 2030, with AI-related chips (such as GPUs and ASICs) contributing over 30% of the incremental growth.
From the perspective of market growth rates, there has been significant volatility over the past few decades, clearly demonstrating cyclical characteristics. Overall, the semiconductor industry is characterized by a long-term upward growth trend, with short- to medium-term cyclical fluctuations.
1. Semiconductors Are Not Just Growth: The Duality of Cyclicality and Growth
The semiconductor industry is often labeled as a “growth track,” but its essence is the resonance of cycles and growth. Over the past decade (2015-2024), global semiconductor sales surged from $330 billion to $627.6 billion, appearing to grow linearly, yet concealing three complete cycles of fluctuation:
2015-2018: A recovery cycle driven by memory chips, with DRAM prices soaring by 76.8%;
2019-2022: A “chip shortage” caused by trade frictions and pandemic disruptions, with a gap of over 30% in automotive chips;
2022-2024: A recovery cycle ignited by generative AI, with HBM demand surging, driving DRAM sales up by 82.6%.
The magic of cycles: Semiconductor demand is influenced by multiple factors including macroeconomics, technological innovation, and geopolitical issues, with price fluctuations reaching 50%-100%. For instance, memory chips undergo a complete cycle of “supply-demand mismatch → capacity expansion → price decline → inventory destocking” every three years.
The logic of growth: Technological iterations (e.g., 5nm → 3nm), domestic substitution (the localization rate of equipment rising from 5% to 30%), and emerging demands (AI computing power chips growing at over 60% annually) collectively drive the long-term upward trend of the industry.
2. Where Do Semiconductor Cycles Come From? Three Core Driving Forces
1. Technological Innovation Cycle
Moore’s Law: The density of transistors doubles every 18 months, forcing companies to continuously invest in R&D. For example, the launch of NVIDIA’s H20 chip directly stimulated HBM demand.
AI Revolution: The demand for large model training has led to an explosion in computing power chips, with global AI server shipments expected to reach 1.67 million units in 2024, a year-on-year increase of 41.5%.
2. Inventory and Capacity Cycles
The price cycle of memory chips is a typical microcosm: peaking in 2021 → bottoming out by the end of 2024 → rebounding in 2025.
Wafer fab expansions lag demand by 1-2 years, leading to supply-demand mismatches. For instance, excessive capacity expansion in 2022 triggered price declines in 2023.
3. Policy and Geopolitical Games
U.S. export controls are accelerating domestic substitution, with the proportion of domestic equipment tenders expected to rise to 45% by 2024. Geopolitical conflicts (such as the Taiwan Strait situation) affect supply chain stability, forcing companies to build diversified capacities.
3. How Have Historical Semiconductor Cycles Played Out? Three Stages of Revelation
| Cycle Stage | Driving Factors | Investment Opportunities | Risk Warnings |
| Recovery Period(2016-2018) | Increased smartphone penetration, explosive demand for memory chips | Memory chips (Samsung, Micron), foundry (TSMC) | Overexpansion leading toprice collapse in 2018 |
| Adjustment Period(2019-2022) | Trade frictions, pandemic disruptions | Domestic equipment (SMIC), automotive chips (Infineon) | Inventory buildup leading toindustry recession in 2022 |
| Recovery Period(2023-2025) | AI computing demand, accelerated domestic substitution | GPUs (NVIDIA), HBM (SK Hynix), equipment (North Huachuang) | Risks of technological iteration (e.g., lithography machine bottlenecks) |
Key Patterns:
Cycle Length: An average of 3-4 years, with memory chips dominating short-term fluctuations, while technological innovation drives long-term trends.
Excess Returns Source: Positioning equipment/materials in the early recovery phase, and allocating design/IDM leaders during the explosive phase.
4. How Should One Invest in Semiconductors? Four Practical Strategies
Strategy 1: Positioning Growth Leaders at Cycle Lows
Indicators: Monitor the memory price index (DXI), equipment tender volumes, and localization rates (e.g., breakthroughs in lithography machines).
Targets: SMIC (14nm mass production), North Huachuang (15% market share in etching machines), Haiguang Information (DCU performance on par with NVIDIA).
Strategy 2: Rotating in Sub-sectors
Equipment/Materials: Policy subsidies favoring sectors with annual growth rates exceeding 30% (e.g., SMIC’s etching machines entering TSMC’s supply chain).
AI Chips: Domestic substitution + essential computing power needs, focus on Cambricon (performance improvement of 2x for Siyuan 590) and Huawei Ascend.
Storage: Explosive demand for HBM, focus on Samsung, SK Hynix, and domestic alternatives like Zhaoyi Innovation.
Strategy 3: Position and Rhythm Management
Position Allocation: Total position within 30%, building in three batches (adding positions at 5%/10%/15% pullbacks).
Profit-taking Discipline: After a profit of over 30%, reduce positions by 20% for every 10% increase, retaining a base position to bet on long-term trends.
Strategy 4: Avoiding Three Major Traps
False Growth: Beware of cross-industry speculation (e.g., real estate companies riding the semiconductor wave).
Valuation Bubble: Be cautious of targets with PE ratios over 100x without performance support (e.g., Cambricon’s PE reaching 300x in 2021).
Geopolitical Risks: Monitor U.S. export control dynamics and avoid companies reliant on imported equipment.
The essence of semiconductor investment is to seek certainty amid technological iterations and industrial changes. Remember three points:
1. Cycles are irreversible, but fluctuations can be smoothed through position management;
2. Growth is the main line, with domestic substitution and AI innovation being the ten-year track;
3. Long-termism: view fluctuations from a 3-5 year perspective, rejecting short-term speculation.
As Warren Buffett said, “Be greedy when others are fearful, and fearful when others are greedy.” In the tidal fluctuations of the semiconductor industry, only investors with clear cognition and firm strategies can capture the true growth waves.