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Expectation difference is productivity.
—— Jingbei Yueguang
Recently, we have clearly felt that the semiconductor equipment sector is in a state of rising sentiment. On one hand, during a slight pullback in mid-June, some short-term holdings have been washed out, establishing a foundation for growth; on the other hand, various sub-sectors in electronics have seen continuous hotspots in the second quarter, with funds constantly switching tracks, while the equipment sector has yet to experience this fund rotation.
Our basic judgment on the sector remains unchanged. The demand for mature processes in China will remain strong in 2025, and advanced processes are expected to grow. In the short term, North Huachuang’s new orders in the second quarter exceeded expectations, and other semiconductor equipment companies also maintained robust growth in new orders, reflecting the strong recent demand for advanced process orders in China. Linear extrapolation of new orders for the entire year may exceed expectations, which is also an important catalyst for current market trading.
Today, we discuss two drivers of semiconductor equipment:
One is that North Huachuang has received a large order for advanced process equipment. Before Q2, it was mentioned that Huachuang and Zhongwei received many orders for memory expansion. Previously, domestic computing power construction was briefly active in Q4 but then stagnated due to the inability to purchase cards. Companies like Muxi and Moore Threads are applying for listing, and Kunlun Core and Birun Technology are expected to start large-scale shipments in Q3. These GPUs, with over 30 billion transistors, will definitely require the use of domestic advanced processes, including the CPU released by Loongson Technology, which claims to have a fully domestic supply chain.
Currently, the visibility and prosperity in Q2 are best in the AI supply chain, PCB, optical modules, and next is semiconductor equipment. The Philadelphia Semiconductor Index has reached a historical high, not only due to the rise of AI chips but also traditional semiconductors focused on automotive, industrial, and consumer applications, such as TI, STMicroelectronics, ON Semiconductor, UMC, and ASE, are also quietly reaching new highs. Memory prices have already risen first, with DDR4 fluctuations being extremely volatile, and the market is betting on the recovery of the semiconductor cycle.
The other driver is a Morgan Stanley research report, which revised the global WFE (Wafer Fabrication Equipment) forecast for 2025 from a year-on-year growth of 2% to 6%, with China being the main contributor. Morgan Stanley raised its forecast for the global WFE market size in 2025 from $104 billion to $109 billion, with a year-on-year growth adjustment from 2% to 6%, and a slight upward adjustment to $110 billion for 2026. This adjustment is mainly attributed to the Chinese market, especially with an additional $5 billion in spending on Foundry/Logic equipment.
Pay attention to domestic orders for advanced process lines!!
According to industry research, advanced process production lines have begun placing orders with domestic equipment companies, and self-controllable capabilities continue to accelerate. Previously, the sector was affected by a slowdown in trading and has corrected to a suitable level, with significant upward potential in the future, so it is recommended to pay attention.
Elastic targets: SMIC Hong Kong stocks, Huicheng Vacuum, Jingyi Equipment, East China Heavy Machinery.
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Disclaimer: The views expressed in this article and any articles from the public account are for discussion purposes only and do not constitute any investment advice.