According to "The Science and Technology Innovation Board Daily" on June 16th, for three consecutive quarters, more than half of Japan's exported semiconductor equipment was sold to China. In the first quarter of this year, Japan's semiconductor manufacturing equipment, equipment components, display panel equipment and other exports to mainland China increased by 82% year-on-year, reaching 521.2 billion yen (approximately RMB 24 billion), the highest level since 2007. In terms of product structure, the operating income of products ranging from 10-30 billion yuan was respectively 401/1288/60 million yuan.

Japan is one of the major importers of semiconductor equipment in China, with a market share of 30% globally, second only to the United States.

According to statistics from SEAJ, in April of this year, the sales of semiconductor equipment in Japan reached 389.106 billion yen (approximately RMB 17.952 billion), a year-on-year increase of 15.7%, and the largest increase in 17 months.

As a result, several related concept stocks in Japan have reached historical highs this year, including semiconductor equipment manufacturers Tokyo Electron, SCREEN, wafer cutting machine supplier DISCO, testing equipment supplier Advantest, EUV mask inspection equipment supplier Lasertec, etc.

Now that the second quarter is coming to an end, based on the expected data from the end of May, Tokyo Electron, SCREEN, Advantest, and DISCO are expected to see growth in revenue in Q2, with a year-on-year growth rate between 20% and 40%.

Among them, SCREEN also predicts that its sales in China from April to September this year will account for 49% of the total.

Importing a large number of foreign devices and upgrading the domestic semiconductor equipment manufacturing rate are not contradictory, but two sides of rapid development in the industry. According to data from the General Administration of Customs of China, from January to April of this year, the total import value of domestic semiconductor equipment was US$10.487 billion, an increase of 88% year-on-year. Brokerages believe that with the rapid growth of equipment import value, the matching of self-supplied semiconductor equipment and the domestic manufacturing rate of equipment are expected to rapidly climb.

Supported by the need for localization, mainland China has become the largest semiconductor equipment market in the world for four consecutive quarters. From the perspective of sales, according to statistics from SEAJ, global semiconductor manufacturing equipment sales in the first quarter of this year were US$26.42 billion, a year-on-year decrease of 2%; the growth rate in mainland China increased against the trend, reaching 113% over the same period.

▌Domestic equipment manufacturers are gearing up.

Although overseas semiconductor equipment companies have had strong stock price performances in the first half of the year, BOCOM International's report on June 12th pointed out that most of the companies' Q1 performance did not return to the level during the previous upward cycle (2021-2022). At the same time, their stock prices are far higher than their previous highs, perhaps because during the AI infrastructure cycle, investors have high enthusiasm for the entire semiconductor industry chain.

Compared to the stock prices of overseas peer companies, analysts believe that under the background of continuous technological improvement, mainland Chinese semiconductor equipment companies' performance has grown strongly, but their stock prices may not truly reflect this trend. The stock prices of overseas semiconductor equipment companies may have already fully reflected their performance expectations, while domestic semiconductor equipment companies may have structural opportunities. The new concept of production quality is guiding mainland China's semiconductor industry to further increase its capital intensity.

As a matter of fact, the National Integrated Circuit Industry Investment Fund Phase III was officially established on May 24th, with a registered capital of 344 billion yuan, surpassing the sum of the previous two phases, demonstrating the government's support for the semiconductor industry. GF Securities believes that areas with low levels of localization (such as the advanced process industry chain, storage industry chain, etc.) are expected to receive support from the big fund, and related companies in those areas may see accelerated development opportunities.

Looking at the situation of domestic leading companies, due to the expansion of downstream wafer plants, companies' delivery and production indicators have greatly risen. Debang Securities expects equipment companies' newly signed orders to be good this year.

1) From the perspective of inventory and delivered goods, equipment manufacturers such as North China Huachuang, Advanced Micro-Fabrication Equipment Inc. China, and Tengjing Technology all had significant growth in inventory from Q4 2023.

2) From the perspective of production volume, Tengjing Technology, AMEC, and others have indicated that their equipment market volume in Q1 2024 showed a significant increase. This year's growth in newly signed orders is expected to bring high certainty for equipment companies' performance in 2024-2025.

Sinolink Securities' research report on June 12th believes that as chip inventory clears to a reasonable level, wafer fabs will usher in the peak demand season in the second half of the year, with an increase in capacity utilization and mature-process factories' capital expenditure expected to restart. Contract manufacturers will maintain high capital expenditures and domestic memory manufacturers are expected to bid for expansions within the year. 2024 is expected to be a year of large orders for domestic semiconductor equipment manufacturers.