On September 5, the United States announced stricter export controls on key technologies such as quantum computing and semiconductor manufacturing products, aiming to restrict the access of competitors such as China.
According to SIA data, global semiconductor industry sales in July 2024 reached $51.3 billion, up 18.7% year-on-year and 2.7% month-on-month, continuing the high growth trend. The Chinese semiconductor market is still growing rapidly, with the Americas market showing the strongest growth. Driven by the wave of artificial intelligence, the demand and competition for high-performance storage products HBM are increasing. On September 5, the United States announced stricter export controls on key technologies such as quantum computing and semiconductor manufacturing products, aiming to restrict the access of competitors such as China. The U.S. Department of Commerce stated that it is implementing global export restrictions on specific types of products, and it is expected that more countries will soon introduce related policies.
All three major indexes fell, and the stock prices of various sub-sectors also declined. (1) Industry index: In the week of September 2-6, all three major indexes fell, with the Shanghai Information Technology Semiconductor Index/Taiwan Semiconductor Index falling by -5.88%/-3.74% respectively, and the Philadelphia Semiconductor Index experiencing the largest decline at -12.20%. The transaction amount of the semiconductor market also declined this week, with an average daily turnover of 22 billion yuan, a decrease of 4.17% compared to the previous week (August 26-30). (2) Sub-sectors: The stock prices of various sub-sectors also declined this week, with the equipment, materials, packaging and testing, digital, and analog sectors falling by -6.9%/-4.5%/-7.0%/-6.0%/-5.1% respectively. In terms of PE valuation, the closing A-share semiconductor material, equipment, packaging and testing, and design sector PE (corresponding to the next year) were 36, 35, 21, and 38 times respectively in the week of September 2-6.
According to SIA data, global semiconductor industry sales in July 2024 reached $51.3 billion, up 18.7% year-on-year and 2.7% month-on-month, continuing the high growth trend. In terms of regions, sales in the Americas (40.1%), China (19.5%), and Asia Pacific/other regions (16.7%) all saw year-on-year growth. The Chinese semiconductor market is still growing rapidly, with the Americas market showing the strongest growth.
Driven by the wave of artificial intelligence, the demand and competition for high-performance storage products HBM are increasing. In NVIDIA's product roadmap, H200 is the first GPU to adopt HBM3e8Hi, and the subsequent Blackwell series chips will also be fully upgraded to HBM3e. Memory manufacturers such as SK Hynix, Samsung, and Micron are all hoping to seize the business opportunities. Currently, Micron Technology and SK Hynix have completed the verification of HBM3e in Q1 2024 and started bulk shipments in Q2. Micron's products are mainly used for H200, while SK Hynix supplies both H200 and B100 series. Samsung has also recently completed verification and officially started shipping HBM3e8Hi primarily used for H200, and the verification work for the Blackwell series is steadily progressing. The competition in the HBM market is fierce. According to **** media reports, SK Hynix plans to launch a 12-layer HBM4 in the second half of 2025 and a 16-layer HBM4 in 2026. On September 4, the head of Samsung's memory business unit stated that the company's HBM4 base dies have been handed over to the wafer fabs.
The United States further tightened semiconductor export restrictions and recommended paying attention to the import of semiconductor equipment. On September 5, the United States announced stricter export controls on key technologies such as quantum computing and semiconductor manufacturing products, aiming to restrict the access of competitors such as China. The U.S. Department of Commerce stated that it is implementing global export restrictions on specific types of products, such as machines required for advanced semiconductor equipment manufacturing and that more countries are expected to introduce related policies soon.
Tracking the semiconductor sector:
Numbers: CPU/GPU - Both sectors saw differentiation this week, with HiSilicon Information -4.0%, Longxin Zhongke +3.2%, and Cambricon -16.2%. Cambricon plummeted 13.5% on Thursday and rose 4.0% in a single day on Friday. According to the company's official statement, the spread of false information has had a significant impact on the stock price. Huafu Securities believes that the fundamentals of domestic computing power remain positive, and advises seizing the investment opportunities in the market fluctuations. SoC - The trend of the SoC sector was downward this week, with Amlogic -4.5%, Rockchip -6.5%, and Aochip Technology -5.2%. Comparing P/E valuations, Huafu Securities found that Bestechnic, Espressif Systems, Amlogic, and Cambricon currently correspond to next year's P/E ratios of 32/25/20/14 times respectively. With recent valuation declines, it is advisable to pay attention.
Storage: The targets of the storage sector experienced a pullback this week, with Gigadevice Semiconductor Inc. -6.2%, Jiangbolong -9.7%, and Biwin Storage -5.9%. Major memory module manufacturer, ADATA, announced a combined revenue of 3.029 billion yuan in August, with a total combined revenue of 26.993 billion yuan for the first 8 months of this year, representing nearly 40% year-on-year growth. ADATA stated that contract prices in the third quarter continue to rise steadily, and the soft demand in the spot market has gradually improved. Not only can the third quarter revenue develop steadily with the advantages of procurement costs over the past few quarters, it is also expected that single-quarter gross margins and operational performance will maintain a good performance. Profitability of various manufacturers in the second half of the year is expected to continue to improve.
Analog: The analog sector experienced a pullback this week, with Shenzhen Goodix Technology -5.4%, SG Micro Corp -3.1%, CETC Chips Technology Inc. -3.9%, and Shanghai Belling Corp.,Ltd. -1.5%. SG Micro Corp stated that the demand for mobile phones and other consumer electronics has shown a mild monthly growth trend since December last year, and is expected to continue its slow recovery trend in the second half of the year. The industrial sector is relatively stable, and is also expected to gradually warm up in the near future. Huafu Securities is optimistic about the recovery of demand in the second half of the year.
RF: The RF sector experienced declines across the board this week, with overseas targets Skyworks/Qorvo down 7.5% and 6.7% respectively, and domestic targets Maxscend Microelectronics/Weijie Chuangxin/Huizhi Micro/Kangxi Communication down 4.9%, 12.7%, 2.3%, 2.6% respectively. According to TrendForce, due to the weak demand for smartphones in the peak season, brand manufacturers' production plans for Q3 tend to be conservative, with a total global smartphone production volume in Q3 of 2.93 billion units, a slight increase of 1.38% month-on-month, a year-on-year decrease of 4.9%. According to Canalys, although global smartphone shipments in Q2 2024 exceeded expectations, based on cost increases, inventory turnover, and challenges brought about by the business environment, the forecasted global smartphone shipments for 2024 have been marginally raised to 1.2 billion units, an increase of 5% year-on-year.
Power: In the power sector, except for China Resources Microelectronics, which rose 1.7%, other targets generally experienced declines. Recently, Huahong Microelectronics stated that the industrial control line was relatively stable in the first half of the year, and the photovoltaic line is slowly recovering, with a relatively high capacity utilization rate for the automotive rule line. Huafu Securities expects that with the recovery of downstream power demand, power prices are expected to stabilize at the bottom. Currently, attention is focused on the bottom opportunities in the field of power sector consolidation.
Equipment: The equipment sector overall experienced significant pullbacks this week. On September 6th, ASML's official website announced, "Due to new government requirements, ASML will need to apply for export licenses for the NXT:1970i and 1980i lithography machines from the Dutch government instead of the U.S. government. The NXT:2000i and subsequent immersion DUV systems already require Dutch export permits." In October 2023, the U.S. began unilaterally restricting the export of some medium-sized lithography machines from ASML. Huafu Securities believes that the strengthening of control over ASML lithography machine models by the Dutch government, rather than through ASML's application to the U.S. government, is a better-than-expected measure over previous concerns about the lithography machines. On September 5th, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) published an interim final rule (IFR) in the Federal Register, upgrading export controls on quantum computing, advanced semiconductor manufacturing, GAAFET, and other related technologies. The stricter control of semiconductor equipment by the U.S. bodes well for opportunities in domestically controllable semiconductor substitution.
Manufacturing: Semiconductor Manufacturing International Corporation (SMIC) -6.6%, CIHMEMS -3.7%, and XMC -4.4% this week. Currently, the capacity utilization rate of some wafer factories remains at a good level. For example, CIHMEMS stated that it is expected to exceed 100% capacity utilization rate in September, and since March, production capacity has continued to present a supply shortage. Looking ahead to the second half of the year, Huafu Securities expects that the overall capacity utilization rate of wafer foundries is expected to improve sequentially.
Packaging and Testing: China Wafer Level CSP -4.8%, JCET Group Co., Ltd. -8.8%, Tianshui Huatian Technology -4.4%, and Tongfu Microelectronics -7.2% this week. Recently, YOFC stated that the increase in demand from downstream IoT customers is quite noticeable, and the current demand is relatively optimistic; the PA field in the second quarter was relatively flat, and it is expected to pick up in the second half of the year. Huafu Securities suggests paying attention to the increase in demand from new IoT products in the second half of the year, and the improved performance of related packaging and testing factories driven by overseas major customers in the mobile phone industry.
This month's focus combination: Naura Technology Group (002371.SZ), JCET Group Co., Ltd. (600584.SH), SG Micro Corp (300661.SZ), Espressif Systems (688018.SH), Bestechnic (Shanghai) Co., Ltd. (688699.SH), Horizon Robotics Ltd. (688256.SH), Amlogic (688099.SH), Gigadevice Semiconductor Inc. (603986.SH), Chingis Technology Corp. (688052.SH), Semiconductor Manufacturing International Corp. (688981.SH), Huahai Qingke Co., Ltd. (688120.SH).
Risk warning
Risks of technology development and implementation falling short of expectations; downstream shipments falling short of expectations; downstream demand falling short of expectations; intensified market competition risk; geopolitical risk; electronic industry's recovery not meeting expectations.