According to Zhitong Finance APP, Tianfeng released a Research Report stating that with the breakthrough of domestic production of photoresists in the 0-1 stage and the partial expansion of the 1-N stage, the domestic production of key raw materials upstream is also in progress. At the same time, unlike the earlier pure policy-driven approach, the pressure from the external environment has made the downstream demand for material localization increasingly urgent, which will also promote close collaboration between upstream and downstream enterprises and accelerate testing and certification.

Tianfeng Securities' main points are as follows:

Characteristics of the photoresist industry: diverse types, long verification cycles.

Photoresists are mainly divided into three categories according to downstream applications: PCB, display, and Semiconductors. The technical barriers for photoresist products are high, and their functionality and product quality directly affect the performance and stability of Electronic Components and parts. Therefore, the certification time required by downstream specialized Chemical suppliers for photoresists is relatively long. Generally speaking, the verification cycle for panel photoresists is 1-2 years, while the verification cycle for semiconductor photoresists is 2-3 years. Once verified, customer loyalty tends to be relatively high.

What is the progress of domestic production of upstream materials?

The main analysis focuses on the domestic production status of materials in different application fields. In the PCB field, most materials have achieved domestic production, but the degree of process maturity for high-end dry film remains relatively low. In the semiconductor field, since high-end semiconductor photoresists are still in the process of being localized, the corresponding key materials such as resin and sensitizers are still in a state of foreign monopoly.

In addition, the most notable expectation gap is in the main material pigments for display photoresists. Although downstream companies have achieved a certain level of domestic production capability for display-grade photoresists, the solvents and initiators on the material side have essentially been localized; however, in the entire colored photoresist spectrum, the pigment liquid, which accounts for the highest cost proportion, has yet to achieve local support. As terminal panel manufacturers have already secured a leading position globally, complete localization of the industry chain to ensure supply chain security has become even more critical.

Providing the following three investment ideas.

1. '0-1 materials', colored photoresist pigments: Suzhou Sunmun Technology, which has planned mass production projects, is expected to be the first to achieve localized production of '0-1' materials in the industry. At the same time, since the application of colored photoresist pigments is in the display field, the market does not have a profound understanding of the localization rate of this second-tier material, which will become the area with the largest expectation gap.

2. '1-N materials': Xuzhou Bokan (in which HMT (Xiamen) New Technical Materials Co., Ltd holds shares). The company is a major domestic enterprise for industrialized production of mid-to-high-end photoresist monomers. With the increase in the localization rate of the entire industry chain, performance elasticity can be anticipated. The release of KrF domestic resin warrants attention towards Red Avenue New Materials Group (603650.SH) and Changzhou Tronly New Electronic Materials (300429.SZ). The industrialization of high-end dry films mainly focuses on the project progress of Shenzhen Rongda Photosensitive & Technology (300576.SZ).

3. Platform-based material enterprises: From a long-term perspective, platform-based enterprises excel in research and development capabilities as well as risk resistance. Such as Jiangsu Yoke Technology (002409.SZ) and Red Avenue New Materials Group.

4. Integrated industry chain: HMT (Xiamen) New Technical Materials Co., Ltd (full industry chain layout).

‍Risk warning:

Intensifying market competition, industrialization processes falling short of expectations, industry prosperity not meeting expectations, and risks from changes in environmental regulations.