Core Viewpoint - The storage chip sector in the A-share market is experiencing a resurgence, driven by price increases from major players like Samsung, which supports market momentum. Additionally, insights from SMIC's investor briefing reveal significant trends in the storage industry [2][3]. Group 1: Market Dynamics - There is a severe shortage of storage chips for mobile phones, leading to substantial price increases. SMIC reported a production capacity utilization rate of 95.8% in Q3, indicating a supply-demand imbalance [3]. - The cautious ordering behavior from clients in the network communication sector is contributing to a conservative outlook for Q4, despite a generally positive recovery in various markets such as consumer electronics and automotive [3][4]. - A 5% fluctuation in supply can lead to exponential price changes in the storage market, highlighting the sensitivity of prices to supply-demand dynamics [5]. Group 2: Inventory and Order Trends - The current tight supply of storage chips has stimulated a clear demand for inventory replenishment, resulting in increased orders, although the future trend remains uncertain [6]. - SMIC has observed three key dynamics: 1. Clients are increasing inventory for analog and power products to capture market share, while the industrial and automotive sectors are replenishing stocks to safe levels [7]. 2. There is a contradictory market sentiment where clients are inclined to stock up on storage chips for complete assembly but remain cautious about future supply uncertainties [7]. 3. SMIC has received a significant number of urgent orders for various products, including NOR/NAND Flash and MCUs, leading to a temporary decrease in the proportion of mobile business as non-urgent orders are postponed [7].

Core Viewpoint - SMIC reports a high capacity utilization rate of 95.8% in Q3, indicating strong demand and a supply-constrained situation in its production lines [1] Group 1: Production and Demand - The company has a significant number of orders, leading to a supply-demand imbalance [1] - The guidance for Q4 does not show a substantial increase due to a severe shortage of memory components in the mobile market, which has resulted in rising prices [1] - Customers are cautious about future supply uncertainties, leading to a trend of increased inventory for memory components to ensure complete assembly of devices [1] Group 2: Impact on Business Operations - SMIC has taken on numerous urgent orders for analog and memory products, including NOR/NAND Flash and MCUs, and has postponed some non-urgent mobile orders to ensure timely delivery [1] - This shift has resulted in a temporary decrease in the proportion of mobile business [1] - The impact of memory supply issues is twofold: it boosts current orders but creates uncertainty for the upcoming year [1] Group 3: Market Dynamics - The industry is experiencing a supply gap, with expectations that high price levels will persist [1] - The verification cycles for NOR Flash, NAND Flash, and MCUs are lengthy, and the barriers to entry for new competitors are high, making it difficult for them to quickly replace existing suppliers [2]

Core Viewpoint - SMIC's production lines are operating at a high capacity utilization rate of 95.8% in Q3, indicating strong demand and a supply shortage situation [1] Group 1: Market Conditions - The smartphone market is currently facing a severe shortage of memory components, leading to significant price increases [1] - Customers are cautious about future supply uncertainties, resulting in a tendency to stockpile memory components to ensure complete assembly of devices [1] - The impact of memory supply issues is twofold: it boosts current orders but creates uncertainty for the upcoming quarter [1] Group 2: Product and Supply Dynamics - SMIC has taken on a large number of urgent orders for products such as NOR/NAND Flash and MCUs, leading to a temporary decrease in the proportion of mobile business [1] - The supply of NOR Flash, NAND Flash, and MCUs has long validation cycles and high barriers to entry, making it difficult for new entrants to quickly replace existing suppliers [2] - Even with new competitors, it takes at least 16 months from initial testing to mass production, ensuring the stability of current suppliers' market positions [2] Group 3: Pricing and Supply Outlook - The industry is currently experiencing a supply gap, and a 5% fluctuation in memory supply could significantly impact prices [1] - High pricing trends are expected to persist due to ongoing supply constraints in the market [1]

Core Viewpoint - SMIC (688981.SH) is experiencing high demand with a capacity utilization rate of 95.8% in Q3, indicating a supply-demand imbalance in its production lines [1] Group 1: Production and Capacity - The company has a full production line, with significant orders leading to a high capacity utilization rate [1] - The guidance for Q4 does not show a significant increase due to a severe shortage of memory in the mobile market, causing concerns among customers about the assembly of complete devices [1] Group 2: Market Dynamics - Customers are currently inclined to stockpile memory to ensure complete device assembly, but there is a general caution regarding supply uncertainties for Q1 of the following year [1] - The company has taken on a large number of urgent orders for analog, memory including NOR/NAND Flash, and MCU, leading to a temporary decrease in the proportion of mobile business as some non-urgent orders are postponed [1] Group 3: Pricing and Supply Outlook - The impact of memory supply is twofold: it boosts current orders but creates uncertainty for the following year [1] - A supply shortage or surplus of just 5% in the memory market could significantly affect prices, with the current industry facing a supply gap and high price levels expected to persist [1] Group 4: Market Stability - Products like NOR Flash, NAND Flash, and MCU have long validation cycles and high barriers to entry, making it difficult for new entrants to quickly replace existing suppliers [2] - Even with new manufacturers attempting to enter the market, it takes at least 16 months from initial testing to mass production, ensuring the stability of current suppliers' market positions [2]

Investment Rating - The report maintains a "Buy" rating for the company, indicating a strong performance relative to the market [7][8]. Core Insights - The company reported Q3 revenue of $2.382 billion, a year-over-year increase of 9.7% and a quarter-over-quarter increase of 7.8%, exceeding guidance [4][7]. - The net profit attributable to shareholders for Q3 was $192 million, reflecting a year-over-year growth of 28.9% and a quarter-over-quarter growth of 44.7% [4][7]. - The gross margin for Q3 was 22%, which is above the guidance range of 18%-20% [4][7]. - For the first three quarters of 2025, total revenue reached $6.838 billion, a year-over-year increase of 17.4%, with a gross margin of 21.6%, up 5.3 percentage points year-over-year [4][7]. Financial Data and Profit Forecast - The company expects total revenue for 2025 to be $6.6755 billion, with a year-over-year growth rate of 15.5% [6]. - The net profit attributable to shareholders is projected to be $512.3 million in 2025, representing a year-over-year growth of 38.5% [6]. - The earnings per share (EPS) is forecasted to be $0.64 for 2025, with a gross margin of 21.9% [6]. - The company’s return on equity (ROE) is expected to improve to 3.4% in 2025 [6]. Operational Performance - The overall utilization rate for Q3 was 95.8%, with a quarter-over-quarter increase of 3.3 percentage points [7]. - The average selling price (ASP) for wafers increased by 3.1% quarter-over-quarter to $953 per wafer [7]. - The company’s 12-inch wafer production capacity increased, contributing significantly to revenue [7]. - The revenue contribution from the industrial and automotive sectors rose, with a quarter-over-quarter increase of 21% [7]. Capital Expenditure and Guidance - The company’s capital expenditure for Q3 was $2.394 billion, reflecting a quarter-over-quarter increase [7]. - For Q4, the company expects revenue to remain stable with a quarter-over-quarter growth of 0% to 2% and a gross margin between 18% and 20% [7].

Core Viewpoint - The company is experiencing high demand with a capacity utilization rate of 95.8% in Q3, indicating a supply-demand imbalance in its production lines [1] Group 1: Current Market Conditions - The mobile market is facing a severe shortage of memory components, leading to significant price increases, which raises concerns among customers about the assembly of complete devices if memory is insufficient [1] - Customers are currently inclined to stockpile memory components to ensure complete device assembly, but there is a general caution regarding supply uncertainties for Q1 of the following year, resulting in a mix of proactive and cautious stances [2] Group 2: Impact on Business Operations - The company has received a large number of urgent orders for various products, including NOR/NAND Flash and MCUs, and has chosen to delay some non-urgent mobile orders to ensure timely delivery of urgent requests, leading to a temporary decrease in the proportion of mobile business [2] - The impact of memory supply is twofold: it boosts current orders but creates uncertainty for the following year, with observations indicating that a 5% shortage or surplus in memory supply could significantly affect prices [2] Group 3: Industry Dynamics - The industry is currently facing a supply gap, and high price levels are expected to persist [2] - Products like NOR Flash, NAND Flash, and MCUs have long validation cycles and high barriers to entry, making it difficult for new entrants to quickly replace existing suppliers, as it takes at least 16 months from initial testing to mass production [2]

Core Viewpoint - The AI industry is currently occupying a significant amount of capacity, leading mainstream suppliers to gradually exit fragmented and niche markets, creating important opportunities for many small to medium-sized suppliers, many of whom are clients of the company [1] Group 1: Market Dynamics - The company continues to invest in the AI sector and has taken on related orders, including those in the memory market [1] - A slight imbalance in supply and demand in the memory market can lead to dramatic price fluctuations, with a 5% shortage or surplus potentially causing prices to double [1] - There is currently a supply gap in the industry, and high price levels are expected to persist [1] Group 2: Product Characteristics - Products such as NOR Flash, NAND Flash, and MCU have long validation cycles and high barriers to entry for replacements [1] - Even if new manufacturers attempt to enter the market, it will take at least 16 months from wafer fabrication to mass production, indicating that the market positions of existing suppliers will remain stable for the foreseeable future [1]

格隆汇11月17日｜中芯国际在投资者关系活动记录表中称，公司的产线实际上还是非常满的，三季度产 能利用率都到95.8%了，这说明订单很多，产线是供不应求的状态。四季度指引没有大的跃升的原因之 一是手机市场现在存储器特别紧缺，价格也涨得非常厉害。客户担心，就算其他芯片都备齐了，万一存 储器不够，整机也组装不起来。而且存储器价格高，其他芯片的成本也需要控制。大家都在为这个事谈 判和观望。第二是网通行业。客户在四季度下单就比较谨慎，怕自己货拿多了，但市场的订单其实已经 切换到竞争对手那里去了。大家总体比较谨慎，所以我们在四季度并没有给出一个非常高的增长数值。 ...

Investment Rating - The industry investment rating is "Outperform the Market" [5][42]. Core Insights - The SW Electronics industry saw a record high in fund heavy positions in Q3 2025, with a fund heavy ratio of 22.14%, up 4.91% quarter-on-quarter and 8.15% year-on-year [1][12]. - The focus of institutional investors is on AI computing power, semiconductor self-sufficiency, and an increased interest in the storage sector [2][22]. - The semiconductor sector remains the only sub-sector with an overweight position, while the concentration of the top five heavy positions has decreased, indicating a trend towards diversification in fund allocations [3][35]. Summary by Sections Fund Heavy Positions and Overweight Ratios - The SW Electronics industry had a matching ratio of 12.42% in Q3 2025, with a slight decrease of 0.14 percentage points quarter-on-quarter but an increase of 3.47 percentage points year-on-year [1][12]. - The overweight ratio for the SW Electronics industry in Q3 2025 was 9.71%, reflecting a quarter-on-quarter increase of 1.44 percentage points and a year-on-year increase of 3.65 percentage points [1][12]. Top Heavy Positions - The top ten heavy positions in the SW Electronics industry for Q3 2025 included companies like Cambricon, SMIC, and Industrial Fulian, with a significant focus on semiconductor and AI computing power stocks [2][17]. - All top ten heavy positions experienced price increases in Q3, with Industrial Fulian, Cambricon, and Shenghong Technology showing the highest gains [2][17]. Investment Focus Areas - Institutional investors are particularly focused on AI computing power, with key players in the AI server manufacturing and domestic AI chip sectors benefiting from accelerated industry development [2][22]. - The semiconductor sector is emphasized for its self-sufficiency, with companies like SMIC and Zhongwei benefiting from domestic supply chain improvements [2][22]. - The storage sector is gaining attention, with leading storage chip manufacturer Zhaoyi Innovation seeing continuous institutional accumulation due to favorable supply-demand dynamics [2][22]. Sub-sector Allocation - Only the semiconductor sector maintains an overweight position at 6.26%, despite a decrease of 1.60 percentage points [3][31]. - The optical and optoelectronic sector has seen a slight narrowing of its underweight ratio, indicating a potential shift in investor interest [3][31]. Diversification Trends - The concentration of the top five heavy positions in the SW Electronics industry has been declining since Q1 2025, suggesting a diversification trend in fund allocations [3][35]. - The market share of the top five, ten, and twenty heavy positions in the overall fund heavy market value is 36.36%, 58.02%, and 74.73%, respectively [3][35]. Investment Recommendations - The report suggests focusing on companies within the AI computing power and semiconductor self-sufficiency sectors, as well as the storage sector, which is expected to benefit from ongoing demand and price increases [2][40][37].

Investment Rating - The report maintains a "Strong Buy" rating for the company, indicating an expectation to outperform the benchmark index by over 20% in the next six months [2][21]. Core Insights - The company reported Q3 2025 revenue of 171.62 billion yuan, with a year-on-year increase of 9.95% and a quarter-on-quarter increase of 6.95%, exceeding previous guidance [5][6]. - The gross margin improved to 25.49%, reflecting a year-on-year increase of 1.57 percentage points and a quarter-on-quarter increase of 4.79 percentage points, also surpassing prior expectations [5][6]. - The company anticipates stable to slight growth in Q4 2025 revenue, with a gross margin forecasted between 18% and 20% [5]. - High capacity utilization and an improved product mix contributed to the revenue and gross margin growth, with capacity utilization reaching 95.8% [5][6]. - The demand for consumer electronics is strengthening, driven by a robust supply chain for home appliances and domestic manufacturers gaining overseas market share [5][6]. Financial Summary - The company’s total revenue is projected to grow from 57,796 million yuan in 2024 to 95,618 million yuan in 2027, with a compound annual growth rate of approximately 19.2% [6]. - The net profit attributable to the parent company is expected to increase from 3,699 million yuan in 2024 to 7,700 million yuan in 2027, reflecting a significant recovery trajectory [6]. - Earnings per share (EPS) are forecasted to rise from 0.46 yuan in 2024 to 0.96 yuan in 2027 [6]. - The price-to-book (PB) ratio for 2026 is estimated at 8 times, leading to a target price of 159.3 yuan per share [5][6].