Investment Rating - The report indicates a supportive outlook for the lithium up-cycle, with a forecast of approximately 20% year-on-year growth in lithium battery production for 2026, despite current pricing trends being higher than expected [1]. Core Insights - The EV market in China has experienced a decline in sales at the start of 2026, with retail and wholesale sales down by 16% and 23% year-on-year, respectively. However, UBS forecasts an 8% growth in the domestic EV market and a 15% increase in wholesale EV sales volumes driven by exports [2]. - The capacity pricing mechanism is expected to enhance the internal rates of return (IRRs) for Battery Energy Storage Systems (BESS), potentially increasing IRRs to around 7-8% as opposed to typical hurdle rates of approximately 6% [3]. - The report highlights that higher battery material costs, particularly for lithium, copper, and aluminum, are anticipated to increase the average cost of battery electric vehicles (BEVs) by approximately RMB 4,000 to RMB 7,000 [4]. - Technological advancements in solid-state batteries are being made, with companies like Samsung SDI overcoming hurdles related to dendrite formation, which is expected to positively impact lithium demand due to increased energy density [9]. Summary by Sections Lithium Market Outlook - The lithium battery production is projected to grow by about 20% year-on-year in 2026, supporting the current pricing and the forecasted lithium up-cycle [1]. EV Market Dynamics - Despite a challenging start to 2026 with significant sales declines, the domestic EV market is expected to grow by 8%, while exports are projected to drive a 15% increase in wholesale sales volumes [2]. BESS Investment Trends - Chinese state-owned enterprises (SOEs) are increasing capital expenditure on BESS, with a focus on capacity pricing mechanisms to improve IRRs, which could lead to a rise in BESS deployment to 230 GWh in 2026 [3]. Cost Implications - The increase in battery material costs is expected to raise BEV costs by RMB 4,000 to RMB 7,000, with cell materials constituting about 60% of BESS module costs [4].

Investment Rating - The report indicates a positive investment outlook for the semiconductor industry, particularly favoring companies like Texas Instruments, Renesas, and STMicroelectronics as preferred picks for exposure to the recovery [2]. Core Insights - The semiconductor inventory is starting to build in the channel, with a month-over-month increase of 4% and a year-over-year average price increase of 2% [2]. - Pricing trends show a general decline in the low to mid single digits through 2023 and 2024, stabilizing in 2025, with signs of increases in 2026 [3]. - The report highlights that MCU and MPU inventories have increased by 7% and 31% month-over-month, respectively, driven by Microchip's significant inventory build [4]. - The pricing environment remains supportive, with average year-over-year pricing flat on a revenue exposure weighted basis [26]. Summary by Sections Inventory Trends - Inventory levels are generally stable, with MCU inventories showing a 323% increase compared to January 2023 [32]. - Nexperia's unit inventory has stabilized, with a month-over-month increase of 4% and a year-over-year price increase of 30-50% [8][10]. Pricing Trends - The Like-for-Like Price Index has been restated to better reflect pricing trends, showing an average price increase of 1% month-over-month and 2% year-over-year [3][25]. - Pricing for Texas Instruments has increased by approximately 13% for two consecutive months, while Infineon's pricing has decreased by around 8% [5]. Company Observations - Microchip's unit inventories have increased significantly, although the reasons for this increase remain unclear [5]. - The report notes that pricing for transistors and diodes has seen limited impact from disruptions, with average pricing remaining stable [20][22].

ab 24 December 2025 Global Research Global Economic Forecast Database UBS forecasts - changes this week Latest global economic forecasts All UBS economic forecasts (>50 indicators for roughly 40 countries/regions) are accessible in Excel through our "Global Forecast Database" which can be found here. For ease of reference, we also circulate the Database tables, on a weekly basis, sorted by Indicator and Region (pg 7-73). A summary can be found on pg 4. Pg 5 shows forecast changes compared to a week ago and ...

Investment Rating - The report indicates a positive outlook for the semiconductor industry, with preferred picks including TI, Renesas, Infineon, and STMicroelectronics to gain exposure to the recovery [2]. Core Insights - The semiconductor distribution channel has experienced a significant pricing increase of 4-5% month-over-month (m-o-m) for power semiconductor products, following a previous increase of 6-9% [2]. - Nexperia's disruption has led to a notable decline in unit inventories of transistors and diodes, with drops of 48% and 32% respectively, while prices have surged by 114% and 149% [3]. - Average quarterly pricing is projected to increase by 6% quarter-over-quarter (q-o-q) for Q4'25, with inventory down 4% q-o-q [4]. Summary by Sections Pricing Trends - Pricing across various product categories has shown stability, with an average increase of 2% m-o-m and 21% year-over-year (y-o-y) [4]. - The pricing environment remains supportive, with a year-over-year increase of approximately 13% in December compared to 11% in November [5]. Inventory Trends - Unit inventories of MCUs and microprocessors have unexpectedly increased by 13% and 19% m-o-m respectively, primarily driven by Microchip products [4]. - Excluding Nexperia, unit inventories of transistors and diodes have decreased by 18% and 23% since the beginning of October [3]. Company Performance - The report highlights that pricing has been up y-o-y for all companies for two consecutive months, indicating a broad-based recovery in the semiconductor sector [5]. - The data suggests that products not directly impacted by Nexperia have remained stable, indicating limited indirect effects from production delays [4].

Investment Rating - The report maintains a positive stance on the analog semiconductor sector, indicating a recovery in the automotive semiconductors market [2][7]. Core Insights - The automotive semiconductor market is projected to experience a revenue decline of -5% YoY in 2025E, an improvement from the previous estimate of -7% YoY, with a subsequent growth of +11.6% in 2026E [4][23]. - Analog revenue growth has returned to positive levels, with Q3'25 showing a 5% YoY increase, and expectations for Q4'25 to grow by 11% YoY [3][4]. - AI is emerging as a growth driver, contributing 5-10% of revenues, with significant increases in AI-related revenues anticipated for major players [5]. Summary by Sections Automotive Semiconductors - The automotive semiconductor revenue is expected to decline by -5% YoY in 2025E, improved from -7% previously, and is projected to grow by +11.6% in 2026E [4][23]. - China’s automotive semiconductor demand is forecasted to grow by 9% YoY in 2025E, down from 21% in 2024, indicating a normalization trend [6][28]. Analog Semiconductors - Analog revenue growth has shown positive momentum, with Q3'25 revenue up 5% YoY, and projections for Q4'25 to grow by 11% YoY [3][4]. - Industrial revenues are expected to grow by 10.8% YoY in 2025E, with a forecast of +14.5% YoY for 2026E [4]. AI and Growth Drivers - AI is becoming a significant growth driver, with major companies like Infineon and TI reporting substantial increases in AI-related revenues [5]. - Infineon anticipates AI revenue to rise from $860 million in FY'25E to $1.7 billion in FY'26E [5]. Regional Insights - The report indicates that while China’s growth is moderating, it remains a key market, with expectations of 6% growth in 2026E compared to 8% for non-China regions [6][28]. - Year-to-date, China’s car volumes grew 13% YoY, with NEV (New Energy Vehicle) volumes up 31% YoY [6]. Sector Preferences - The report highlights a preference for analog semiconductors, which are currently trading at approximately 20x P/E for 2026E, compared to a 10-year average of 19x [7]. - Preferred stocks include TI, IFX, and Renesas, while ON and Melexis are rated Neutral [7].

Investment Rating - The report maintains a cautious outlook on the smartphone industry, with a preference for component suppliers over OEMs due to rising memory prices and supply challenges [5][8]. Core Insights - The smartphone industry is expected to face challenges in 2026, with limited unit growth forecasted at +1.0% YoY in 2026 and +2.0% YoY in 2027, following a +3.5% YoY growth in 2025 [2][8]. - The UBS Evidence Lab 4Q25 Smartphone Survey indicates a moderate increase in purchase intent, with 40% of respondents planning to buy a smartphone in the next 12 months, up from 36% in 2Q25 [3][19]. - Rising memory prices are projected to significantly impact Bill of Material (BOM) costs, potentially accounting for approximately 14% of flagship smartphone BOM costs and 34% of mid-range/lower-end smartphone BOM costs by 4Q26 [4][101]. Summary by Sections Industry Outlook - The smartphone market is anticipated to grow moderately, with unit sell-in forecasts slightly raised to 1.27 billion units in 2025 and 1.28 billion units in 2026, reflecting a +3.5% and +1.0% YoY growth respectively [50][55]. - The average age of the smartphone installed base has decreased to 22.0 months, indicating a normalization in the replacement cycle [30][44]. Purchase Intent Trends - Purchase intent for the iPhone 17 series is strong, with 66% of respondents interested in this model, up from 61% for the iPhone 16 series [3][89]. - Retention rates for Apple and Samsung remain stable at 87% and 75% respectively, while Chinese OEMs have seen declines in retention rates [59][61]. Component Supplier Preference - The report favors component suppliers such as ASE, SK Hynix, and TSMC, while maintaining neutral ratings on major OEMs like Apple, Lenovo, and Xiaomi, and a buy rating on Samsung Electronics [5][8]. - The memory supply shortage is expected to create significant challenges for OEMs, particularly smaller ones, as they may struggle to secure adequate memory supply [4][110].

Investment Rating - The report indicates a positive outlook for the semiconductor industry, particularly in the context of recovery following disruptions at Nexperia, with preferred picks including TI, Renesas, Infineon, and STMicroelectronics [2][4]. Core Insights - The semiconductor distribution channel has experienced a month-over-month price increase of 6-9% for power semiconductor products, alongside a significant drop in unit inventories by as much as 20% [2]. - Nexperia's disruption has led to a notable decrease in unit inventories of transistors and diodes, with reductions of 35% and 22% respectively, while prices surged by 68% and 103% [3][10]. - Overall, the pricing environment is supportive, with average year-over-year pricing up 11% in November compared to October [5][27]. Summary by Sections Distributor Data - Nexperia's unit inventories have decreased significantly, with transistors down 36% month-over-month and diodes down 25% month-over-month, while pricing for Nexperia products has more than doubled compared to the same period last year [15][10]. - Other manufacturers have also seen inventory reductions, with onsemi's transistors down 10% month-over-month [15][21]. Market Trends - MCU inventory levels have stabilized, marking the fifth consecutive month of flat unit inventory, indicating a normalization trend across various product categories [4][30]. - Pricing across all product categories has shown an upward trend, with an average increase of 2% month-over-month and 19% year-over-year [4][34]. Company Observations - The report highlights that pricing for all companies tracked has increased year-over-year for the first time, suggesting a broad-based recovery in the semiconductor sector [5][27]. - Unit inventories for nearly all companies remain stable, indicating limited indirect impacts from production delays related to Nexperia [4][5].

Investment Rating - The report indicates a positive outlook for the semiconductor industry, suggesting a potential better than expected Q4 2023, with preferred picks including Texas Instruments, Renesas, Infineon, and STMicroelectronics [2][3]. Core Insights - The semiconductor industry is experiencing a recovery phase, with a slight increase in inventories and supportive pricing dynamics observed for the first time since May 2023 [2][3]. - Pricing across all product categories has shown an increase, with an average of 2% month-over-month and 15% year-over-year, indicating a positive trend in demand and product mix [3][4]. - The report highlights a broad-based recovery in inventory levels, with most companies either flat or up in inventory units across various products [4]. Summary by Sections Inventory Trends - MCU inventories have shown a 1% month-over-month increase after a 2% decline last month, with a notable 7% month-over-month increase in Capacitors [3]. - Overall inventory levels are stable, with destocking in MCUs slowing down, suggesting a transition to normalized inventory levels [10][18]. Pricing Dynamics - The average year-over-year pricing is up 9%, driven by significant increases in specific categories such as NXP's Wireless & RF and Microprocessors, which increased by 78% and 18% respectively [8]. - Pricing trends are supportive, with all product categories experiencing increases, reinforcing the positive sentiment in the market [4][8]. Company Observations - The report includes heatmaps that indicate pricing was up 10% year-over-year in October compared to 8% in September, suggesting a consistent upward trend across categories [4]. - The analysis of company-specific data shows that most companies are experiencing either stable or increasing inventory levels, indicating a healthy recovery across the semiconductor sector [4][18].

Investment Rating - The report provides a positive investment rating for the Taiwan Technology sector, particularly focusing on AI and semiconductor industries, indicating strong growth potential and demand for related technologies [5]. Core Insights - The AI supply chain is experiencing significant growth, with numerous large-scale AI data center projects being announced across various regions, indicating a robust demand for AI infrastructure [8][10]. - The report highlights a projected increase in the total addressable market (TAM) for AI accelerators, expected to grow from approximately $125 billion in 2024 to $309 billion by 2027, reflecting a compound annual growth rate (CAGR) of 35% [22]. - The semiconductor sector is anticipated to see earnings growth, with a projected 34% increase in 2025, driven by the demand for AI-related technologies [44]. Summary by Sections Section 1: AI Cycle - The report outlines various large-scale AI data center projects, detailing their capacities and operators, which collectively indicate a growing trend in AI infrastructure development [8]. Section 2: AI Demand Across Sub-sectors - Emerging markets have a significant revenue weighting in the AI value chain, with various segments such as foundry, memory, and tech components contributing to the overall growth [31]. Section 3: Earnings Growth and Hyperscaler Capex Expectations - The report projects continued earnings growth for the semiconductor sector, with specific metrics indicating a strong performance in 2025 and 2026, alongside increased capital expenditures from major hyperscalers [44][48].

Investment Rating - The report assigns a "Buy" rating to TSMC and ASE Industrial, indicating a positive outlook for these companies in the semiconductor industry [5][32]. Core Insights - The demand outlook for CoWoS (Chip on Wafer on Substrate) is strengthened due to increased production estimates for Nvidia and Broadcom, with Nvidia's CoWoS demand expected to rise significantly in 2026 [2][4]. - Nvidia's Rubin production at TSMC is on track, with an increase in production units estimated from 1.3 million to 2.3 million in 2026, indicating robust growth potential [3]. - The introduction of Nvidia's new Rubin SKU, CPX, is anticipated to drive further CoWoS demand, with projections showing an increase from 444k units in 2025 to 678k units in 2026 [4]. Summary by Sections Demand Forecasts - Nvidia's CoWoS demand estimates for 2025 and 2026 have been raised by 5% and 26% respectively, driven by higher production units and new product launches [2]. - Broadcom's CoWoS demand for AI accelerators in 2026 has also been revised upwards, reflecting stronger demand from major clients like Google and OpenAI [2]. Production Insights - TSMC's CoWoS capacity is projected to increase from 100kwpm to 110kwpm by the end of 2026, supporting the anticipated growth in demand from Nvidia and Broadcom [2]. - The report highlights that Nvidia's total GPU production units at TSMC are expected to reach 6.9 million and 7.4 million in 2025 and 2026 respectively, up from previous estimates [2]. Stock Recommendations - TSMC is favored as a leading Cloud/Edge AI foundry due to its advanced packaging capabilities, while ASE is expected to benefit from the growth in advanced packaging and testing [5]. - The valuation comparison indicates strong growth potential for both TSMC and ASE, with TSMC's market cap at approximately $1,225 billion and ASE's at $25 billion [5].