Summary of Newway Photomask Conference Call Company and Industry Overview - **Company**: Newway Photomask (688401.SS) - **Industry**: Semiconductor and Panel Manufacturing - **Core Products**: Photomasks used in semiconductor manufacturing and panel production, compatible with all generations of panel production lines from G2.5 to G11 [2][3] Key Insights from Management 1. **Growing Demand for Photomasks**: Management expressed optimism regarding increasing demand for photomasks in the semiconductor sector, aligning with expectations of rising capital expenditure (capex) in China’s semiconductor industry [1][3] 2. **Capex Growth Projections**: Anticipated growth in China’s semiconductor capex from **US$41 billion in 2024** to **US$43 billion and US$45 billion in 2025 and 2026**, respectively, driven by capacity expansions from foundries and memory players [1] 3. **Advanced Nodes Capacity Expansion**: Continuous capacity expansion is expected from local foundries in advanced nodes to support the development of local AI chips and the growing AI ecosystem [1] 4. **Localization Trend**: A rising trend towards localization in semiconductor production is anticipated, initially focusing on logic before expanding to memory over the next two years, which will benefit local suppliers of semiconductor production equipment (SPE) [1] 5. **Product Range and Precision**: The company primarily covers **130nm+ process nodes**, with capabilities extending to **90nm, 40nm, and 14nm**. Advanced nodes require higher precision and customization, leading to higher entry barriers for competitors [3] Capacity Expansion Plans - **Locations**: Management is committed to expanding capacity in **Chengdu and Xiamen**, focusing on photomasks for both semiconductors and Gen-8.6 OLED panels [3] - **Market Diversification**: The company aims for a balanced contribution from both semiconductor and panel markets in the long term [3] Investment Recommendations - **Buy Recommendations**: Analysts recommend buying stocks of companies involved in semiconductor production equipment, including Naura, AMEC, ACMR, Accotest, and Kematek, in light of the positive trends in the semiconductor industry [1] Additional Considerations - **Customization Needs**: Customers are increasingly requesting customized photomasks, necessitating close collaboration between Newway Photomask and its clients [3] - **Defect Tolerance**: Advanced nodes exhibit lower defect tolerance, which emphasizes the need for high precision in photomask manufacturing [3]

Investment Rating - The report assigns a "Buy" rating to several companies in the semiconductor sector, including ACM Research, AMEC, AccoTest, Cambricon, Horizon Robotics, Montage, NAURA, Piotech, and Will Semi [13]. Core Insights - The semiconductor industry in China is expected to see increased capital expenditure (capex) in the coming years, driven by local demand for advanced semiconductor capacities amid tariff uncertainties [2]. - There is a significant focus on high-end lithography systems, which are critical for producing advanced node semiconductors, as existing tools may soon become obsolete [3][4]. - The technology gap in lithography remains substantial, with a need for more skilled talent and a robust supply chain to support research and development [4][6]. Summary by Sections Investment in High-End SPEs - The industry is prioritizing investment in high-end lithography systems due to export controls on existing technologies, with a noted urgent demand for these systems in China [3]. Technology Gap - The complexity of lithography systems presents a significant challenge, requiring time for R&D and a greater pool of talent to expedite development [4][6]. Lithography Ecosystem - The lithography ecosystem in China is still in its early stages, with supply chain companies collaborating to develop necessary systems, although challenges remain in producing highly customized lens components [6].