Investment Rating - The report maintains a strong positive outlook on the AI application-driven demand for computing power, indicating a sustained high growth trajectory in the industry [2]. Core Insights - The computing power industry is experiencing a resurgence in interest, particularly in the domestic market, as the supply chain begins to address critical bottlenecks such as advanced process capacity and supply of high-bandwidth memory (HBM) [2][3]. - The report highlights the ongoing tight balance in domestic computing power supply, with expectations that key challenges will gradually be overcome, leading to continuous positive news for the industry [2]. - The report suggests that the second half of the year and into next year will present significant investment opportunities in domestic computing power [2]. Summary by Sections Domestic Developments - Domestic AI applications are launching new products, with notable advancements such as Alibaba's Tongyi Qianwen 3 achieving significant breakthroughs in programming capabilities, comparable to top-tier closed-source models [3]. - Tencent's CodeBuddy IDE is set to enhance software development efficiency by allowing users to create applications through natural language dialogue, eliminating the need for coding knowledge [3]. Overseas Developments - The report recommends focusing on high-end PCB, optical modules, and server ODM sectors within the overseas computing power supply chain, anticipating sustained high demand and profitability [3]. - The supply of key materials for AI servers, such as fiberglass cloth and M8 CCL materials, is expected to remain tight, leading to potential price and profit margin increases [3]. Investment Recommendations - Key domestic computing power hardware companies, such as Cambricon and SMIC, are highlighted as potential investment opportunities [4]. - The report also suggests monitoring traditional analog chips, which are benefiting from domestic substitution and local demand, with wafer fab utilization rates remaining high and terminal prices increasing by 10-20% [6]. - The report identifies potential investment opportunities in the Apple supply chain, particularly with the upcoming iPhone 17 and 18 models, which may lead to upward revisions in market expectations [9].

Summary of Conference Call Records Industry and Companies Involved - **Industry**: Semiconductor - **Companies**: Huahong Semiconductor, ZTE Corporation Key Points and Arguments Huahong Semiconductor Performance - Q2 revenue declined due to one-time factors but strong downstream demand, especially in consumer and automotive electronics, is noted. Industrial segments also showed growth, with Q3 performance expected to exceed expectations [1][2] - The company received 10,000 equipment orders for 14nm expansion in the first half of the year, with an additional 5,000 to 10,000 expected in the second half [1][4] ZTE Corporation Performance - ZTE's N+2 and N+3 advanced process expansions faced short-term setbacks but are expected to recover in Q3. The N+2 expansion is anticipated to meet market expectations, while N+3's success depends on Mate 80 demand [1][4] - ZTE's Q1 revenue was projected to decline by 4% to 6% due to isolated incidents, but recovery is expected in Q3 [2][4] Market Expectations and Catalysts - Market expectations for Q2 performance are largely priced in, with significant focus on Q3 guidance from both companies. Continued optimism in consumer and automotive demand is anticipated [1][6] - Key catalysts for the second half include performance guidance, advanced process expansions, and potential capital operations, such as parent company capacity injections [1][5] Semiconductor Sector Overview - The semiconductor sector has underperformed, with a year-to-date increase in the single digits, while other segments have seen over 10% growth. The sector's trading volume is at a historical low of about 5% [7] - The foundry segment is particularly lagging, suggesting a need for investors to focus on innovative foundry opportunities [7] Long-term Projections - ZTE is projected to reach revenues of 30 billion by 2030, with advanced manufacturing contributing 20.6 billion and mature manufacturing 10.7 billion, maintaining a price advantage over TSMC [3][9] - Huahong aims for 100,000 pieces of advanced manufacturing capacity by the end of 2027, with projected revenues of 50 billion to 100 billion by 2030, also showing a competitive edge against TSMC [3][9] Investment Recommendations - Investors are advised to focus on the advanced manufacturing sector and consider companies in the advanced packaging segment, which are expanding capacity and collaborating with domestic GPU manufacturers [10][11] Additional Insights - The semiconductor sector's cash flow and performance metrics are currently at low historical levels, indicating potential investment opportunities in undervalued segments [7][9] This summary encapsulates the essential insights from the conference call records, highlighting the performance, expectations, and strategic directions of Huahong Semiconductor and ZTE Corporation within the semiconductor industry.

Summary of Conference Call Records Company and Industry Overview - The conference call primarily discusses **Shanghai Yizhi Electronics** and the **domestic computing power industry** in China, particularly focusing on AI CPU chip development and applications in various sectors such as agriculture, education, and healthcare [2][4][10]. Key Points and Arguments 1. **Market Interest and Trends**: There is a noticeable increase in demand for domestic computing power in 2025, particularly after the launch of Deepseek, which has significantly boosted the understanding and application of large models in China. The initial excitement around integrated machines and inference clusters has stabilized, leading to a focus on vertical applications [3][10]. 2. **Product Development**: Shanghai Yizhi Electronics has developed and mass-produced three AI CPU chips, with two already in the market and a third soon to be launched. These chips are designed to run AI models directly and are compatible with both domestic and international GPU manufacturers [4][6]. 3. **Collaborations and Orders**: The company has secured significant orders from major telecom operators, including China Telecom, which purchased 2,600 servers and 5,200 processors, totaling nearly 300 million yuan. Additionally, Yizhi Electronics is testing products with China Mobile and supplying directly to Unicom [5][6]. 4. **Policy Support**: National policies are expected to favor the use of domestic computing power, which benefits Yizhi Electronics. The company’s chips can adapt to various market needs, enhancing their competitive edge [6][12]. 5. **Agricultural Automation**: A collaboration with Tsinghua University aims to apply AI computing power in agricultural automation, focusing on tasks like automated plowing, sowing, and harvesting, primarily using domestic chips to reduce reliance on NVIDIA products [8][10]. 6. **Progress in Internet Computing Clusters**: Domestic companies are making significant strides in internet computing clusters, with examples like Huawei's 384-node cluster and the Shanghai Cube project demonstrating effective system integration to catch up with NVIDIA [9][10]. 7. **Vertical Application Success**: Domestic computing power has seen substantial usage in vertical fields such as industry, agriculture, education, and healthcare, where Chinese companies are leading the way [10][12]. 8. **General Computing Power Trends**: General-purpose computing power in the internet sector is still catching up, with companies leveraging system-level strategies to enhance competitiveness. Major orders from companies like ByteDance are driving product improvements [11][12]. 9. **Growing Demand in Specific Industries**: The fastest-growing sectors for domestic CPU and GPU demand include telecommunications, finance, and oil, with policies in place to support domestic computing solutions [13][14]. 10. **Changing Attitudes Towards Domestic Chips**: Internet companies are increasingly testing domestic chips, indicating a shift in attitude as AI technology advances. This trend is expected to accelerate as more companies adopt these technologies [14][19]. 11. **Performance of Domestic Brands**: Domestic brands in the inference chip market are showing an upward trend, with more brands gaining significant market presence [20][21]. 12. **Future Development Goals**: Yizhi Electronics aims to position itself as a leader in the semiconductor cycle, focusing on niche markets and striving for leadership in the general AI field as model capacities and user numbers grow [22]. Additional Important Insights - The demand for inference technology is expanding, with applications in various fields, including search engines and educational tools, indicating a shift towards a results-based payment model rather than traditional methods [18][19]. - The competitive advantage of Chinese companies in edge computing products is notable, particularly as these markets are primarily located within China, unlike the Gulf and U.S. markets [16][17].

Group 1 - The core view of the report indicates that the Sci-Tech Innovation Board is expected to accelerate its rise, with a shift in leading sectors towards technology. The index is anticipated to continue its upward trend without significant resistance, as evidenced by the recent increases in major indices: Shanghai Composite Index up 1.67%, ChiNext Index up 2.76%, and Sci-Tech 50 Index up 4.63% [2][13]. - There is an imminent change in the leading structure of industries and themes. Last week, the leading sectors included construction materials (up 8.2%), coal (up 8.0%), steel (up 7.7%), and non-ferrous metals (up 6.7%), driven by themes such as "anti-involution" and hydropower station developments. However, the report suggests that the current phase of rapid price increases may be nearing its end, and market expectations for policy announcements may not exceed optimistic forecasts [3][14]. - The technology sector is expected to become the main focus of attention as the rapid rise of cyclical sectors comes to an end. The report emphasizes that technology will be the main line of the upcoming market trends [4][15]. Group 2 - The report maintains a positive outlook on artificial intelligence (AI) as a key theme, predicting significant marginal changes in the AI industry over the next 1-2 months. The release of new models, such as OpenAI's GPT-5, is expected to stimulate competition and drive growth in the sector [5][16]. - Within the AI theme, the report highlights strong potential in domestic computing power, AI applications, PCB-related sectors, and robotics. It argues that domestic computing power is crucial for national development and will likely receive continued policy support. AI applications are expected to gain traction as new models are released, while the PCB sector remains in an upward trend. Robotics, as a significant application of AI, is also projected to follow the growth of the AI sector [6][17][18].

Investment Rating - The report maintains an "Accumulate" rating for the electronic industry, indicating a positive outlook for the sector over the next six months [1]. Core Insights - The advanced packaging sector is crucial for the development of domestic computing power, with significant growth expected due to rising demand for advanced packaging technologies such as CoWoS and Fan-out [4]. - The report highlights the strong performance of ASMPT in Q2, driven by robust demand in China, with a 50% year-on-year increase in TCB orders, indicating a recovery in domestic advanced packaging demand [4]. - The report suggests that domestic computing power is likely to replicate the rapid growth seen in overseas markets, particularly in AI applications, positioning advanced packaging as a foundational element for this growth [4]. Summary by Sections Industry Trends - The report notes a projected increase in the electronic industry, with a focus on advanced packaging technologies that are essential for GPU, CPU, and base station applications [4]. - The importance of domestic advanced packaging supply is emphasized, especially in light of constraints in Taiwan's advanced packaging capacity [4]. Investment Recommendations - The report recommends focusing on leading companies in advanced packaging, including Shenghe Jingwei, Changdian Technology, Tongfu Microelectronics, and Yongxi Electronics, as well as materials and equipment suppliers like Qiangli New Materials and Jingzhida [4].

Investment Rating - The report maintains a positive outlook on the computer industry, indicating a "Look Favorably" investment rating for the sector [6][7]. Core Insights - The computer industry is experiencing a low holding ratio, with public fund allocation at 2.6% in Q2 2025, down 0.6 percentage points from the previous quarter, ranking 13th among 30 primary industries [8][9]. - AI remains the main theme for the computer sector throughout 2025, supported by three key factors: the introduction of domestic super-node solutions improving cost-performance, the launch of several foundational large models driving AI applications into commercialization, and continuous innovations across various fields such as stablecoins and 3D printing [9][11]. - The report highlights significant company updates, particularly the official upgrade of iFLYTEK's reasoning large model X1, which enhances capabilities in multiple languages and applications [38][43]. Summary by Sections Investment Allocation - In Q2 2025, the computer industry's public fund allocation decreased to 2.6%, marking a historical low since 2010, with a configuration coefficient of 0.56, down from 0.67 in Q1 2025 [8][9]. - The report suggests increasing positions in Hong Kong-listed computer stocks such as Kingdee and Meitu [6][7]. AI Development - The report identifies three main drivers for the future performance of the computer industry: 1. The launch of domestic super-node solutions that enhance cost-performance and reduce the gap with overseas solutions [9][10]. 2. The introduction of multiple foundational large models that facilitate the commercialization of AI applications [10][11]. 3. Ongoing innovations in various sectors, including stablecoins and 3D printing, which are expected to gain traction [11][12]. Valuation Metrics - As of July 22, 2025, the computer industry’s PE (TTM) stands at 85.4x, placing it in the 93.40% historical percentile, while the PS (TTM) is at 3.4x, in the 48.90% historical percentile [24][25]. - The report notes that current valuation levels exceed those of 2020 and 2023, reflecting optimistic market expectations regarding potential profitability [24][25]. Company Updates - iFLYTEK's reasoning large model X1 has been officially upgraded, showcasing improvements in comprehensive capabilities and multi-language support, with applications in education, healthcare, and enterprise solutions [38][43]. - The report emphasizes the growth trend in AI revenue for iFLYTEK, with significant increases in both consumer and enterprise AI solutions [44]. Market Dynamics - The report discusses the varying rhythms of different technology sectors, influenced by the certainty and traceability of new technologies, with AI applications expected to follow a similar trajectory to cloud computing [36][37]. - The report anticipates a rapid increase in market capitalization for AI-related companies as performance metrics begin to materialize in the latter half of 2025 [37][38].

Core Insights - H20's resumption of sales to China is expected to alleviate supply pressure on computing chips, stimulating the entire computing infrastructure and AI industry chain [2][3] - Since the rebound on April 9, overseas computing has seen a significant increase of 40.9%, while domestic computing, represented by Huawei's chain, has only increased by 21.1% [3][4] - The performance of domestic computing has improved, and H20's impact on domestic computing is limited, indicating that domestic computing still has long-term growth potential [5] Industry Overview - The computing power industry chain has been catalyzed by H20's return to the Chinese market, which is designed to comply with U.S. export restrictions and is specifically tailored for the Chinese market [3][5] - The domestic computing power industry is entering a growth cycle, supported by technological advancements, commercial applications, and increasing demand for AI models [4] - Key companies in the domestic computing power sector, such as Huawei, have demonstrated significant performance improvements, with Huawei's computing cluster outperforming NVIDIA's GB200 NVL72 [4][5] Investment Opportunities - The report suggests focusing on specific segments within the computing infrastructure industry, including servers, liquid cooling, copper connections, PCBs, optical communications, cloud computing, and domestic computing [5] - The IPO acceptance of domestic GPU manufacturers like Muxi Integration and Moore Threads fills the gap in the A-share market for full-function GPUs, further supporting the domestic computing ecosystem [4]

Group 1 - The Hang Seng Index and Hang Seng Tech Index rose over 1% on July 18, indicating a strong performance in the tech sector [1] - The Hong Kong Tech 30 ETF (513160) increased by 1.36% with a trading volume exceeding 219 million yuan and a turnover rate over 14%, showing active trading [1] - The ETF has seen a net inflow of over 130 million yuan over the past three days, with a net rate exceeding 10% in the last five days [1] Group 2 - Citic Securities predicts that the H20 unlock will boost CAPEX investment rhythm among leading manufacturers, creating ample investment opportunities in AI for the second half of the year [2] - Dongxing Securities highlights that the current focus on technological self-reliance and digital economy development aligns with policy themes, with high market attention on AI and domestic computing power [2] - The demand for AI technologies in traditional industries is increasing, with expectations for explosive growth in inference demand ahead of disruptive applications [2]

Market Overview - The Shanghai Composite Index fell by 0.42% to 3505.0 points, with a high of 3527.04 points [1] - The Shenzhen Component Index rose by 0.56% to 10744.56 points, with a high of 10784.97 points [1] - The ChiNext Index increased by 1.73% to 2235.05 points, with a high of 2245.44 points [1] ETF Market Performance - The median return of stock ETFs was -0.17% [2] - The top-performing scale index ETF was the Yinhua CSI 800 Enhanced Strategy ETF with a return of 2.6% [2] - The top-performing industry index ETF was the Southern CSI Communication Services ETF with a return of 4.42% [2] - The top-performing strategy index ETF was the CICC MSCI China A-Share International Quality ETF with a return of 0.98% [2] - The top-performing style index ETF was the Harvest CSI Emerging Technology 100 Strategy ETF with a return of 2.86% [2] - The top-performing theme index ETF was the Xinhua CSI Cloud Computing 50 ETF with a return of 7.82% [2] ETF Performance Rankings - The top three ETFs by return were: - Xinhua CSI Cloud Computing 50 ETF (7.82%) - Southern ChiNext Artificial Intelligence ETF (7.12%) - Huabao ChiNext Artificial Intelligence ETF (7.07%) [5] - The top three ETFs by decline were: - ICBC Credit Suisse National Index 2000 ETF (-4.62%) - Guotai CSI Coal ETF (-2.33%) - Penghua SSE Sci-Tech Innovation Board New Energy ETF (-1.76%) [6] ETF Fund Flows - The top three ETFs by fund inflow were: - Huaxia SSE Sci-Tech Innovation Board 50 Component ETF (inflow of 968 million yuan) - Guolian An CSI All-Index Semiconductor Products and Equipment ETF (inflow of 537 million yuan) - Huatai-PB CSI Dividend Low Volatility ETF (inflow of 414 million yuan) [8] - The top three ETFs by fund outflow were: - Huatai-PB CSI 300 ETF (outflow of 1.244 billion yuan) - E Fund CSI Artificial Intelligence Theme ETF (outflow of 788 million yuan) - Huaxia SSE 50 ETF (outflow of 743 million yuan) [9] ETF Margin Trading Overview - The top three ETFs by margin buying were: - Huaxia SSE Sci-Tech Innovation Board 50 Component ETF (buying amount of 765 million yuan) - Guotai CSI All-Index Securities Company ETF (buying amount of 282 million yuan) - E Fund ChiNext ETF (buying amount of 234 million yuan) [11] - The top three ETFs by margin selling were: - Southern CSI 1000 ETF (selling amount of 75.48 million yuan) - Southern CSI 500 ETF (selling amount of 29.88 million yuan) - Huatai-PB CSI 300 ETF (selling amount of 19.71 million yuan) [12] Institutional Insights - Dongwu Securities highlighted that AI applications are on the verge of rapid growth, with significant cost reductions and increasing penetration rates, suggesting a focus on AI leaders across various industries [13] - Huayuan Securities noted the recent release of the KimiK2 model and its open-source nature, which is expected to drive demand for AI computing power and benefit related sectors such as AI chips, servers, and data centers [14]

Core Insights - The Shanghai Stock Exchange Sci-Tech Innovation Board 100 Index (000698) experienced a decline of 0.66% as of July 15, 2025, with mixed performance among constituent stocks [3] - The China Artificial Intelligence Computing Power Development Assessment Report indicates that China's intelligent computing power is expected to reach 725.3 exaFLOPS in 2024, a year-on-year increase of 74.1% [4] - The Sci-Tech Innovation 100 Index ETF (588030) saw a decrease of 0.59%, with a latest price of 1.01 yuan, while it recorded a cumulative increase of 1.19% over the past week [3][4] Market Performance - The top-performing stocks in the Sci-Tech Innovation 100 Index included Huaheng Biological (688639) with a rise of 5.04%, while Airo Energy (688717) led the decline with a drop of 4.99% [3] - The ETF's trading volume reached 1.52 billion yuan, with a turnover rate of 2.4% [3] - Over the past two weeks, the Sci-Tech Innovation 100 Index ETF's scale increased by 24.15 million yuan, ranking first among comparable funds [4] Investment Trends - Leveraged funds have been actively investing in the Sci-Tech Innovation 100 Index ETF, with a net purchase of 21.67 million yuan on the highest single day [5] - The ETF's net value increased by 41.94% over the past year, placing it in the top 14.3% among equity index funds [5] - The ETF's management fee is 0.15%, and the custody fee is 0.05%, which are the lowest among comparable funds [5] Sector Analysis - The report from IDC and Inspur indicates that the AI computing power market in China is projected to grow to 25.9 billion USD by 2025, reflecting a 36.2% increase from 2024 [4] - Major companies like Huawei and Longxin Zhongke are launching high-performance AI nodes and new generation CPU and GPGPU products, enhancing the domestic computing infrastructure [4] - The top ten weighted stocks in the Sci-Tech Innovation 100 Index account for 22.99% of the index, with companies like Baijie Shenzhou (688235) and Ruichuang Micro-Nano (688002) leading the list [6]