Core Viewpoint - The threat posed by Intel's foundry business revival to TSMC is overstated, and it may actually benefit TSMC by alleviating regulatory pressures due to its monopoly status [5][8]. Group 1: Intel's Foundry Business - Intel's foundry business faces fundamental challenges beyond financial issues, including the need for a different corporate culture and customer-centric innovation [11]. - The success of Intel's foundry strategy may depend on adopting an N-1 approach, which could reduce risks for potential clients [11]. Group 2: Market Dynamics - TSMC is expected to maintain over 90% market share in advanced process nodes, despite the participation of major clients like Apple and Nvidia in Intel's foundry revival plan [10]. - The perception of TSMC as a potential monopolist has not significantly boosted its price-to-earnings ratio, and may instead attract more scrutiny from government agencies [8]. Group 3: Competitive Landscape - The competition from Intel's foundry may create a false sense of choice for customers, which could ultimately be advantageous for TSMC by reducing regulatory scrutiny and pressures related to manufacturing returning to the U.S. [8][9].

Market Performance - As of August 20, the Shanghai Composite Index rose by 1.04% to close at 3766.21 points, while the Shenzhen Component Index increased by 0.89% to 11926.74 points. The ChiNext Index saw a smaller gain of 0.23%, closing at 2607.65 points [1] - The Kweichow Moutai ETF (588170) surged by 3.99%, and the Semiconductor Materials ETF (562590) rose by 2.94% [1] - In the overnight U.S. market, the Dow Jones Industrial Average increased by 0.04%, while the S&P 500 fell by 0.24% and the Nasdaq Composite dropped by 0.67%. The Philadelphia Semiconductor Index decreased by 0.72%, with Micron Technology down by 3.97% and ARM down by 2.13% [1] Industry Insights - Baidu's CEO, Robin Li, announced during the Q2 investor call that the company is developing the next-generation flagship model, which will have significant improvements in core capabilities and will be released as soon as it is ready. The company will also continue to iterate and update existing models [2] - OpenAI's CFO, Sarah Friar, revealed that the company achieved $1 billion in revenue for the first time in July, although it continues to face ongoing pressure from AI computing power shortages [2] - Weicai Technology reported a 47.53% year-on-year increase in revenue for the first half of 2025, reaching 634 million yuan, and a staggering 831.03% increase in net profit attributable to shareholders, amounting to 101 million yuan. The company has increased its investment in advanced packaging chips, high-reliability chips, and high-performance chip testing, leading to a rise in market penetration and sustained revenue growth [2] Semiconductor Industry Outlook - Huatai Securities believes that advanced process foundries have structural growth potential, supported by ongoing demand for AI chips. The large-scale computing clusters from OpenAI and xAI are expected to drive demand for pre-training computing power, while the demand for inference semiconductors is also growing rapidly [3] - The semiconductor equipment and materials industry is identified as a key area for domestic substitution, characterized by low domestic replacement rates and high ceilings for domestic substitution. This sector is expected to benefit from the expansion of semiconductor demand driven by the AI revolution, technology restructuring, and advancements in lithography technology [3]

Core Insights - TSMC has secured a significant client for its 2nm process, with Intel reportedly entrusting the Nova Lake-S desktop processor to TSMC for manufacturing, expected to enter mass production in Q3 2026 [1][2] - The collaboration between Intel and TSMC continues to evolve, with Nova Lake-S being the first processor from Intel to utilize TSMC's 2nm technology, following previous partnerships for 3nm processes [2] TSMC Developments - TSMC is set to hold an earnings call on July 17, 2023, amidst a quiet period prior to the event [1] - TSMC's stock price fell by 5 New Taiwan Dollars to 1,095 New Taiwan Dollars on July 14, 2023, with a subsequent ADR decline of approximately 0.8% [1] Intel Developments - The Nova Lake-S processor is anticipated to feature multiple versions for both desktop and laptop applications, with the high-end variant expected to include 52 cores, comprising 16 performance cores (P-core) and 32 efficiency cores (E-core) [2] - Nova Lake-S will integrate advanced storage controllers capable of supporting speeds up to 8,800 MT/s, with GPU functionalities provided by the Xe3 Celestial architecture and media decoding managed by the Xe4 Druid architecture [2] Market Implications - The addition of Intel as a client for TSMC's 2nm process is expected to enhance TSMC's order volume, following interest from other major companies like Apple, NVIDIA, AMD, Qualcomm, and MediaTek [1] - The flexibility in production offered by TSMC's 2nm process may mitigate potential delays or shortages in chip supply that could arise from Intel's own manufacturing constraints [1]