Core Viewpoint - The article emphasizes that investing in the semiconductor industry requires deep understanding and calm analysis rather than mere enthusiasm for "domestic" labels. It highlights the internal divisions within the industry and the need for companies to be both offensive and defensive to survive and thrive in a competitive landscape [2][5][53]. Group 1: Company Capability Dimension - Companies must be "dual-capable monsters," excelling in both new technology development to capture high-profit segments and in old product iteration to maintain stable cash flow through cost reduction and deep service [6]. - The survival of companies will hinge on their ability to continuously deliver profits, which serves as the ultimate test of their business narratives [6]. Group 2: Downstream Demand Dimension - Downstream demand is split into two distinct tracks: advanced process (≤28nm) driven by a "technology arms race" with exponential growth characteristics, and mature process (>28nm) driven by stable demand from sectors like electric vehicles and IoT, representing the current fertile ground for investment in China [6][36]. - Investment strategies must differentiate between paying for "dreams" (advanced processes) and "grain" (mature processes) [6]. Group 3: Domestic Substitution Dimension - Domestic substitution is driven by geopolitical pressures, leading to a non-linear, "stair-step" replacement rhythm where each external sanction creates new opportunities for domestic manufacturers [6][34]. - Key investment decisions should focus on identifying which segments require immediate substitution and which are more gradual, with a focus on certainty versus growth potential [6]. Group 4: Equipment and Materials Market Insights - The semiconductor equipment market is characterized by high barriers to entry and significant capital requirements, with the investment in equipment for advanced processes skyrocketing from approximately $3 billion for 28nm to $16 billion for 3nm [29]. - The market is highly concentrated, dominated by major players like AMAT and ASML, indicating substantial opportunities for domestic players to capture market share [28][29]. Group 5: Challenges and Opportunities - The rapid pace of technological iteration presents challenges, but also opportunities for latecomers to leapfrog established players by adopting new technologies [22]. - The increasing complexity and cost of manufacturing processes necessitate a focus on yield management, which will elevate the value of measurement and inspection equipment [24]. Group 6: Current State of Domestic Substitution - Current domestic substitution rates show that cleaning equipment and CMP have surpassed 20%, while areas like lithography and measurement remain below 5%, indicating significant potential for growth in these challenging segments [42]. - The R&D expenditure in the equipment sector is projected to exceed 10 billion in 2024, reflecting a 42.5% increase, underscoring the commitment to building technological barriers [42]. Group 7: Material Market Dynamics - The materials market in China is the largest globally, yet the production value does not match its market share, presenting a significant opportunity for growth [46]. - The complexity of materials, particularly in manufacturing, poses challenges for domestic substitution, as it requires extensive technical expertise and long-term quality management [49].