Group 1 - The Hang Seng Technology Index opened lower but rose over 1.5% during the session, with key stocks like Alibaba and semiconductor companies such as Hua Hong Semiconductor and SMIC showing strength [1] - TSMC reported a revenue of NT$263.71 billion for June, a decrease of 17.7% from May but a year-on-year increase of 26.9%. The company's revenue for the first half of the year was NT$1,773.046 billion, up 40.0% year-on-year [1] - TSMC maintained its forecast for a double-digit revenue growth in USD for the year, estimating a growth rate of 24% to 26% [1] Group 2 - The Hong Kong technology sector has seen a valuation correction over the past quarter, with the latest valuation of the Hang Seng Technology Index ETF (513180) at 19.69 times P/E, which is below 92% of the time since the index was launched [2] - The sector is expected to have significant upside potential if favorable events act as catalysts, given its high growth and elasticity characteristics [2] Group 3 - The semiconductor industry is undergoing a structural transformation driven by geopolitical factors, leading to a decrease in the proportion of externally sourced chips from 63% in 2024 to 42% in 2025 [1]

Core Viewpoint - The article discusses the valuation discrepancies between SMIC's A-shares and H-shares, highlighting the contrasting perspectives of domestic and foreign investors regarding the company's potential and investment returns [1][39]. Group 1: Investment Characteristics - SMIC is viewed as a critical asset in China's semiconductor industry, with significant production capacity and a leading position in mature process technology [5][40]. - The company has experienced substantial revenue growth, with a projected revenue of $8 billion in 2024, reflecting a compound annual growth rate of 16% over six years [9]. - However, capital expenditures have also surged, reaching $7.3 billion in 2024, indicating that over 90% of revenue is reinvested into capital [10][19]. Group 2: Financing and Cash Flow - SMIC's financing sources include equity financing, debt financing, and non-controlling shareholder investments, with each contributing approximately equally over the past six years [21]. - The company raised $7.5 billion through its IPO in 2020 and has accumulated $9.4 billion in net borrowings over seven years [23][24]. - Recent trends show a decline in state-owned capital injections, with only $280 million received in 2024, significantly lower than previous years [30]. Group 3: Valuation Discrepancies - The valuation gap between SMIC's A-shares and H-shares is attributed to differing investment philosophies, with domestic investors viewing it as a strategic asset while foreign investors see it as less unique compared to competitors like TSMC [39][41]. - Domestic investors are more likely to adopt a long-term perspective, while foreign investors focus on short-term returns and may not be willing to endure the associated risks [41][42]. - The article suggests that SMIC's valuation is likely to remain structurally different due to these contrasting views, making it challenging to reconcile the price differences in the market [43]. Group 4: Investment Opportunities - SMIC is characterized as a heavy asset business with cyclical performance, and its valuation is expected to fluctuate between 1-2 times price-to-book (PB) ratio based on market conditions [50]. - The company is positioned as a "growth reserve," with potential for higher PB elasticity when trading below 1 PB, but risks of significant declines when trading above 2 PB without fundamental breakthroughs [54]. - Investors are encouraged to consider their investment horizon and the nature of returns they seek, especially given the cyclical nature of the semiconductor industry [55].

Core Viewpoint - A recent study led by the University of Bristol highlights a breakthrough in semiconductor technology that could enable advanced applications such as autonomous vehicles, remote medical diagnostics, and immersive virtual experiences, all relying on faster data communication and transmission capabilities [1][2]. Group 1: Semiconductor Breakthrough - The transition from 5G to 6G requires a complete upgrade of semiconductor technology, circuits, systems, and related algorithms [2]. - A new architecture has been tested that enhances GaN (Gallium Nitride) RF amplifiers, achieving unprecedented performance due to a latch effect discovered in GaN [2][3]. - The new devices utilize parallel channels with sub-100 nanometer fins to control current flow, demonstrating high performance in the W-band frequency range (75 GHz to 110 GHz) [2]. Group 2: Future Applications and Implications - The potential applications of the latch effect in GaN devices could significantly impact various sectors, including healthcare, education, and transportation, by enabling remote diagnostics, virtual classrooms, and enhanced road safety [1][3]. - The research team is focused on improving the power density of these devices to serve a broader user base and is collaborating with industry partners to commercialize the next-generation devices [3].