Core Viewpoint - TSMC plans to exclude Chinese manufacturers' equipment from its advanced semiconductor production lines, particularly for the upcoming 2nm factory, due to concerns over potential U.S. restrictions and geopolitical risks [2][4][5] Group 1: Production Plans - TSMC will begin mass production of 2nm products at its factory in Hsinchu, northern Taiwan, followed by production in Kaohsiung and a facility under construction in Arizona, USA [4][5] - The company previously used equipment from Chinese manufacturers, including AMEC and Mattson Technology, but decided to eliminate these in the 2nm production process to mitigate risks [4][5] Group 2: Geopolitical Concerns - The decision to exclude Chinese equipment is influenced by fears of increased U.S. restrictions and geopolitical uncertainties [2][4] - A proposed U.S. bill aims to prohibit the use of foreign equipment from "unreliable" countries in semiconductor factories receiving U.S. government funding, which could include Chinese equipment [4][5] Group 3: Supply Chain Strategy - TSMC is investigating alternatives to reduce reliance on Chinese-made materials and chemicals for its production lines in Taiwan and the U.S., enhancing supply chain resilience [5] - The company plans to use more local suppliers in China to comply with localization policies and reduce carbon footprints [5] Group 4: Industry Implications - Chinese semiconductor manufacturers are increasingly adopting domestic equipment, presenting growth opportunities for local firms like North Huachuang, while foreign companies may face declining market shares in China [5]

Core Viewpoint - The global semiconductor industry is undergoing a dual transformation driven by AI and geopolitical restructuring, with intense competition among international investment banks regarding the strategic positioning and market outlook of SMIC [1] Group 1: Morgan Stanley's Downgrade of SMIC - In February 2025, Morgan Stanley downgraded SMIC's H-share rating from "Neutral" to "Underweight," reflecting concerns over the company's business growth momentum and profitability for 2025 [3] - The optimistic guidance for Q1 2025 is largely dependent on government subsidies and pre-tariff order rush, which are unsustainable factors [3] - The Chinese wafer foundry industry is entering a capacity release peak from 2025 to 2026, indicating a trend of supply-side overcapacity [3][4] Group 2: Financial Performance and Concerns - SMIC's revenue has rapidly increased from $336 million in 2018 to $803 million in 2024, driven by market expansion and supportive domestic policies [4] - Despite record revenue, rising costs have raised concerns about "increasing revenue without increasing profit," with a gross margin of only 18% in 2024, down from 20.8% in 2023 [4][5] - The market sentiment is pessimistic about SMIC's growth momentum for 2025, with expectations that gross margins may remain below 20% due to ongoing pricing pressures in the mature process segment [5] Group 3: Goldman Sachs' Upgrade of SMIC - In February 2025, Goldman Sachs upgraded SMIC's H-share rating from "Neutral" to "Buy," reflecting optimism about the company's business under product mix adjustments and the moderate impact of pricing pressures and depreciation [6] - Goldman Sachs expects SMIC to benefit from the strategic demand for localized semiconductor production, with long-term revenue growth being highly certain [6] - The capital expenditure for 2025 is projected to remain high at $750 million, indicating a coherent long-term capacity expansion plan [6] Group 4: Market Dynamics and Strategic Positioning - The divergence in ratings from Morgan Stanley and Goldman Sachs reflects the dual tensions of "cyclicality vs. growth" and "globalization vs. localization" in the semiconductor industry [8] - SMIC's valuation is increasingly tied to geopolitical factors, technological breakthroughs, and industrial policies, making it a strategic barometer for observing China's technological advancements [8] - The next five years will be critical for SMIC as it transitions from "capacity expansion" to "quality breakthroughs," necessitating a dynamic perspective on short-term fluctuations and long-term value [8]