Group 1 - The core viewpoint of the report indicates that silicon wafer demand is expected to continue increasing due to the capacity expansion of wafer fabs, with China's capital expenditure ranking first globally and significant room for domestic production rate improvement in high-end processes and specialty silicon wafer categories [1] - From a technological advancement perspective, 3D stacking is showing a significant increase in the unit consumption of silicon wafers, and domestic major manufacturers are likely to position themselves for the next generation of 3D stacked chip products during their capacity expansion [1] - From a cyclical perspective, AI demand is anticipated to drive a restart of the semiconductor industry cycle, leading to an optimistic outlook for the overall shipment growth and product price recovery of domestic semiconductor silicon wafer companies [1]

Core Viewpoint - Wall Ran Technology Co., Ltd. has initiated its IPO process, aiming to issue 24,769,280 H-shares, with trading expected to commence on January 2, 2026, marking it as the first GPU company listed in Hong Kong following the domestic listing of Moer Thread as the first GPU company on the Sci-Tech Innovation Board [1] Group 1: Company Overview - Founded in September 2019 by former SenseTime president Zhang Wen, Wall Ran Technology has recruited top talents, including the head of the self-developed GPU team from HiSilicon, to form its core team [1] - The company focuses on developing chips for AI model training and inference, with its first product, the BR106, designed to target next-generation products from international competitors [1][2] Group 2: Product Development - The BR106 chip was successfully designed and mass-produced within approximately three years, with production commencing in January 2023 [2] - The second product, BR110, is aimed at edge and cloud inference applications, with mass production expected in October 2024 [2] - Wall Ran is also developing the next-generation flagship data center chip, BR20X, which is expected to provide enhanced computing power and support for a wider range of data formats [2][3] Group 3: Technological Innovations - Wall Ran Technology is the first in China to adopt 2.5D chiplet technology for packaging dual AI computing bare chips, which helps to overcome limitations in traditional single-chip IC manufacturing [3] - The company has developed advanced packaging technologies that improve chip and memory integration, particularly beneficial for AI training workloads and cloud computing [4] Group 4: Financial Performance - Wall Ran Technology reported revenues of 0.5 million yuan in 2022, which increased to 3.368 billion yuan in 2024, driven by a growing customer base and increased revenue per customer [6] - The company has incurred significant losses over the years, with losses of 14.743 billion yuan in 2022 and projected increases in losses due to rising R&D expenditures [7][8] - R&D expenditures have been substantial, with 203,980% of total revenue in 2022, indicating a strong focus on innovation despite financial losses [7] Group 5: Market Position and Future Outlook - As of 2024, Wall Ran Technology holds a market share of 0.16% in the Chinese smart computing chip market and 0.20% in the GPGPU market, with expectations to increase to 0.19% and 0.23% respectively by 2025 [8] - The company has secured 24 binding orders valued at approximately 821.8 million yuan and has established several framework sales agreements, indicating a strong future revenue pipeline [8]

Investment Rating - The report maintains a "Recommended" rating for the industry, indicating a positive outlook for the sector's fundamentals and expectations for the industry index to outperform the benchmark index [60]. Core Insights - UMC's Q3 2025 revenue reached NT$ 59.127 billion, with a net profit of NT$ 14.98 billion, and an ASP of $862 (equivalent to 8-inch wafers), while capacity utilization improved to 78% [1][20]. - The company expects wafer shipments to continue growing through 2026, with a projected annual growth rate in wafer shipments reaching low double digits for 2025 [3][25]. - The 22nm revenue contribution has exceeded 10%, indicating a growing market share in advanced technology nodes [2][24]. Summary by Sections Financial Performance - Q3 2025 revenue was NT$ 59.127 billion, a year-on-year decrease of 2.25% but a quarter-on-quarter increase of 0.63% due to higher wafer shipments [1][20]. - Gross margin for Q3 2025 was 29.8%, down 4.0 percentage points year-on-year but up 1.1 percentage points quarter-on-quarter, attributed to improved capacity utilization [1][20]. - Net profit for Q3 2025 was NT$ 14.98 billion, reflecting a year-on-year increase of 3.52% and a quarter-on-quarter increase of 68.28% [1][20]. Capacity and Utilization - UMC's Q3 2025 wafer shipments totaled 1 million pieces (equivalent to 12-inch wafers), with a capacity utilization rate of 78%, exceeding guidance expectations [1][20]. - The company anticipates a capacity utilization rate of 75% for Q4 2025, with stable ASP in USD terms [3][25]. Market Segmentation - In Q3 2025, revenue by application was segmented as follows: Communications 42%, Consumer 29%, Computers 12%, and Others 17% [2]. - The revenue contribution from 40nm and below nodes accounted for 52%, with 22/28nm nodes contributing 35% [2]. Future Guidance - For 2025, UMC projects a low double-digit percentage growth in wafer shipments, with 8-inch wafers expected to see high single-digit growth [3][25]. - Capital expenditures for 2025 are maintained at $1.8 billion, with 90% allocated to 12-inch wafer fabs and 10% to 8-inch wafer fabs [3][25].

Core Viewpoint - The report from CITIC Securities indicates that three technological trends will significantly enhance the usage and importance of etching equipment: (1) adoption of multiple patterning in photolithography, (2) demand for 3D stacked storage and near-memory computing, and (3) upgrades in underlying transistor structures [1][2]. Group 1: Multiple Patterning - The current EUV lithography technology is limited, making DUV multiple patterning a key strategy for domestic breakthroughs, leading to a substantial increase in the usage of etching equipment [3]. - The DUV multiple patterning method allows for continued iteration down to 3nm, with the etching equipment usage in production lines increasing up to four times compared to the EUV method [3]. Group 2: 3D Stacking Demand - The increase in storage layers for 3D NAND and DRAM is driving exponential growth in the demand for etching equipment, with the usage share rising from 35% to 48% as layers increase from 32 to 128 [4]. - The need for higher aspect ratio etching equipment is also growing, with current mainstream 3D NAND using a 60:1 aspect ratio, and future technologies expected to reach 90:1 for higher layer counts [4]. - TSV (Through-Silicon Via) processes, essential for 3D expansion in packaging, require etching and filling equipment, which constitutes nearly 70% of the TSV process, further increasing demand for etching equipment [4]. Group 3: GAA Transistor - The introduction of GAAFET technology, which will replace FinFET, is expected to increase the etching process steps from 5 to 9, leading to a rise in the share of etching equipment from 20% to 35% in advanced processes [5]. - The value of individual etching equipment is projected to grow by 12% year-on-year, with new demands for high-selectivity SiGe isotropic etching processes emerging, particularly through Atomic Layer Etching (ALE) methods [5].

Group 1 - Nikon aims to double its wafer alignment sales by FY2027 compared to FY2024, highlighting its key advantage in measuring wafer deformation to improve exposure equipment alignment accuracy [2] - SK Hynix has adopted the industry's first High NA EUV lithography system at its M16 chip manufacturing plant in Icheon, South Korea, to accelerate the development of next-generation DRAM chips [2] - LG Energy has secured a total of 107 GWh battery orders from Mercedes-Benz, including a 32 GWh supply agreement for electric vehicle batteries in Europe and a previous 75 GWh order [2] - EVE Energy's "Longquan No. 2" all-solid-state battery has successfully rolled off the production line, targeting high-end applications such as humanoid robots and low-altitude aircraft, with an annual production capacity of nearly 500,000 cells [2]

Core Insights - Zhang Jiansheng, a fund manager at Baodao Fund, has shifted his investment strategy towards Hong Kong stocks, increasing their representation in his portfolio from 3 to over 50% by Q2 2024, indicating a positive outlook on the market [1] - His investment philosophy emphasizes a bottom-up stock selection framework, focusing on competitive barriers, industry dynamics, and valuation metrics [1][2] - Zhang's approach to valuation is unique, prioritizing the implied return over a five-year horizon rather than traditional price-to-earnings ratios, which he believes provides a more rational assessment of a company's worth [2] Stock Selection Criteria - Competitive barriers are deemed essential; companies lacking these barriers, regardless of growth rates, are not considered for heavy investment [1][3] - Industry supply-demand dynamics are critical for risk management, with Zhang highlighting the domestic innovative drug sector as an example of improving investment value due to favorable conditions [2] - Cash flow value is prioritized over market sentiment, as demonstrated by a past missed opportunity in telecom operators due to an overemphasis on short-term negatives [2][3] Focus Areas and Market Trends - Zhang identifies three key sectors for investment: 3D stacking technology, cloud computing, and edge AI, anticipating significant growth driven by technological advancements [3] - The changing pricing logic in the Hong Kong stock market, influenced by increasing southbound capital, presents new opportunities for bottom-up stock selection [3] - Despite the rise in the Hang Seng Tech Index, many quality assets in the Hong Kong market remain undervalued, suggesting potential for future appreciation [3]