Core Insights - The PC market in mainland China is projected to reach 10.2 million units in Q2 2025, marking a 12% year-on-year growth, driven by strong demand from both consumer and commercial sectors [1] - Apple has shown remarkable performance due to the new MacBook Air, supported by policy subsidies, while Huawei continues to lead the tablet market [1] - The growth is primarily attributed to ongoing consumer subsidy policies and robust demand from state-owned enterprises and government procurement [1] PC Market Overview - The PC market (excluding tablets) in mainland China is expected to grow by 2% in 2025 and by 3% in 2026 [1] - The tablet market is projected to grow by 8% in 2025 but is expected to decline by 9% in 2026 [1] AI PC Segment - AI PCs are emerging as a new market driver, accounting for 28% of the overall PC market in Q2 2025, with an expected penetration rate of 34% for the entire year [1] - By 2026, the penetration rate of AI PCs is anticipated to rise to 52% [1] - Cumulative shipments of AI PCs in the Greater China region are projected to reach 107 million units by the end of 2029, laying a solid foundation for the proliferation of AI applications [1]

Investment Rating - The report maintains an "Overweight" rating for the semiconductor industry, indicating an expectation that the industry stock index will outperform the benchmark [5]. Core Insights - DeepSeek is expected to accelerate the adoption of AI applications, increasing overall hardware demand due to significant breakthroughs in open-source models and cost savings in computing [1][2]. - The introduction of DeepSeek is anticipated to lower the costs of large model training, driving sustained growth in domestic AI chip demand and upstream manufacturing expansion [2]. - The report highlights that domestic advanced process chip capacity is currently tight, with significant capital expenditures expected to support the growing demand for AI computing and automotive-grade chips [3]. Summary by Sections Section 1: DeepSeek's Impact - DeepSeek's open-source strategy is disrupting closed-source models, enhancing the AI foundational capabilities of domestic SMEs [1]. - The cost-effective replication of capabilities by latecomers is shifting capital investment focus towards inference [1]. - The development of a domestic AI ecosystem combining models, computing power, and cloud services is underway, potentially narrowing the gap with the US [1]. Section 2: Domestic AI Chip Manufacturing - The report suggests investors focus on domestic AI chip manufacturing opportunities, particularly those utilizing 7nm and more advanced processes, with companies like SMIC and Hua Hong Semiconductor highlighted [2]. - Advanced packaging technologies such as CoWoS are expected to see increased demand, with domestic firms like Changdian Technology and Tongfu Microelectronics positioned to benefit [2]. - The acceleration of capacity construction in advanced processes and packaging is seen as a favorable opportunity for domestic equipment commercialization [2]. Section 3: Capital Expenditure Trends - SMIC's capital expenditure is projected at $7.33 billion for 2024, with expectations to maintain similar levels in 2025, contrary to previous market expectations of a decline [3]. - A new industrial land project in Yizhuang New City has a total investment of no less than 50 billion yuan, indicating strong future capital commitments [3]. - The report anticipates that advanced process chips will become a key competitive area, with more investment projects expected to materialize in the coming years [3]. Section 4: External Trends and Domestic Equipment Development - The tightening of export controls by the Netherlands and Japan on advanced semiconductor manufacturing equipment is prompting increased R&D investments by domestic firms [4]. - Domestic equipment manufacturers have made significant progress in various equipment categories, with a rising share of advanced process orders expected in 2024 [4]. - Companies such as Northern Huachuang, Zhongke Feimeng, and others are recommended for attention due to their advancements in high-end equipment [4].