Investment Rating - The industry investment rating is "In-Line" for Greater China Technology Semiconductors [2]. Core Insights - The report highlights the growth potential in China's AI semiconductor sector, with a forecasted capital expenditure increase of 62% year-over-year to RMB 373 billion for the top six companies [19]. - TSMC's revenue guidance for Q3 2025 indicates a potential growth of approximately 3% quarter-over-quarter in USD, but a decline of 1.6% in TWD [12]. - The report anticipates that China's local GPU market will significantly expand, with local GPU revenue projected to reach RMB 287 billion by 2027, driven by advancements in SMIC's leading node capacity [33]. Summary by Sections Valuation Comparison - TSMC's target price is set at 1,288 TWD, representing a 19% upside potential, with an estimated P/E ratio of 23.9x for 2024 [8]. - The average EPS growth for the semiconductor sector is projected at 40% for 2024, with a mean P/B ratio of 2.3x [8]. - The memory segment shows a notable upside potential for Giga Device, with a target price of 145.0 CNY, indicating a 20% upside [9]. TSMC Preview - TSMC's Q3 2025 revenue is estimated at NT$ 910 billion, with a gross profit of NT$ 508 billion, reflecting a year-over-year growth of 35.1% [12]. - The gross margin is expected to be 55.8%, while the operating margin is projected at 45.5% [12]. China AI Semiconductor Demand - The report projects that China's GPU self-sufficiency ratio will increase from 34% in 2024 to 82% by 2027, indicating a strong trend towards domestic production [28]. - The total addressable market (TAM) for cloud AI in China is expected to reach USD 48 billion by 2027 [30].

Investment Rating - Industry View: In-Line [5] Core Insights - The semiconductor industry is experiencing unprecedented demand driven by AI advancements and geopolitical tensions [3][5] - China's AI semiconductor market is expected to see significant growth, with local GPU revenue projected to reach Rmb287 billion by 2027 [21][19] - The overall AI semiconductor market is anticipated to deliver over 30% CAGR from 2023 to 2030, with inference AI semiconductors growing at 55% CAGR [78][77] Summary by Sections China AI Semi Demand and Supply - The top six companies' capital expenditures are forecasted to grow 62% YoY to Rmb373 billion [10] - China's GPU self-sufficiency ratio was 34% in 2024 and is expected to reach 82% by 2027 [16] - The total addressable market (TAM) for China's cloud AI is projected to be US$48 billion by 2027 [18] Semiconductor Solutions and Technology Trends - Moore's Law is expected to continue with chip scaling to 3nm/2nm for better power efficiency [78] - Advanced packaging technologies like CoWoS and SoIC are being utilized to increase data speed and memory bandwidth [78] - The EDA market in China is projected to grow at a 12% CAGR from 2023 to 2030, reaching US$3.3 billion [29] Investment Opportunities - AI semiconductors are expected to account for approximately 34% of TSMC's revenue by 2027 [148] - The demand for custom AI semiconductors is increasing, driven by major cloud service providers and tech companies [120][121] - The global semiconductor market size may reach US$1 trillion by 2030, with AI semiconductors being a major growth driver [59]