21 August 2025 Global Semiconductor Capital Equipment China WFE Import Tracker (Jul 2025): Record high month of the year, demand still resilient with imports YTD +2% Qingyuan Lin, Ph.D. +852 2123 2654 qingyuan.lin@bernsteinsg.com Stacy A. Rasgon, Ph.D. +1 213 559 5917 stacy.rasgon@bernsteinsg.com David Dai, CFA +852 2918 5704 david.dai@bernsteinsg.com Carmine Milano +44 207 762 1857 carmine.milano@bernsteinsg.com We track monthly Wafer Fabrication Equipment (WFE) imports to China through data from the China ...

Core Viewpoint - Chongqing Zhenbao Technology Co., Ltd. has officially received acceptance for its IPO application on the Sci-Tech Innovation Board, becoming the first company from Chongqing to be accepted this year [1] Group 1: Company Overview - Zhenbao Technology is one of the few companies in China that has achieved mass production of non-metallic components for advanced integrated circuit manufacturing equipment and high-generation, high-voltage display panel manufacturing equipment [1] - The company's main products include equipment components made of silicon, quartz, silicon carbide, and alumina ceramics, as well as surface treatment services such as thermal spraying regeneration, anodizing, and precision cleaning [1] Group 2: Financial Performance - The company's projected revenue for the years 2022 to 2024 is 386 million yuan, 506 million yuan, and 635 million yuan respectively, while the net profit attributable to the parent company is expected to be 81.62 million yuan, 108 million yuan, and 152 million yuan, indicating a continuous improvement in profitability [2] Group 3: Client Relationships - Zhenbao Technology has established partnerships with major domestic display panel manufacturers such as BOE, Huaxing Optoelectronics, and Tianma Microelectronics, as well as international integrated circuit manufacturers like Intel, GlobalFoundries, United Microelectronics, and Texas Instruments [2] - The company maintains business relationships with key domestic integrated circuit manufacturers including Jinghe Integrated, China Resources Microelectronics, Chipone Technology, Wuhan Xinxin, Jita Semiconductor, and Guangdong Core Semiconductor [2] Group 4: Industry Position and Impact - Zhenbao Technology is recognized as a national high-tech enterprise, a national specialized and innovative "little giant" enterprise, and has received various accolades such as a national intellectual property advantage enterprise and a demonstration enterprise for technological innovation in Chongqing [2] - The IPO is expected to enhance the company's role in promoting the localization process in the semiconductor sector, aiding China's semiconductor industry in breaking foreign technology monopolies and achieving a higher level of self-reliance [2]

Summary of China Semiconductor Industry Conference Call Industry Overview - The focus is on the **China Wafer Fab Equipment (WFE)** market, with a revision of the 2025 outlook due to stronger foundry demand [1][17] - The 2025 WFE demand projection for China has been revised up to **USD 39 billion**, reflecting a **-13% YoY** change, while the 2026 projection is set at **USD 41 billion** with a **5% YoY** increase [1][26] Key Insights - **Demand Sustainability**: The sustainability of WFE demand in China remains a key topic of discussion, with recent data showing resilient import figures year-to-date [1][4] - **Local Production Growth**: Local AI chip production is gaining traction, driven by export controls limiting access to advanced overseas manufacturing, making local production essential [2] - **Capacity Expansion**: Despite global overcapacity concerns in mature logic, Chinese foundries are expected to continue expanding capacity, aiming for self-sufficiency [3][35] - **Utilization Rates**: Companies like Hua Hong are operating at **103% utilization** with only a **9% gross margin**, indicating a focus on filling new capacity rather than protecting margins [3] Financial Projections - **2024 WFE Demand**: Projected at **USD 45 billion**, with a **23% YoY** increase, supported by strong import data and local supplier growth [25][30] - **2025 and 2026 Projections**: The demand is expected to decrease slightly in 2025 and 2026, with projections of **USD 39 billion** and **USD 41 billion**, respectively [26][32] Import Data - Year-to-date import data shows a **-2% YoY** decline, indicating stability rather than a slowdown in demand [4][42] - The largest import region is **Guangdong**, suggesting a ramp-up in advanced logic customers [4] Company Ratings - **NAURA, AMEC, and Piotech** are rated as **Outperform** due to their leadership in deposition and dry etch technologies, benefiting from domestic WFE substitution [5][8][9][10] - **AMAT and LRCX** are also rated as **Outperform**, with expectations of growth driven by market dynamics and service narratives [11] Market Dynamics - The share of Chinese foundries in global mature logic revenue is currently at **21%**, with a target of **30%** [3] - The domestic share of WFE is expected to reach **36% by 2026**, driven by government incentives and local co-development efforts [22][28] Conclusion - The Chinese semiconductor industry is poised for continued growth, with a focus on self-sufficiency and local production capabilities. The demand for WFE is expected to remain strong despite global market fluctuations, supported by local foundries' expansion and government policies promoting domestic suppliers.