Summary of Key Points from the Conference Call Industry Overview - The chipmaking industry is facing disruption due to inertia in technical decisions and a lack of innovation in existing processes [3][4] - Companies like ASML are developing tools that may not be economically viable, indicating a stagnation in technological advancement [4] Company Focus: Substrate - Substrate is a Bay Area startup focused on developing X-ray lithography (XRL) technology to reduce the cost of advanced logic wafers [6] - The company aims to create a new American foundry and develop an end-to-end chipmaking process [14] Technological Claims - Substrate's XRL tool claims to achieve: - Single-patterning capability for 2nm, 1nm, and potentially beyond [10] - Equivalent resolution to high-NA EUV [10] - Production of leading-edge wafers at 50% less cost than existing options [10][12] - Performance metrics include: - Overlay <= 1.6 nm - Full-wafer Critical Dimension Uniformity (CDU) of 0.25 nm - Line Edge Roughness (LER) <= 1 nm [10] Economic Implications - If Substrate's claims are validated, it could revolutionize lithography by significantly reducing costs and increasing design flexibility [17][24] - The potential market for Substrate's technology could reach $50 billion by 2030, posing a serious threat to incumbents like ASML [24] Strategic Importance - Substrate's success could enhance the U.S.'s strategic position in advanced chipmaking, reducing reliance on foreign fabs, particularly in Taiwan [34] - The company is taking measures to protect its innovations from espionage, especially from China, which is also developing similar technologies [35][36] Competitive Landscape - Substrate's XRL technology is positioned as a revolutionary step compared to competitors like xLight, which focuses on improving existing EUV tools [39][41] - The competitive dynamics are influenced by the need for advanced lithography solutions amid rising geopolitical tensions [35] Challenges Ahead - Despite impressive claims, Substrate faces significant challenges in scaling its technology from lab to industrial levels [16][31] - The company acknowledges the difficulties in transitioning from theoretical capabilities to practical, high-volume production [16][31] Future Milestones - Key milestones for Substrate include: - Building a complete XRL tool with a particle accelerator source [43] - Demonstrating sustained performance and successful chip production using their technology [46] Conclusion - Substrate's advancements in X-ray lithography could disrupt the chipmaking industry, but substantial proof and development are required to validate their ambitious claims and achieve market penetration [43][46]

Summary of Conference Call on China Semiconductors Industry Overview - The focus is on the **semiconductor industry in China**, particularly the developments surrounding **SMIC (Semiconductor Manufacturing International Corp)** and **Hua Hong Semiconductor Ltd** [1][3]. Key Points and Arguments 1. **Positive Catalysts Ahead of National Day**: Anticipation of further positive developments in semiconductor localization in China before the National Day on October 1st, including testing of EUV tools by Sicarrier and DUV machines by SMIC [1]. 2. **AI Chip Self-Sufficiency Goal**: China aims for **70% self-sufficiency in AI chips by 2027**, which is expected to positively impact local foundries, especially SMIC [1]. 3. **Technological Advancements**: Continuous positive news regarding local equipment and semiconductor supply suggests that SMIC may produce chips at **7nm/5nm** using multi-patterning techniques [1]. 4. **EUV Machine Development**: There are reports of progress in self-supply of EUV machines, with trial production expected to start in the second half of 2025 [1]. 5. **Valuation of Hua Hong Semiconductor**: Target price set at **HK$45**, based on **1.6x 2026E BVPS**, reflecting an improving demand outlook and stable pricing [3]. 6. **Valuation of SMIC**: Target price set at **HK$53.0**, based on **2.4x 2026 P/B**, justified by sustainable momentum from US-China decoupling and gradual industry recovery [6]. 7. **Upside Risks for Hua Hong**: Potential for greater-than-expected demand in the semiconductor market and less capacity expansion by competitors [4]. 8. **Downside Risks for Hua Hong**: Risks include lower-than-expected demand and stronger capacity expansions by competitors [5]. 9. **Upside Risks for SMIC**: Better-than-expected margins from efficiency improvements and strong policy support could enhance profitability [7]. 10. **Downside Risks for SMIC**: Risks include heavy depreciation burdens affecting margins and weaker-than-expected demand impacting earnings [8]. Additional Important Information - The report emphasizes the importance of local developments in the semiconductor industry as a significant factor for investment decisions in SMIC and Hua Hong [1][3]. - The target prices for both companies reflect a bullish outlook based on anticipated market conditions and technological advancements [3][6]. - The report also highlights the potential conflicts of interest due to the firm's business relationships with the companies discussed [2].