Core Viewpoint - The semiconductor market growth is driven by average selling prices (ASP) rather than shipment volumes, indicating that a recovery can only be confirmed when shipment volumes increase [2][3] Group 1: Market Trends - The global semiconductor market is projected to grow by 16% this year, reaching $732 billion, with a worst-case scenario of 15% growth and a best-case scenario of 19% [2] - By 2026, the market is expected to grow by 12%, reaching $813 billion, with a worst-case growth of 6% and a best-case growth of 18% [2] - There is a dichotomy in the market, with AI data centers thriving while non-AI markets remain weak [2][3] Group 2: Capital Expenditure and Pricing - Capital expenditure as a percentage of sales remains high at approximately 15%, compared to a long-term trend of 11% [3] - Average selling prices have stabilized at $1.76 in July after hitting a low of $1.11 in June 2022 [3] - The enthusiasm for compound semiconductors is waning, with significant investments in GaN wafer fabs in China surpassing those in SiC [3] Group 3: Geopolitical Factors - The U.S. government is considering imposing tariffs on semiconductors, potentially exceeding 25%, which adds uncertainty to the global semiconductor industry [5][6] - The Trump administration's policies have created a climate of uncertainty, affecting not only U.S. companies but also allies like South Korea and Japan [5][6] - The U.S. government is leveraging its position to pressure companies like Intel to increase investments while simultaneously restricting imports of semiconductor equipment to China [6][7] Group 4: Industry Sentiment - The semiconductor industry is experiencing a downturn, with a significant drop in the Business Sentiment Index (BSI) for the electronics and telecommunications sector [5] - Experts emphasize the need for calm and accurate judgment in the face of market volatility and government policies [8]

Investment Rating - The report assigns a "Buy" rating to the company, with a target price of HKD 52.55 for 2025, based on a 35x price-to-sales (P/S) ratio [4]. Core Insights - The company is a leading high-tech enterprise focused on the research and industrialization of GaN-on-Si technology, utilizing an IDM model that integrates chip design, epitaxy growth, chip manufacturing, and packaging [2]. - The global GaN power device market is projected to grow from CNY 3.2 billion in 2024 to CNY 50.1 billion in 2028, with a compound annual growth rate (CAGR) of 98.5%, driven primarily by applications in consumer electronics and electric vehicles [2][40]. Summary by Sections Investment Logic - The company has established deep collaborations with leading firms in various sectors, including lidar, data centers, 5G communications, and electric vehicle charging, achieving mass production of GaN power devices that range from low to high voltage (15V-1200V) [2]. - GaN power devices offer advantages such as high frequency, low loss, and cost-effectiveness, making them suitable for a wide range of applications [2]. Competitive Advantages - Cost Advantage: The company benefits from an 8-inch wafer production process, which is more cost-effective and efficient compared to the 6-inch products of most competitors. The company has achieved a manufacturing yield exceeding 95% as of 2024 [3]. - Capacity Advantage: The company has established production bases in Suzhou and Zhuhai, with a monthly capacity of 13,000 8-inch GaN power wafers, positioning it as the largest in the world [3]. - Customer and Technology Advantage: The company serves well-known brands in consumer electronics, data centers, and automotive sectors, with significant growth in automotive-grade product shipments and AI-related products [3]. Financial Forecast and Valuation - Revenue projections for 2025, 2026, and 2027 are CNY 1.32 billion, CNY 2.21 billion, and CNY 3.45 billion, respectively, with year-on-year growth rates of 59%, 67%, and 56% [4][8]. - The company is expected to reduce losses significantly in 2025 and 2026, with a forecasted net profit of CNY 238 million in 2027, representing a year-on-year increase of 265% [4][8].

Core Viewpoint - The global power semiconductor market is projected to reach 7.771 trillion yen by 2035, which is 2.3 times the size in 2024, driven by the long-term growth from electric vehicle (EV) adoption despite short-term inventory issues in 2024 [1][2]. Market Size and Growth Projections - The power semiconductor market is expected to reach 3.5285 trillion yen in 2025, with silicon power semiconductors accounting for 3.147 trillion yen. The market is anticipated to expand starting in 2026 after inventory normalization [1]. - The next-generation power semiconductor market is projected to reach 513.8 billion yen by 2025, with significant growth expected for GaN power semiconductors due to their ability to replace silicon semiconductors [2]. - By 2035, the market for next-generation power semiconductors is expected to reach 3.1981 trillion yen, with SiC power semiconductors projected to reach 2.9034 trillion yen [2]. Specific Semiconductor Types - SiC power semiconductors are expected to see an adoption rate exceeding 50% in electric vehicles by 2035, up from just over 10% in 2024 [2]. - The GaN power semiconductor market is projected to grow to 278.7 billion yen by 2035, with significant applications in AC-DC adapters and server power supplies [3]. - The market for GaN power semiconductors is expected to reach 58 billion yen by 2025, driven by production scale effects and price reductions [3]. Wafer and Component Market Trends - The power semiconductor wafer market is expected to reach 300.9 billion yen by 2025 and 911.8 billion yen by 2035, with SiC wafers projected to surpass silicon wafers in 2024 due to increased production from Chinese companies [5]. - The overall market for power semiconductor components is expected to reach 1.7408 trillion yen in 2023 and 615.2 billion yen by 2025 [5]. Manufacturing Equipment Market - The power semiconductor manufacturing equipment market is projected to reach 1.3234 trillion yen by 2035, with a forecasted size of 739.3 billion yen in 2025. A decline in automotive-related capital investment is expected to impact the market in 2025 [7].