Investment Rating - The report maintains an "In-Line" industry view for Greater China Technology Semiconductors [6]. Core Insights - China's AI GPU self-sufficiency is projected to increase from 34% in 2024 to 82% by 2027, with the total addressable market (TAM) for cloud AI expected to grow at a CAGR of 28% to reach US$239 billion by 2027, with China accounting for approximately US$48 billion [2][17]. - The overall semiconductor self-sufficiency ratio in China is currently at 24%, up from 20% in 2023, driven by government subsidies, inventory digestion, and capacity ramp-up in memory and leading node products [3][11]. - Local GPU suppliers like Huawei and Cambricon are primarily supported by SMIC, which faces capacity expansion challenges [2][18]. Summary by Sections AI GPU Self-Sufficiency - The self-sufficiency ratio for AI GPUs in China is estimated at 34% for 2024 and expected to rise to 82% by 2027, with significant growth in the cloud AI market [2][17]. - The TAM for cloud AI is projected to grow to US$48 billion in 2027, with China expected to capture 20% of global demand [2][17]. Semiconductor Market Overview - China's semiconductor market was valued at approximately US$183 billion in 2023, with local companies generating US$43 billion in revenue, marking a 36% increase from US$32 billion in 2023 [3]. - The self-sufficiency ratio for semiconductors in China is currently at 24%, reflecting a 4 percentage point increase from the previous year [3][11]. Localization Progress - Significant advancements have been made in memory, image sensors, and power semiconductors, while equipment and EDA progress has been slower than expected [8]. - Local vendors in memory and power semiconductors are benefiting from the growth in electric vehicles and gaining market share over global competitors [8]. Stock Implications - The report is equal-weight on SMIC and Empyrean Technology, noting that while SMIC is crucial for local AI chip production, potential Nvidia acquisitions could impact domestic GPU market share [4]. - Positive outlook on China wafer fab equipment makers like Naura, AMEC, and ACM Research due to local foundry and memory capacity expansion [4].