Summary of the Conference Call on China's Semiconductor Supply Chain Industry Overview - In 2Q25, China semiconductor chipmakers (fabless, IDM, foundry, OSAT) reported a revenue growth of 16-21% YoY, indicating a mild recovery in net profit margins (NPM) with fabless/IDM companies' average NPM increasing from 12% in 1Q25 to 13% in 2Q25. Foundry and OSAT suppliers' average NPM improved slightly from 4% to 5% [1][8] - Semiconductor equipment companies experienced a slowdown in sales growth from 42% YoY in 1Q25 to 28% in 2Q25, although their average NPM improved from 16% to 19% [1] - Silicon wafer suppliers, such as NSIG and Lion Electronics, continued to report losses in 2Q25 with NPM at -18% and -5%, respectively [1] Inventory Management - Notable inventory reduction was observed among Chinese semiconductor fabless companies in 2Q25, with inventory turnover periods for MCU, analog, and power discrete segments decreasing by 16-48 days QoQ [2] - Overall inventory levels in the China market remain higher than pre-2022 levels but are healthier compared to 2023-24, where days of inventory (DoI) were between 200-300 days [2] Demand and Supply Dynamics - The integrated circuit (IC) billing volume in China was reported at 12.6 billion units in July, reflecting a 10% YoY increase. This demand growth rebounded from a -1% contraction in June [3] - China's IC import volume grew by 12% YoY, while domestic manufacturing volume increased by 25% YoY. The netting off of a 17% export growth suggests a supply volume increase of 15% YoY on a 3-month moving average basis [3] - The trend of inventory digestion among Chinese chipmakers observed in 2Q25 may be moderating as supply growth has outpaced demand for two consecutive months since June [3] Pricing Trends - The global average unit price for NOR flash was reported at US$0.39 in July, down 6% MoM and 28% YoY, indicating continued price softness [4] - However, major Taiwan and China NOR flash suppliers reported normalized inventory levels, which may support price stabilization [4] - Specialty DRAM contract prices have seen significant increases in 3Q25, with DDR4 prices rising approximately 70% in July and 10% in August, while 4Gb DDR3 prices increased by 20% in July and 50% in August [4] Financial Performance Overview - In 2Q25, the fabless and IDM sectors saw over 20% YoY sales growth, while foundry, OSAT, and silicon wafer sectors grew in the mid to high teens [8] - Despite improvements in net profit margins across sectors, silicon wafer companies like NSIG and Lion Electronics continued to post net losses [8] Future Outlook - Consensus forecasts predict 15%-26% YoY sales growth for the semiconductor industry in 2026, with expectations for further improvement in net profit margins [9] - Specific companies such as SMIC and JCET are projected to see significant sales growth, with SMIC's sales expected to reach US$78.3 billion by 2026, reflecting a 16% YoY increase [9] Additional Insights - The semiconductor supply chain is experiencing a dynamic shift in supply and demand, with potential implications for inventory management and pricing strategies moving forward [3][4] - The recovery in profitability and sales growth across various segments indicates a positive trend for the semiconductor industry in China, despite ongoing challenges in specific areas such as silicon wafer production [1][8]

Core Insights - The memory market is expected to reach a record of $200 billion for the second consecutive year in 2025, driven by surging demand for AI training workloads in data centers, marking a strong rebound from the severe downturn experienced in 2022-2023 [2] - High Bandwidth Memory (HBM) is projected to dominate the market, with global HBM revenue expected to grow at an astonishing compound annual growth rate (CAGR) of 33% from 2024 to 2030, capturing an unprecedented 50% share of the DRAM market by 2030 [2] - The NAND industry continues to face headwinds due to weaker-than-expected consumer demand and rising inventory levels across the supply chain, prompting leading suppliers to implement aggressive supply-side adjustments [2] Market Dynamics - Major memory suppliers, including SK Hynix, Samsung, and Micron, are actively enhancing yields and expanding production capacity in anticipation of a shortage expected in 2025, intensifying competition in the high-capacity memory (HBM) market [6] - China is increasing its domestic memory manufacturing efforts to narrow the technology gap with global leaders, extending this strategy to personal computers and consumer electronics, thereby adding pressure to the global memory supply-demand landscape [6] Technological Innovations - Advanced packaging methods, such as CMOS bonding, are redefining memory innovations beyond planar scaling, with companies like Yangtze Memory Technologies achieving significant advancements in 3D NAND technology [7] - The transition to 3D DRAM architecture is seen as inevitable, with all major DRAM suppliers actively exploring various 3D integration pathways by 2025, including innovative unit architectures and advanced tool solutions to address unique manufacturing challenges [8]

Core Viewpoint - The company, Zhaoyi Innovation, plans to issue H-shares and list them on the Hong Kong Stock Exchange to enhance its global strategy and international brand image while improving its core competitiveness [1][2]. Group 1: H-Share Issuance - The company has convened meetings to approve the issuance of H-shares and plans to list them on the Hong Kong Stock Exchange [1]. - The issuance aims to accelerate overseas business development and deepen the company's global strategy [1]. - The company will consider the interests of existing shareholders and market conditions when determining the timing and window for the issuance [1]. Group 2: Regulatory Approval - The issuance and listing require approval from the company's shareholders and regulatory bodies, including the China Securities Regulatory Commission and the Hong Kong Stock Exchange [1][2]. - The company is currently discussing related work with intermediary institutions, but specific details of the issuance are yet to be finalized [2]. Group 3: Previous Fundraising Activities - Zhaoyi Innovation was listed on the Shanghai Stock Exchange in August 2016, raising a total of 581.50 million yuan, with a net amount of 516.53 million yuan after expenses [2]. - The company has conducted multiple fundraising activities, with a total of 5.88 billion yuan raised across three rounds [6].

Investment Rating - The report maintains a "Buy" rating for Giantec Semiconductor Corporation with a target price of RMB 104.70, indicating a potential upside of 40% from the closing price of RMB 75.00 as of May 13, 2025 [6]. Core Insights - Giantec's revenue and net profit for Q1 2025 reached RMB 2.61 billion and RMB 0.99 billion respectively, marking year-on-year growth of 5.60% and 94.71%, and quarter-on-quarter growth of 0.72% and 26.07% [1][2]. - The strong performance is attributed to the rapid growth in sales of DDR5 SPD and automotive EEPROM products, which offset declines in smartphone EEPROM and other segments [1][2]. - The gross profit margin (GPM) for Q1 2025 was 60.29%, an increase of 5.67 percentage points year-on-year, supported by effective cost control and a slight increase in R&D expenses [2]. Summary by Sections Financial Performance - For Q1 2025, Giantec achieved a historical high in both revenue and profit, with a net investment income of RMB 19 million from reduced holdings in Huahong Semiconductor [1]. - The company expects continued growth in SPD and automotive EEPROM sales, with new products like NOR flash memory contributing to revenue [1][4]. Product Outlook - The report anticipates that DDR5 SPD and automotive/industrial EEPROM will be key drivers for revenue growth and profitability in 2025, with stable pricing expected in these segments [3][4]. - The company is also looking to expand into high-value markets such as automotive electronics and industrial control for NOR flash memory [3]. Valuation Metrics - The projected net profits for 2025, 2026, and 2027 are RMB 4.71 billion, RMB 6.48 billion, and RMB 8.70 billion respectively, with a price-to-earnings (PE) ratio of 35 times for 2025 [4][10]. - The report highlights a significant improvement in return on equity (ROE), expected to reach 19.32% in 2025 [10].

Core Viewpoint - The article discusses the evolution and future of alternative and persistent memory technologies, highlighting the competition among various types of memory to become mainstream in the semiconductor industry [2][3][6]. Group 1: Historical Context - For the past 40 years, semiconductor memory has evolved from SRAM, DRAM, EPROM, and EEPROM to include newer technologies like FRAM, MRAM, ReRAM, and PCM [2][3]. - NAND flash memory has been a cornerstone of non-volatile storage, but it faces limitations at the 15nm node, leading to the development of 3D NAND variants [7][8]. Group 2: Current Developments - Recent advancements in memory technologies include the emergence of microcontrollers utilizing MRAM and FRAM, with companies like NXP and Texas Instruments leading the way [6][10]. - The collaboration between NXP and TSMC aims to develop MRAM-based microcontrollers for the automotive market in 2023 [6]. Group 3: Challenges and Limitations - The transition to alternative memory technologies faces economic challenges, as the costs associated with these new technologies are currently higher than traditional NAND and DRAM [8][10]. - The integration of new memory types into existing systems is complicated by the need for additional on-chip SRAM, which increases costs and complexity [5][10]. Group 4: Future Predictions - Experts predict that it may take around ten years for alternative memory technologies to replace flash and SRAM in embedded applications due to slow development in microcontroller technology [10]. - The transition to alternative memory in external NAND flash chips and SDRAM is expected to be delayed, but once it begins, it may accelerate quickly [10].