Summary of the Investor Presentation: Greater China Semiconductors Outlook Industry Overview - **Industry Focus**: Semiconductors in Greater China - **Overall Industry View**: Attractive [2][4] Key Insights - **Top Investment Picks**: - **AI Segment**: TSMC (Top Pick), Winbond (Top Pick), Alchip, Aspeed, MediaTek, KYEC, ASE, FOCI, Himax, ASMPT [4] - **Non-AI Segment**: Novatek, OmniVision, Realtek [4] - **China Wafer Fabrication Equipment (WFE)**: NAURA Tech, AMEC, ACMR [4] - **Specialty Semiconductors**: Silergy, SG Micro, SICC, Yangjie [4] - **Market Dynamics**: - AI cannibalization may impact recovery in the second half of 2025 due to tariff costs [4] - A decline in semiconductor inventory days historically signals positive stock price appreciation [4] - The demand for AI semiconductors is expected to accelerate due to generative AI, influencing various verticals beyond the semiconductor industry [4] - Tech deflation is anticipated to stimulate demand for technology products [4] Financial Metrics and Valuation - **Valuation Comparison**: - TSMC's current price is 1,255.0 TWD with a target of 1,388.0 TWD, indicating an 11% upside [5] - UMC's current price is 41.1 TWD with a target of 48.0 TWD, indicating a 17% upside [5] - SMIC's current price is 63.0 HKD with a target of 40.0 HKD, indicating a -37% downside [5] - **P/E Ratios**: - TSMC: 27.7 (2024), 21.4 (2025e), 18.4 (2026e) [5] - UMC: 10.9 (2024), 15.6 (2025e), 11.5 (2026e) [5] - **EPS Growth**: - TSMC: 40% (2024), 29% (2025e), 17% (2026e) [5] - UMC: -23% (2024), -30% (2025e), 35% (2026e) [5] Supply Chain and Production Insights - **China's GPU Supply**: - The self-sufficiency ratio for domestic GPUs was 34% in 2024, expected to reach 82% by 2027 [26] - Local GPU revenue could grow to RMB 287 billion by 2027, driven by SMIC's leading node capacity [31] - **Capex Forecast**: - The top six companies' capital expenditures are forecasted to grow 62% YoY to RMB 373 billion [24] Additional Considerations - **AI Demand**: The DeepSeek technology is expected to drive inference AI demand, raising questions about the sufficiency of domestic GPU supply [4][21] - **Market Trends**: The semiconductor stock index has shown an upward trend, with non-AI semiconductor growth at only 10% YoY in 2024 [9][14] This summary encapsulates the critical insights and financial metrics from the investor presentation, highlighting the semiconductor industry's current landscape and future outlook in Greater China.

Investment Rating - Industry view is cautious [1] Core Insights - The report highlights a cautious outlook for the semiconductor industry, particularly in the context of AI and memory sectors, with a focus on potential recovery in the second half of 2025 impacted by tariff costs [7] - Long-term demand drivers include the reacceleration of AI semiconductor demand due to generative AI, which is expected to proliferate across various verticals outside the semiconductor industry [7] - The report indicates that the global semiconductor revenue peaked in the third quarter of 2024, with a forecasted decline in semiconductor exports from Korea since February 2025 [12][19] Summary by Sections Semiconductor Market Dynamics - The cyclical downturn is characterized by a shift from euphoria to pessimism, as indicated by the SOX Index performance [8] - Historical data shows that declines in semiconductor inventory days have historically signaled positive stock price appreciation [41] - The report notes that the domestic GPU supply chain may face dilution due to shipments of NVIDIA B30, impacting inferencing AI demand [7] Memory and Logic Cycles - Memory stock prices are seen as leading indicators for logic semiconductors, with the report suggesting that memory share price peaks lead logic semis [42][43] - The report forecasts a significant increase in HBM (High Bandwidth Memory) market size, projecting it to reach US$64 billion by 2027, with a CAGR of 107% from 2023 to 2027 [67] AI and Technology Trends - The report emphasizes the shift in value from hardware to application in the AI investment stack, indicating a growing focus on software and application development [73] - It is projected that local GPU revenue in China could grow to RMB 287 billion by 2027, driven by advancements in local manufacturing capabilities [90]