Investment Rating - The industry investment rating is "Outperform the Market" [1][38] Core Views - Huahong Semiconductor reported impressive results for Q3 2025, achieving record highs in multiple key operational metrics [3] - The semiconductor industry is entering a high prosperity cycle driven by AI demand and domestic substitution [6] - The global semiconductor market is showing strong recovery, with Q3 2025 global sales reaching $208.4 billion, a 15.8% increase quarter-on-quarter and a 25.1% increase year-on-year [6] Summary by Sections Company Performance - Huahong Semiconductor achieved sales revenue of $635.2 million in Q3 2025, marking a historical high with a year-on-year growth of 20.7% and a quarter-on-quarter growth of 12.2% [4] - The gross margin for Q3 improved to 13.5%, exceeding company guidance, with a year-on-year increase of 1.3 percentage points and a quarter-on-quarter increase of 2.6 percentage points [4] - The overall capacity utilization rate reached 109.5% by the end of Q3, up 1.2 percentage points from the previous quarter, indicating full operational capacity [4] Market Trends - The embedded non-volatile memory revenue grew by 20.4% year-on-year, driven by increased demand for MCU products, while standalone non-volatile memory saw a remarkable revenue surge of 106.6% year-on-year [4] - Consumer electronics remained the largest market for Huahong Semiconductor, contributing $407.5 million in sales, accounting for 64.1% of total revenue, with a year-on-year growth of 23.2% [4] - The semiconductor industry is experiencing a significant increase in advanced process demand, with expectations for global advanced process capacity to grow at a CAGR of 14% [6] Investment Recommendations - It is recommended to focus on key companies in the semiconductor manufacturing sector, such as SMIC and Huahong Semiconductor, as well as the storage industry chain [6]

Core Insights - Huawei, Xiaomi, and Vivo lead the Chinese smartphone market with respective market shares of 17.6%, 17.6%, and 16.4%, collectively accounting for over half of the market [5] - Huawei is experiencing growth in average selling price (ASP) due to the easing of self-developed chip supply chain constraints and strong performance of its Mate and Pura series [6][9] - The global average smartphone price is projected to rise from $370 in 2025 to $412 in 2029, indicating a trend towards higher-end devices [6] Market Performance - In the first eight weeks of Q3 2025, China's smartphone sales declined by 2% year-on-year, but Huawei maintained growth through a diverse product lineup, including the successful Nova 14 series [9] - Huawei's market share in China increased from 15% to 18.1% in Q2 2025, driven by strong sales of the Nova 14 series and significant price reductions on high-end models [16] - The overall smartphone market in China is entering an adjustment period, with Huawei and Apple being the main growth drivers in Q2 2025 [25] High-End Market Dynamics - In H1 2025, Huawei ranked third in the global high-end smartphone market, benefiting from a loyal consumer base and strong offline sales [14] - The high-end smartphone segment (priced over $600) saw Huawei's unit sales share increase, reflecting its competitive positioning in this lucrative market [16] Future Outlook - Counterpoint Research anticipates that Huawei will be a key player in the global smartphone market, with improved supply chain capabilities potentially allowing for greater market share in mid-range segments [34] - The company is expected to lead the Chinese market in Q1 2025, with a market share of 19.4%, marking its highest record since 2021 [38] - Huawei's dominance in the foldable smartphone market is reinforced, capturing half of the sales in this category in China [44]

Core Viewpoint - The Chinese smartphone market experienced a 2% year-on-year decline in sales due to significant drops in vivo and Honor's sales, while OPPO and Huawei showed resilience and growth in the mid-range segment [4][7]. Market Performance - In the first eight weeks of Q3 2025, the overall smartphone sales in China decreased by 2%, primarily influenced by the poor performance of vivo and Honor [4][7]. - OPPO achieved the strongest growth due to a well-rounded product lineup, particularly the Reno 14 series, which combines flagship features with mid-range pricing [6][7]. - Huawei maintained positive growth through supply chain optimization and continued focus on the mid-range market, with the Nova 14 series performing well since its launch [6][7]. - Apple and Xiaomi experienced slight declines in sales, with Apple's market share dropping by one percentage point, although the iPhone 16 Pro series showed stable performance [6][7]. Future Outlook - Counterpoint anticipates a slight decline in smartphone sales for Q3 2025, with overall performance for the year expected to remain flat [6][7]. - The average battery capacity of Chinese smartphones is the highest globally, with an 11% year-on-year increase noted in May 2025 [6].

Group 1 - The core viewpoint of the report indicates that the Chinese smartphone market experienced a 2% year-on-year decline in shipment volume for Q2 2025, while maintaining overall market stability [1] - Huawei and vivo both hold the top market share at 18%, reflecting a stable competitive landscape among leading brands, with companies actively responding to market changes through product innovation and strategic adjustments [1] Group 2 - Huawei's market share reached 18% in Q2 2025, showing a slight decrease of 1 percentage point from Q1 2025 but a 3 percentage point increase compared to Q2 2024, driven by strong demand for the newly launched Nova 14 series [3] - Vivo also achieved a significant market share increase to 18%, with a 4 percentage point rise from the previous quarter, although it experienced a slight year-on-year decline of 1 percentage point due to overall market conditions [3] - OPPO maintained a stable market share of 16%, with a 1 percentage point increase from the previous quarter, showing consistent brand performance year-on-year [3] Group 3 - Xiaomi's shipment volume grew by 4% year-on-year, attributed to an early release of subsidy plans that met market demand [3] - Apple's shipment volume increased by 1% year-on-year, primarily due to the introduction of the iPhone 16 series with significant price reductions, which lowered the purchasing threshold for consumers [3]

Group 1 - Huawei regained the top position in China's smartphone market in Q2 2025 with a shipment of 12.2 million units, a year-on-year increase of 15%, capturing an 18% market share [1] - Vivo followed closely with 11.8 million units shipped, holding a 17% market share, but experienced a 10% decline compared to 13.1 million units in Q2 2024 [1] - OPPO (including OnePlus) ranked third with 10.7 million units shipped, representing a 16% market share, while Xiaomi achieved 10.4 million units, marking its eighth consecutive quarter of year-on-year growth [1] Group 2 - Apple ranked fifth with 10.1 million units shipped, reflecting a 4% year-on-year growth, but faced initial growth challenges due to high pricing of the new iPhone 16 series not meeting national subsidy standards [2] - The overall smartphone market in mainland China saw a 4% year-on-year decline in Q2, attributed to the diminishing effects of earlier subsidy policies [2] - Canalys expects moderate growth in the Chinese smartphone market for the year, with potential to surpass global market growth in 2025, as consumer confidence is anticipated to recover in the second half of the year [2]