Summary of China Semiconductor Equipment Import Analysis Industry Overview - The report focuses on the semiconductor production equipment (SPE) industry in China, particularly analyzing import trends and demand dynamics in major cities like Shanghai and Beijing [1][4]. Key Highlights - **November 2025 SPE Imports**: Total SPE imports normalized to **US$2.1 billion**, reflecting a **10% YoY decrease** and a **29% MoM decline** from **US$2.98 billion** in October [1]. - **Year-to-Date (YTD) Performance**: Combined import demand for the first eleven months of 2025 reached **US$30.5 billion**, marking a **5% YoY increase** [1]. - **Regional Demand**: Shanghai and Beijing accounted for **67%** of total SPE imports in November, with Shanghai's imports at **US$902 million** (+179% YoY) and Beijing's at **US$525 million** (+41% YoY) [1]. Equipment Type Analysis - **Lithography Equipment**: - November litho imports totaled **US$707 million**, down **15% YoY** and **32% MoM**. However, litho accounted for **33%** of total imports, above the typical range of **20-25%** [2]. - Strong demand for litho suggests sustainable expansion activities in the long term [2]. - **Deposition Equipment**: Imports reached **US$414 million**, up **8% YoY**, driven by other deposition (+72% YoY) and CVD (+24% YoY) [2]. - **Etch Equipment**: Imports were **US$428 million**, down **32% YoY** [2]. Import Sources - The Netherlands and Japan were the top exporters to China, holding **29%** and **28%** market shares, respectively [2]. - Imports from the US accounted for only **4%** of total SPE imports [2]. Major Import Transactions - In November, Shanghai imported **nine litho tools** from the Netherlands for a total of **US$494 million** (average selling price of **US$55 million** per unit) [3]. - Accumulated litho imports from the Netherlands in Shanghai, Beijing, and Guangdong reached **US$3.2 billion**, with Shanghai showing a **71% YoY increase** [3]. Future Outlook - **WFE Spending Projections**: Expected growth of **10%** in 2026 and **1%** in 2027, following an **8%** growth in 2025, driven by advanced logic and memory capacity expansion projects [4]. - **Top Picks**: NAURA is highlighted as a key buy, with buy ratings also on AMEC and ACMR Shanghai [4]. Risks and Considerations - **Downside Risks**: Include potential macroeconomic downturns, geopolitical tensions, and slower-than-expected R&D progress [48]. - **Upside Risks**: Faster-than-expected demand recovery and aggressive capex plans from domestic fabs could enhance market conditions [48]. Conclusion - The analysis indicates a mixed but cautiously optimistic outlook for the semiconductor equipment sector in China, with significant regional demand and potential for growth in WFE spending, despite existing risks.

Summary of Conference Call on China's Wafer Fab Equipment (WFE) Market Industry Overview - The conference call focused on the **China Wafer Fab Equipment (WFE)** market, highlighting the demand forecast and revenue growth for Chinese semiconductor companies. Key Points Demand Forecast - The WFE spending estimates for China in **2025** and **2026** have been raised by **12%** and **11%** respectively, now projected at **US$37.55 billion** and **US$39.4 billion** from previous estimates of **US$33.5 billion** and **US$35.5 billion**, indicating **1.5%** and **4.9%** year-over-year growth in those years [1][8] - Initial expectations for **2027** indicate a flat demand at **US$39.4 billion** [1] - Factors supporting the demand include: - Stronger-than-expected import demand for semiconductor equipment, with a **2%** year-over-year increase [1] - Continued capacity expansion in **28nm** and below node logic fabs, including companies like **SMIC** and **HLMC** [1] - Optimistic outlook from Chinese vendors regarding end-demand [1] Revenue Growth for Chinese Companies - Revenue growth estimates for three covered Chinese WFE companies have been raised to **39%** and **24%** year-over-year for **2026** and **2027** respectively, with combined WFE revenue expected to reach **US$11.9 billion** in **2027**, implying a **30%** domestic market share, up **17 percentage points** from **2024** [3] - The growth is attributed to improved technology maturity among domestic vendors and increasing demand from local fabs facing challenges in accessing US equipment [3] Company-Specific Insights - **NAURA**, **AMEC**, and **ACMR** are identified as top picks, with earnings forecasts for **2026-2027** raised by **1-4%** to reflect a more optimistic view on China's WFE demand [4] - Price targets for these companies have been adjusted: - **NAURA**: from **Rmb419.60** to **Rmb470.00** [4] - **AMEC**: from **Rmb235.00** to **Rmb255.50** [4] - **ACMR**: from **Rmb137.50** to **Rmb163.50** [4] Market Dynamics - The demand for WFE in **H225** is expected to be solid, with projections of **US$18-19 billion** driven by strong imports and domestic revenue growth of **30%** year-over-year in the same period [2] - The anticipated growth in **2026** is supported by resuming solid growth in Chinese memory demand, particularly from **CXMT** and **YMTC** [2] Import Data and Capacity Expansion - China's total semiconductor production equipment (SPE) imports reached **US$18 billion** in the first seven months of **2025**, marking a **2%** year-over-year increase, primarily driven by capacity expansion in **Guangdong Province** [10] - The import demand from **Shanghai** accounted for **25%** of total imports, indicating significant regional activity [10] Financial Performance - Major Chinese WFE companies reported a combined revenue of **Rmb26.6 billion** in **H125**, reflecting a **32.8%** year-over-year increase [13] Additional Insights - The report emphasizes the importance of local companies gaining market share due to geopolitical factors affecting access to foreign technology [3] - The overall sentiment is optimistic regarding the sustainability of WFE demand in China, countering skepticism from some investors [1][2] This summary encapsulates the key insights and projections regarding the WFE market in China, highlighting growth opportunities and the competitive landscape among domestic companies.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Semiconductor Production Equipment (SPE) in Japan - **Key Company Mentioned**: TSMC (Taiwan Semiconductor Manufacturing Company) Core Insights and Arguments - **Elimination of China-made SPE**: TSMC is reportedly planning to eliminate China-made semiconductor production equipment from its advanced processes, particularly the N2 process, as a response to potential US government restrictions, including the China EQUIP Act [3][7][8] - **Impact on Japanese SPE Makers**: If the report is accurate, this move could positively impact Japanese SPE manufacturers such as SCREEN Holdings and Kokusai Electric, allowing them to expand their market share against Chinese competitors like AMEC and Mattoson Technology [3][8] - **Competition Dynamics**: Tokyo Electron is highlighted as a competitor in etching systems against AMEC and Mattoson Technology. The report suggests that Japanese firms may not currently compete with Chinese manufacturers in the Taiwan market for ashing systems and wafer CVD [7][8] - **Technological Advancements**: The report acknowledges that China-made SPE, including cleaning systems and vertical heat treatment furnaces, have been improving in performance, which poses a potential threat to Japanese firms [8] Additional Important Information - **Market Sentiment**: The overall view of the semiconductor production equipment industry in Japan is considered attractive, indicating a positive outlook for investment opportunities [5] - **Analyst Coverage**: The report is prepared by Morgan Stanley MUFG Securities, with analysts Tetsuya Wadaki and Suzune Tamura providing insights into the semiconductor sector [4][5] - **Unconfirmed Reports**: The information regarding TSMC's elimination of China-made SPE has not been officially confirmed, and the analysts express caution regarding the veracity of the media reports [3][8]