Summary of TSMC's Capex and Investment Insights Industry Overview - The report focuses on the semiconductor industry, particularly TSMC (Taiwan Semiconductor Manufacturing Company) and its capital expenditure (capex) implications for semiconductor capital equipment (semicap) stocks and the broader semiconductor market [2][15]. Key Insights on TSMC 1. **Market Share**: TSMC accounts for approximately 15-25% of the global wafer fab equipment (WFE) market, while China holds a larger share of 30-40% [3][16]. 2. **Capex Allocation**: A significant portion of TSMC's capex is directed towards infrastructure and non-wafer-based equipment, such as packaging and testing, rather than solely wafer fabrication [3][21]. 3. **Wafer-Level Packaging**: TSMC dominates the wafer-level package equipment market, contributing 60-80% of this segment, particularly in high-bandwidth memory (HBM) and logic manufacturing [4][30]. 4. **Long-Term Capex Trends**: TSMC's capex decisions are more indicative of long-term growth rather than short-term revenue spikes, with a correlation coefficient (R²) of only 0.1-0.2 for 1-2 year horizons, improving to ~0.4 for 3 years and ~0.5 for 4 years [5][36]. 5. **Efficiency Comparison**: TSMC is structurally deflationary to the WFE market, spending 30-35% less capex and 10-40% less on WFE compared to Intel for equivalent capacity, indicating a significant efficiency advantage [7][78]. Investment Implications 1. **Outperform Rating**: TSMC is rated as "Outperform" with a price target of NT$1,260.00, reflecting confidence in its long-term growth prospects [11]. 2. **Comparative Analysis**: TSMC's revenue is 3.5-6.5 times that of Intel Foundry, while its capex is only 1-2 times, suggesting a much lower capex intensity (capex/revenue ratio) of 1/4-1/3 compared to Intel [78][82]. 3. **Market Dynamics**: The report highlights the impact of technology complexity and onshoring trends, which are expected to keep the overall WFE/semi ratio elevated, with rising capex per wafer [8][86]. Additional Considerations - **Geopolitical Factors**: The report notes the influence of geopolitical factors and external shocks, such as the Global Financial Crisis and COVID-19, on TSMC's capex decisions and market conditions [5][36]. - **Infrastructure Investment**: TSMC's strategy involves building infrastructure in phases to manage risks and enhance operational efficiency, particularly in new sites like Arizona [60][68]. - **Future Capacity Planning**: TSMC's approach to capacity planning includes significant investments in advanced packaging and technology upgrades, which are crucial for maintaining its competitive edge in the semiconductor market [34][60]. This comprehensive analysis provides valuable insights for investors looking to understand TSMC's strategic direction and its implications for the semiconductor industry.

Investment Rating - The report maintains an "Overweight" (OW) rating on Naura, AMEC, and ACMR, with revised target prices reflecting positive outlooks for these companies [6][37][55]. Core Insights - The outlook for China's wafer fab equipment (WFE) market remains strong, driven by better-than-expected demand from logic foundries and ongoing localization efforts [1][2]. - The total addressable market (TAM) forecast for China WFE has been raised from $36.6 billion (down 12% year-over-year) to $40.3 billion (down 3% year-over-year) for 2025, and from $35.1 billion (down 4% year-over-year) to $36.2 billion (down 10% year-over-year) for 2026 [3][9]. - China is expected to continue gaining market share in WFE, with approximately 25% of foundry capital expenditures allocated to domestic WFE in 2025, up from 20% in 2024 [4]. Market Demand and Supply Dynamics - Strong demand for logic foundries in China is anticipated in the second half of 2025, with expectations of increased spending related to AI applications [2][9]. - Despite concerns regarding oversupply in mature nodes, the report suggests that government initiatives may prioritize localization over economic rationale in the second half of 2025 [5]. - The report indicates that imports of semiconductor equipment into China may recover starting in July 2025, following a decline in early 2025 [21]. Company-Specific Developments - Naura has expanded its product portfolio, launching new ion implant equipment, and is expected to benefit from the increasing localization of semiconductor manufacturing in China [4][37]. - The report highlights that leading Chinese WFE players are likely to capture larger shares of the market due to their expanding product pipelines and advanced R&D capabilities [6][37]. - Naura's revenue growth is projected to be supported by increased capital expenditures from logic foundry and memory customers in 2025 [37][51]. Financial Projections - The report revises Naura's earnings estimates upward for 2025-2027, reflecting strong demand and market share gains [51][52]. - Naura's net sales are projected to increase from Rmb 41.88 billion in 2025 to Rmb 61.42 billion by 2027, with corresponding net income growth [63][66].