2025-10-22 02:12Summary of Conference Call on Greater China Semiconductors Industry Overview - Industry: Greater China Semiconductors - Focus: Semiconductor foundry market, particularly SMIC and Hua Hong Key Points Demand and Growth Projections - AI GPU Demand: The proliferation of AI applications in China, supported by government policies, is expected to significantly boost domestic leading-edge foundry demand over the next two years [1][2] - Revenue Forecasts: Updated revenue forecasts for China AI GPU are Rmb113 billion for 2026 and Rmb180 billion for 2027, reflecting a 62% CAGR from 2024 to 2027 [2][20] Supply Dynamics - SMIC's Expansion: SMIC is expanding its leading-edge fab capacity, which is anticipated to alleviate equipment bottlenecks. The forecast includes a total capacity of 22kwpm for 7nm and under by 2025, increasing to 42kwpm by 2026 [1][10] - Local Supply: Local suppliers like Naura and AMEC are gradually replacing previously bottlenecked tools, enhancing China's ability to produce AI GPU chips [1][10] Competitive Landscape - Mature Node Demand: Demand for mature nodes remains weak, with oversupply in capacity. However, there is still demand from smartphone SoCs and autonomous driving semiconductors that could offset potential GPU demand weaknesses [3] - Hua Hong's Position: Despite raising wafer prices, Hua Hong's profitability appears weaker compared to SMIC and UMC, with an EBITDA margin of 30% in Q2 2025 compared to SMIC's 47% and UMC's 41% [3][9] Stock Recommendations - SMIC: Upgraded to Overweight (OW) with a price target of HK$80, reflecting strong domestic AI demand and improved gross margins [4][8] - Hua Hong: Downgraded to Underweight (UW) due to concerns over the sustainability of its mature node business and inventory build-up [4][9] Strategic Insights - Self-Sufficiency in Semiconductors: China's semiconductor self-sufficiency ratio is projected to rise to 30% by 2027, driven by advancements in local production capabilities and government support [52][60] - AI Localization: SMIC is positioned to benefit from strong domestic AI localization demand, supported by government initiatives and the need for advanced node manufacturing [89] Risks and Considerations - Market Risks: Potential risks include the possibility of local CSPs purchasing more AI chips from foreign vendors, which could impact SMIC's utilization rates and market share [94] - Performance Variability: The performance of local AI chips, particularly from Huawei, may face challenges compared to global competitors like NVIDIA [36][90] Additional Insights - Huawei's Developments: Huawei is advancing its AI chip capabilities with new product launches and improvements in interconnect bandwidth, which may enhance its competitive position in the market [35][37][38] This summary encapsulates the critical insights from the conference call regarding the semiconductor industry in Greater China, focusing on demand forecasts, supply dynamics, competitive positioning, and strategic recommendations for key players like SMIC and Hua Hong.