APAC Tech: Semiconductors Memory: Kioxia CY4Q24 read-across; disciplined capex and 2H25 NAND recovery in-line with our view On February 14, Japanese NAND producer Kioxia (Not Covered) reported its CY4Q24 (FY3Q24 or December quarter) earnings, and we provide read-across to our covered Korean memory suppliers, SK Hynix (Hynix) and Samsung Electronics (SEC). Kioxia's CY4Q24 NAND results in-line with SEC/Hynix and outlook of recovery in 2H in-line with our view CY4Q24 results: Directions of NAND pricing, bit sh ...

更多资料加入知识星球：水木调研纪要 关注公众号：水木纪要 Flash | 17 Feb 2025 15:38:42 ET │ 9 pages China Internet Positive Implications From Industry Leaders Meeting With President Xi CITI'S TAKE We see some positive implications from the highly discussed meeting between President Xi and leading industry executives held in Beijing on Feb 17th. 1) The decision to call for such a meeting likely indicates the importance of technology innovation and the contribution of private enterprises to the development and growth of China's economy; ...

更多资料加入知识星球：水木调研纪要 关注公众号：水木纪要 17 February 2025 Commodity Economic Comment Economics Trump policies drive more commodity market fragmentation ◆ A consequence of rapidly shifting and uncertain US trade policies under the new Trump administration is that commodity markets are fragmenting. This has been most vivid recently for metals such as copper, aluminium and gold, where a wide premium has opened up between US and offshore prices. It reflects that businesses are seeking commodity supply certainty, but that t ...

更多资料加入知识星球：水木调研纪要 关注公众号：水木纪要 February 16, 2025 04:10 AM GMT M Update HK/China Transportation & Infrastructure | Asia Pacific Week in Review (Issue 7-25) Week in review: BCIA FY24 preliminary results; soft post-CNY container shipping spot market . BCIA miss on DTA reversal: BCIA announced a net loss of Rmb1.35-1.65bn, much worse than the market expectation of a Rmb500-700mn loss. We view this result as a minor negative, as a significant increase in tax expense was a negative surprise. We estimate ~Rmb2bn cum ...

Summary of TSMC Conference Call Company and Industry - **Company**: TSMC (Taiwan Semiconductor Manufacturing Company) - **Industry**: Semiconductor Manufacturing Key Points and Arguments 1. Expansion of US Fabs - TSMC plans to expand its Arizona facilities to include up to 6 Fabs over the next several years, with 3 already announced (Fab 1 - N4, Fab 2 - likely N3, and Fab 3 - A16/A14) - Potential for an additional Fab 5 and an advanced packaging Fab 4, leading to a capex exceeding $100 billion in the US over the next 5-10 years, significantly higher than the $65 billion announced for Fab 1-3 in April 2024 [4][8] 2. Support from the US Chips Act - Continued support from the Chips Act, particularly in the form of Investment Tax Credits (ITC), is crucial for TSMC's expansion plans - The ITC, which credits back 25% of qualified capex, is deemed more important than upfront grants due to TSMC's healthy free cash flow position [4][8] 3. Tariff Threats - President Trump has threatened tariffs of 25-100% on semiconductor exports to the US, which could significantly impact TSMC and its customers - TSMC's direct exports to the US are minimal (7% of Taiwan's US exports), but indirect exports could have a larger economic impact - TSMC is expected to pass on tariffs to customers, but this could lead to cost inflation and negatively affect unit growth [4][8] 4. R&D Expansion in the US - TSMC may consider minor R&D expansions in the US, similar to its operations in Japan, but centralized R&D in Taiwan remains a key differentiator - Close cooperation between R&D and manufacturing is essential for leading-edge process ramp, which is challenging to achieve overseas [5][6] 5. Joint Ventures and Acquisitions with Intel - Speculation exists about TSMC participating in a joint venture with Intel or acquiring Intel Fabs, but TSMC management has indicated this is not a preferred route due to differences in Fab layouts and organizational culture - Such actions would require strong financial subsidies and commitments from the US government [6][8] 6. Sharing Process Know-How with Intel - Proposals to share TSMC's process know-how with Intel are considered unlikely, as TSMC is expected to protect its intellectual property vigorously [6] 7. Stock Price Implications - TSMC's stock is expected to react neutrally to positive announcements regarding US capacity expansion, with potential dilution in gross margins that should diminish over time - Any joint venture or operational control of Intel Fabs is likely to be viewed negatively in the short term due to significant P&L impacts [9][10] 8. Investment Thesis and Valuation - TSMC is rated as "Overweight" with a price target of NT$1,500, supported by strong growth levers from its near-monopoly position in AI accelerators and ongoing technology leadership - Risks include potential market share losses to competitors like Samsung and a challenging foundry competitive landscape [10][11][13] Additional Important Content - TSMC's pricing power is expected to lead to strong gross margin expansion, and the company is likely to become a larger customer for Intel in the next 3-5 years [11][12]

Summary of TSMC Conference Call Company Overview - **Company**: TSMC (Taiwan Semiconductor Manufacturing Company) - **Industry**: Semiconductors - **Market Cap**: NT$27,484,964 million [7] - **Stock Rating**: Overweight [7] - **Price Target**: NT$1,388.00, representing a 31% upside from NT$1,060.00 as of February 14, 2025 [7] Key Points and Arguments US Fab Expansion - TSMC's decisions regarding US fab expansion will prioritize customer needs and shareholder value rather than supporting Intel [2][3] - TSMC management previously stated they would not consider a joint venture (JV) in the US, unlike in Japan and Europe, due to existing business advantages in leading-edge technology [4] - TSMC is not interested in acquiring Intel's US fabs, as they expect significant business from Intel as an IDM customer [5] R&D and CoWoS Capacity - There is skepticism about the necessity of moving R&D to the US, given the strong R&D capabilities of Intel and IBM [9] - TSMC's CoWoS (Chip on Wafer on Substrate) capacity in the US will depend on key customer needs, with potential cost-sharing arrangements [10] - TSMC has partnered with Amkor for CoWoS in the US, which may address local production demands [10] Market Dynamics and Financial Outlook - TSMC has invested US$37 billion in R&D over the past decade, contributing to its competitive edge [11] - The company anticipates that US tariffs could impact long-term margins, but remains optimistic about growth driven by AI demand and its technological leadership [11][17] - Inventory corrections are expected to persist into the second half of 2024, with a potential increase in outsourcing from Intel's CPU business in 2025-2026 [17] Risks and Considerations - Potential headwinds include the impact of US tariffs and geopolitical issues, which may act as a stock overhang until further clarifications are provided [11] - TSMC's gross margin is projected to remain above 53% in the long term, with pricing strategies for large customers being a key factor [17] Additional Insights - TSMC's growth strategy is closely tied to its relationships with key partners and customers, emphasizing the importance of shareholder benefits in decision-making [11] - The semiconductor industry is experiencing a shift, with TSMC maintaining a strong market share in leading-edge foundry services despite potential demand weaknesses [17] This summary encapsulates the critical insights from TSMC's recent conference call, highlighting the company's strategic direction, market positioning, and financial outlook.

Summary of Wanhua Chemical (600309.SS) Conference Call Company Overview - Wanhua Chemical is the global leader in MDI production with a total capacity of 4.1 million tonnes as of mid-2024, with facilities in Ningbo, Yantai, Fujian, and Hungary [23][12][10]. Industry Context - A petition was filed for anti-dumping duties on US MDI imports from China, which could impact Wanhua significantly as the US is China's largest MDI export market, accounting for 22% of total exports [2][4]. - Rising protectionism is identified as a risk for Wanhua due to China's increasing reliance on exports to manage domestic surplus [2][25]. Financial Performance - The company reported a net profit of Rmb 16,234 million in 2022, which increased to Rmb 16,816 million in 2023, but is projected to decline to Rmb 13,763 million in 2024 [5][6]. - Earnings per share (EPS) growth is expected to be negative in 2024 (-18.2%) but recover slightly in 2025 (3.5%) and 2026 (10.0%) [5][6]. - The target price for Wanhua Chemical shares is set at Rmb 64, reflecting a 12x price-to-earnings ratio based on 2026-27 estimates [4][26]. Market Dynamics - Domestic MDI prices increased by Rmb 600-700 per tonne (3-4%) post-Chinese New Year due to re-stocking and low inventory levels [2]. - However, the company faces challenges with non-PU chemicals struggling at low pricing levels, which could lead to further softening of earnings in Q4 2024 [2][4]. Economic Outlook - The forecast for US natural gas prices suggests a rise to $4.2-$5.0 per mmbtu in 2025-26, which may affect Wanhua's profitability from its new mixed feed cracker [3]. - The company is expected to experience a decline in return on equity (ROE) due to increased market fragmentation and competition in the functional materials sector [25]. Risks and Concerns - Key downside risks include execution risks in new business ventures, lower-than-expected MDI spreads due to weak demand, and potential price reductions by competitors to gain market share [28]. - The potential for increased tariffs on US imports of propane could disproportionately affect Wanhua compared to its peers [25][4]. Conclusion - Wanhua Chemical is currently rated as a "Sell" due to anticipated declines in earnings and the impact of external market pressures, including trade tensions and domestic oversupply issues [4][25].

Summary of Xiaomi (1810.HK) Conference Call Company Overview - **Company**: Xiaomi Corporation - **Ticker**: 1810.HK - **Industry**: Technology, specifically smartphones and IoT products Key Financial Highlights - **4Q24E Results**: Expected to beat expectations with adjusted net income forecasted at RMB 6.8 billion, 19% above consensus [1][2] - **Revenue Forecast**: Anticipated total revenue of RMB 106 billion, representing a 15% quarter-over-quarter (QoQ) increase and a 45% year-over-year (YoY) increase [2] - **Smartphone Sales**: Projected to grow by 13% YoY to RMB 49.9 billion, driven by a 5% increase in shipments and a 7% increase in average selling price (ASP) [2] - **IoT Revenue**: Expected to reach RMB 29.6 billion, a 45% YoY increase, supported by subsidies [2] - **Internet Revenue**: Anticipated to rise 15% YoY to RMB 9.1 billion due to increased advertising and pre-installation income [2] Gross Margin Insights - **Overall Gross Margin**: Expected to be 21.0%, up 0.6 percentage points QoQ [2] - **Smartphone Gross Margin**: Forecasted to stabilize at 12.0%, reflecting a 0.3 percentage point increase QoQ due to lower memory prices [2] - **IoT Gross Margin**: Estimated at approximately 20.0% [2] - **Internet Gross Margin**: Expected to be around 76.0% [2] Market Position and Performance - **Smartphone Market Share**: Xiaomi achieved a 13% global market share with 42.7 million shipments in 4Q24, a 4.8% YoY increase [2] - **China Market Share**: In China, Xiaomi's share reached 16% with 12.2 million units shipped, a 28.4% YoY increase [2] Future Outlook and Catalysts - **Target Price Increase**: Target price raised by 26% to HK$51.7 based on improved growth and gross margin outlook across all segments [1][3] - **Upcoming Products**: Anticipated catalysts include the launch of Mi 15 Ultra, SU7 Ultra, and AI smart glasses [1] - **EV Segment**: Forecasted to contribute RMB 17.4 billion in revenue in 4Q24E with a gross margin of 20% [8] Revised Projections - **Smartphone Shipments**: Revised forecast for shipments to reach 168 million in 2024E, with gross margins improving due to high-end models and better cost control [9] - **IoT Revenue Growth**: Increased growth projections to 28% in 2024E, supported by consumer electronics subsidies [9] - **EV Shipments**: Revised target for EV shipments to 137,000 in 2024E, reflecting strong demand [9] Valuation Metrics - **Market Capitalization**: Approximately HK$1,122.3 billion (US$144.2 billion) [3] - **Expected Total Return**: 15.7% based on the new target price [3] - **Valuation Methodology**: Sum-of-the-parts (SOTP) valuation based on 20x core business earnings and 1.0x EV sales [22] Risks - **Competitive Pressures**: Risks include increased competition in the smartphone market and potential challenges in maintaining market share against rivals like Huawei [23] - **Cost Pressures**: Rising expenses related to new store expansions and interest rate increases could impact profitability [23] This summary encapsulates the key points from the conference call regarding Xiaomi's financial performance, market position, future outlook, and associated risks.

Summary of the Conference Call on China's AI Development Industry Overview - The report focuses on the **Artificial Intelligence (AI)** industry in **China** and its economic implications. Key Points and Arguments 1. **Economic Impact of AI**: In 2023, it was estimated that AI could raise labor productivity and potential GDP in China by **9%**, which has been revised down to **8%** due to the large share of workers in less-exposed, physically intensive occupations [5][23][10]. 2. **Generative AI's Role**: The main economic impact from Generative AI is expected to come from task automation, driving labor cost savings and productivity increases. However, the overall uplift in China will be smaller compared to more developed economies like the US [5][10]. 3. **Faster Adoption Timeline**: Recent developments, including the emergence of **DeepSeek** as a global competitor, suggest that AI adoption in China will occur faster than previously anticipated. AI is expected to start raising potential growth in China by **2026**, providing a **0.2-0.3 percentage point** uplift to annual GDP growth by **2030** [4][10][19]. 4. **AI-Related Spending**: AI-related spending in China is projected to rise sharply in **2025-2027**, potentially boosting GDP by almost **1%** by the end of the decade. This increase reflects initial tech company capital expenditures transitioning to spending on end-user AI services by non-tech companies [10][29][31]. 5. **Labor Market Challenges**: The adoption of AI poses challenges for the Chinese labor market, particularly for low-skilled service occupations. The youth unemployment rate remains above **15%**, and job losses in sectors like real estate and finance have been reported [33][35]. 6. **Demographic Trends**: China's aging population may necessitate increased reliance on AI and robotics to maintain productivity levels. The working-age population is projected to contract by **25%** over the next **25 years** [35][33]. 7. **Investment Cycle**: The race for AI development is expected to boost tech sector employment in the near term, while the non-tech sector may experience minimal job displacement initially. However, significant displacement may occur as AI becomes ready for mass adoption [35][37]. 8. **Future Uncertainty**: The future path of AI development and its impact on job displacement remains uncertain. Despite the rapid advancements, the real GDP growth forecast for China has not been changed due to the unpredictability of AI adoption [37][33]. Additional Important Content - **Foundation Models**: The number of foundation models in China rose to **20** in **2023**, surpassing the combined total of the EU and UK, indicating a significant advancement in AI research [10][11]. - **Investment in AI Infrastructure**: Major Chinese tech companies, including Bytedance, Baidu, Alibaba, and Tencent, are expected to increase their capital expenditures by **38%** in **2025** to enhance AI capabilities [29][30]. - **AI Adoption Rates**: The updated model suggests that AI adoption rates in China could exceed **30%** by **2030**, with marginal adoption peaking in the early **2030s** [19][22]. This summary encapsulates the critical insights from the conference call regarding the current state and future outlook of AI in China, highlighting both opportunities and challenges within the industry.

更多资料加入知识星球：水木调研纪要 关注公众号：水木纪要 16 Feb 2025 15:26:22 ET │ 17 pages China Healthcare Riding on China AI Rally CITI'S TAKE Riding on the DeepSeek-driven technology rally, China online healthcare names have surged YTD. Fundamentally, we expect AI will help improve operating efficiency of online healthcare names. We expect more TP upside ahead with OPM expansion. Compared to US peers trading at 18.0x/13.6x FY25E/26E PS multiples, Chinese healthcare AI stocks are much cheaper, trading at 5.0x/4.2x and 5.4x/4.5x for ...