23 Feb 2025 17:00:35 ET │ 307 pages China Healthcare Handbook 2025: Come Back and Catch Up CITI'S TAKE We believe that in 2025 investor interest will return to China's healthcare sector, keen to catch up with the latest developments. Although concerns might persist, investors will find it difficult to turn a blind eye to the significant improvements in domestic innovations that have global potential. Even the most risk-averse investors have stopped asking about GPOs; rather, they are looking for policy deta ...

China (PRC) | Alternative Energy Solar: Module Price for Distributed PV Rebounds Slightly with Demand Pick-Up SIA reported P-/N-type poly quotes stayed at RMB34.0/41.7 per kg; M10/ G12 P-type/G10L/G12R/G12 N-type wafer prices were all flat WoW at RMB1.10/1.66/1.18/1.30/1.55 per pc. Per SolarZoom, M10/G12 PERC/ M10 TOPCon cell prices stayed at RMB0.285/0.29/0.295 per W. Mono M10, G12 PERC/Bi-facial M10, G12 PERC/M10 TOPCon modules stayed at RMB0.69/0.70/0.71 per W. Per SCI, 3.2/2.0mm SG prices were flat WoW ...

Asia Pacific Equity Research 26 February 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. China Battery & Materials Year 2025 investment thesis; initiate on Hunan Yuneng at Overweight China Asia Autos & EV Battery Rebecca Wen AC (852) 2800-8505 rebecca.y ...

Summary of the Conference Call Transcript Company and Industry Involved - **Company**: Microsoft Corp. (MSFT) - **Industry**: Data Centre Equipment Core Points and Arguments 1. **Microsoft's Capex and Capacity Intentions**: Further clarification is needed from Microsoft regarding its capital expenditure (capex) and broader capacity intentions, as the current situation appears to be Microsoft-specific rather than indicative of a broader industry trend [2][3][8] 2. **Impact of Lease Cancellations**: Microsoft has cancelled leases for two data centres totaling a few hundred megawatts and opted not to convert statements of qualification into leases for up to 1 gigawatt of capacity, reallocating some projects from international to domestic [3][8] 3. **Microsoft's Market Share**: Microsoft accounts for approximately 4% of global data centre capacity and about 8% of planned future additions, indicating a significant role in the data centre market [4][9] 4. **Capex/Sales Ratio**: Microsoft has a high capex/sales ratio of around 23%, second only to Meta at 28%, suggesting aggressive investment in infrastructure [4][9] 5. **Current Market Reaction**: The current share price reaction of Schneider Electric, which has seen a 4% decline, is viewed as a potential buying opportunity rather than a sign of a fundamental shift in the market [2][8] 6. **Demand Trends**: Initial assessments indicate that there are no signs of demand slowdown in the data centre sector, with capacity utilization data reaching new all-time highs [8][9] 7. **Future Capacity Plans**: Microsoft is expected to maintain its ambitious data centre buildout plans, with projections indicating it will account for a significant share of future capacity additions [4][9] Other Important but Possibly Overlooked Content 1. **Competitive Landscape**: The competitive pressure from cloud-native leaders like Amazon and Google poses risks to Microsoft's growth, particularly in the context of its legacy businesses transitioning to cloud-centric models [24] 2. **Regulatory Risks**: Microsoft faces legal and regulatory risks due to its dominant position in the PC operating systems and productivity applications market, which could impact its investment strategies [24] 3. **Analyst Ratings**: Microsoft currently holds a "Buy" rating with a price target of $480, reflecting positive sentiment among analysts despite the recent lease cancellations [38][49] This summary encapsulates the key insights from the conference call, focusing on Microsoft's strategic positioning within the data centre equipment industry and the implications of its recent decisions.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Chinese Economy and Real Estate Market - **Date**: February 24, 2025 Core Insights and Arguments 1. **Passenger Turnover Growth**: Passenger turnover during the Chinese New Year peak season increased by 7% from 2024 and was 15% higher than pre-COVID levels in 2019 [2][2][2] 2. **Property Sales Performance**: The growth of 30-city property sales showed a mixed performance with 9% growth in the 14 days before CNY, a significant 72% increase during the CNY holidays, but a decline of 2% in the 18 days after [2][2][2] 3. **Construction Work Resumption**: The work resumption ratio for over 13,000 construction projects was 47.7% in the third week post-CNY, a decrease of 15.2% YoY, marking the lowest level since 2021 [3][3][3] 4. **Housing Prices**: Average housing prices in 70 major cities declined by 0.1% MoM and 5.4% YoY, with tier 1 cities experiencing slight increases while lower-tier cities continued to decline [4][4][4] 5. **LPR Stability**: The one-year and five-year Loan Prime Rates (LPR) remained unchanged at 3.1% and 3.6% respectively in February [4][4][4] 6. **Government Support for Private Sector**: A meeting held by President Xi with business leaders emphasized support for the private sector and included an action plan with 20 measures to enhance foreign investment [5][5][5] 7. **Economic Growth Forecast**: The GDP growth target for 2025 is expected to be around 5%, which is considered ambitious given the current economic headwinds [7][7][7] 8. **Fiscal Policy Adjustments**: An expansion of the fiscal deficit by over 2 percentage points of GDP is anticipated, with a headline deficit projected at 4% of GDP [7][7][7] Additional Important Information 1. **Weak Construction Resumption**: The construction workers returning ratio was 49.7%, down 7.8% YoY, indicating a slower return compared to previous years [3][3][3] 2. **Market Access for Foreign Investment**: The action plan aims to fully remove restrictions on foreign investment in the manufacturing sector and expand market access in various service sectors [5][5][5] 3. **Trade Policy Concerns**: Potential additional tariffs on Chinese goods by the US may lead to further policy support from China throughout 2025 [7][7][7] This summary encapsulates the key points discussed in the conference call, highlighting the current state of the Chinese economy, particularly in the real estate sector, and the government's response to economic challenges.

Summary of the Chinese Internet Data Centre Sector Conference Call Industry Overview - The conference call focused on the **Chinese Internet Data Centre (IDC) Sector** and its relationship with hyperscalers' capital expenditures (capex) [2][8]. Key Points and Arguments 1. **Hyperscalers' Capex to IDC EBITDA Conversion**: - A simplified calculation indicates that incremental IDC EBITDA is at least **3%** of hyperscalers' total capex [2][4]. - For example, if a hyperscaler spends **Rmb100 billion** on capex, it could translate to **Rmb3 billion** in incremental IDC EBITDA [2][4]. 2. **Factors Affecting Calculations**: - Several factors can influence the final results, including: - A higher mix of CPU or domestic GPU servers may increase total MW [3]. - Data centers located in tier 1 cities may have higher IDC capex per MW and EBITDA [3]. - Data centers in remote areas may have lower IDC capex per MW [3]. 3. **Detailed Calculation Breakdown**: - The report provided a detailed breakdown of the calculation: - Total server capex: **Rmb100 billion** - Average selling price per server: **Rmb1 million** - Total number of servers: **100,000** - Average power density: **7.5 kW/unit** - Total server power: **750 MW** - Total IT power: **833 MW** - IDC capex per MW: **Rmb30 million** - IDC EBITDA yield: **12%** - Total incremental IDC EBITDA: **Rmb3 billion** [4]. 4. **Recognition Timeline**: - Incremental IDC EBITDA will be fully recognized in an average of **2 years** due to project delivery and utilization ramp-up time [4]. Risks and Opportunities 1. **Downside Risks**: - Weaker-than-expected demand for AI training. - Potential faults at data centers damaging reputation. - Higher-than-expected interest rates. - Less favorable regulatory environment [9]. 2. **Upside Risks**: - Stronger-than-expected growth in AI and cloud business. - Lower-than-expected electricity costs. - Lower-than-expected interest rates. - Tighter control on license granting and Power Usage Effectiveness (PUE) requirements [9]. Additional Insights - The report emphasizes the complexity of converting hyperscalers' capex into IDC orders and EBITDA due to various assumptions involved [2]. - The analysis is based on estimates from UBS and highlights the potential for growth in the IDC sector driven by AI and cloud computing demands [2][9]. Conclusion - The Chinese IDC sector presents significant investment opportunities, particularly in relation to hyperscalers' capital expenditures, but also carries inherent risks that investors should consider.

J P M O R G A N Asia Pacific Equity Research 24 February 2025 Memory Market Update AI memory expert fireside chat – key takeaways from Korea Conference 2025 We hosted an AI memory fireside chat session on 'HBM industry dynamics' with OMDIA (a third-party research vendor) at our Korea conference and share our key takeaways. OMDIA's overall comments on the HBM demand outlook, pricing and tech cadence were consistent with our findings (SKH ahead of SEC/MU) and we found their observations on tight clean room ca ...

24 February 2025 Asia Quantitative Strategy China Quant Strategy: The rally has more legs Rupal Agarwal +65 6230 2358 rupal.agarwal@bernsteinsg.com In all recent conversations with GEM/Asian fund managers, there have been 2 pertinent questions- When would India market start recovering and does China rally have legs? We re-iterated our near-term cautious view on India recently - India Quant Strategy: Is it time to add more risk?. In this report we address the China question. We turned positive on China in Se ...

Summary of Global Semiconductor Capital Equipment Conference Call Industry Overview - The conference call focused on the Global Semiconductor Capital Equipment industry, particularly the outlook for wafer fabrication equipment (WFE) spending in 2025 and 2026, with specific emphasis on NAND and DRAM segments [2][22]. Key Points and Arguments 1. **WFE Spending Forecasts**: - The WFE forecast for 2025 has been increased to $108 billion, remaining flat year-over-year, while the 2026 forecast is slightly reduced to $115 billion, reflecting an 8% year-over-year growth [2][22]. - The 2024 WFE number is confirmed at $108 billion, indicating a 10% year-over-year growth, driven by strong spending in China [2][22]. 2. **Regional Insights**: - China’s WFE spending is projected to decline by 20% in 2025, while non-China regions are expected to see a 15% increase [2][22]. - The forecast for China’s WFE has been slightly adjusted upwards by $0.9 billion for 2025 due to positive signs of accelerating capital expenditures in logic [36][34]. 3. **NAND and DRAM Segments**: - NAND spending is expected to grow by 43% year-over-year in 2025, driven by increased demand for upgrades and investments from YMTC, although it remains below the peak of $20 billion seen in 2021/22 [2][30]. - DRAM spending is forecasted to increase by 13% year-over-year, reflecting higher capital expenditures from Micron, despite a decline in China [2][30]. 4. **Company-Specific Insights**: - **Lam Research (LRCX)**: Target price raised to $105 due to higher earnings expectations and a favorable outlook on NAND upgrades [3][38]. - **Applied Materials (AMAT)**: Target price maintained at $210, with a positive view on secular WFE growth and capital return strategies [17][38]. - **Tokyo Electron (TEL)**: Rated Outperform with a target price of ¥34,600, expected to gain market share and expand margins despite weaker contributions from China [4][11]. - **Advantest**: Target price set at ¥12,400, benefiting from AI testing demand and expected to increase average selling prices and margins [10][58]. - **DISCO**: Target price set at ¥55,200, dominant in the grinder and dicer market with a significant market share [9][58]. 5. **Market Dynamics**: - The semiconductor capital equipment market is experiencing a shift with local Chinese suppliers gaining market share due to domestic substitution [6][18][19]. - The overall sentiment indicates a cautious optimism regarding the recovery of NAND investments and the potential for growth in 2026 as the market normalizes [4][58]. Other Important Insights - The conference highlighted the importance of monitoring the impact of geopolitical factors on the semiconductor supply chain, particularly concerning China’s role in the global market [36][37]. - The discussion also pointed out the competitive landscape among major players, with companies like ASML and Lam Research positioned favorably due to their technological advancements and market strategies [5][16][38]. This summary encapsulates the critical insights and forecasts discussed during the conference call, providing a comprehensive overview of the current state and future outlook of the semiconductor capital equipment industry.

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the implications of the USTR's proposals for additional fees on port calls for Chinese-built ships, affecting the global shipping and shipbuilding industry [1][2]. Core Insights and Arguments - **USTR Proposals**: The USTR proposed additional fees ranging from USD0.5 million to USD1.5 million per port call for all Chinese carriers and any carrier with a share of Chinese-built ships in their fleet or orderbook [2]. - **Impact on Sub-Sectors**: The dry bulk sector is expected to be the most affected, accounting for 28% of US seaborne trade, with over 40% of port calls by Chinese-built ships. Tankers and containers follow, with 35% and 20% of trade respectively [3]. - **Cost Implications**: The additional costs could represent 25-117% of voyage revenues for Chinese carriers and 14-67% for others, depending on whether fees stack or are capped [4]. - **Negative Outlook for Chinese Carriers**: Higher costs are likely to be passed on to customers, significantly impacting Chinese carriers, which hold 58% of the orderbook. Near-term headwinds for new orders are anticipated until further clarity is provided [5]. - **Stock Implications**: Companies like OOIL and CSH-H/A are expected to face headwinds, while SITC is seen as immune due to its intra-Asia operations. Maersk and HLAG are vulnerable due to their high exposure to Chinese shipyards [6]. Additional Important Content - **Service Fee Structure**: The proposed service fees vary based on the percentage of Chinese-built vessels in a carrier's fleet, with fees up to USD1 million for those with over 50% of their fleet comprised of Chinese-built vessels [11]. - **Timeline of USTR Actions**: A timeline of events leading to the USTR's proposals highlights the ongoing scrutiny of China's dominance in the maritime sector, with significant actions dating back to March 2024 [12]. - **Seaborne Trade Statistics**: The report provides detailed statistics on US seaborne trade by cargo type, indicating that dry bulk and crude tankers are particularly vulnerable to the proposed fees [25]. - **Company-Specific Exposure**: A detailed analysis of various companies reveals their exposure to US port calls and Chinese-built ships, with COSCO Shipping facing the most significant negative impact due to its high reliance on Chinese-built vessels [23]. Conclusion - The USTR's proposals are poised to create significant disruptions in the global shipping and shipbuilding sectors, particularly affecting Chinese carriers and shipbuilders. The financial implications for various companies will vary based on their exposure to Chinese-built vessels and US port calls, necessitating a careful reassessment of investment strategies in this sector.