: The global semiconductor market experienced significant growth in July. Overseas control of semiconductor equipment continues to tighten.

Huafu Securities released a research report stating that according to SIA data, the global semiconductor industry's sales in July 2024 reached 51.3 billion US dollars, a year-on-year increase of 18.7% and a month-on-month increase of 2.7%, continuing its high growth trend. The Chinese semiconductor market is still warming up rapidly, with the strongest growth in the Americas market. Driven by the wave of artificial intelligence, the demand and competition for high-performance storage products HBM have increased. On September 5, the United States announced stricter export controls on key technologies such as quantum computing and semiconductor manufacturing products to restrict the access of competitors such as China. The US Department of Commerce stated that it is implementing global export restrictions on specific types of products and expects more countries to introduce related policies soon. All three major indexes declined, with stock prices in various sub-sectors falling. (1) Industry index: The three major indexes all fell this week (0902-0906), with the Shanghai Semiconductor Index/Taiwan Semiconductor Index falling by -5.88%/-3.74% respectively, and the Philadelphia Semiconductor Index experiencing a larger decline of -12.20%. The semiconductor trading volume fell again this week (0902-0906), with an average daily turnover of 22 billion RMB, a decrease of 4.17% from last week (0826-0830). (2) Sub-sectors: Stock prices in various sub-sectors fell this week, with equipment, materials, packaging testing, digital, and analog sectors falling by -6.9%/-4.5%/-7.0%/-6.0%/-5.1% respectively. Based on PE valuation, the closing PE ratios of A-shares in the semiconductor materials, equipment, packaging testing, and design sectors for the week (0902-0906) were 36, 35, 21, and 38 times respectively. SIA: The global semiconductor market saw a significant increase in July, with monthly sales increasing for the fourth consecutive month. According to SIA data, global semiconductor industry sales reached 513 billion US dollars in July 2024, an increase of 18.7% year-on-year and 2.7% month-on-month, continuing its high growth trend. By region, sales in the Americas (40.1%), China (19.5%), and Asia Pacific/other regions (16.7%) increased year-on-year. The Chinese semiconductor market continues to warm up rapidly, with the Americas market showing the strongest growth. Driven by the wave of artificial intelligence, the demand and competition for high-performance storage products HBM have increased. In NVIDIA's product planning, the H200 is the first GPU to use HBM3e8Hi, and the subsequent Blackwell series chips will also be fully upgraded to HBM3e. The three major memory manufacturers SK Hynix, Samsung, and Micron are hoping to seize the opportunity. Currently, Micron Technology and SK Hynix have completed HBM3e verification in Q1 2024 and started mass shipments in Q2. Micron's products are mainly used for H200, while SK Hynix supplies both H200 and B100 series. Samsung also recently completed verification and started shipping HBM3e8Hi for H200, with the verification work for the Blackwell series steadily advancing. The competition in the HBM track is fierce, with SK Hynix planning to launch 12-layer HBM4 in the second half of 2025 and 16-layer HBM4 in 2026. Samsung's memory division head stated on September 4 that the company's HBM4 basic bare chips have been handed over to wafer factories. The US semiconductor export restrictions have been further tightened, and attention is advised on the issue of semiconductor equipment imports. The US announced on September 5 stricter export controls on key technologies such as quantum computing and semiconductor manufacturing products to restrict the access of competitors such as China. The US Department of Commerce stated that it is implementing global export restrictions on specific types of products, such as machines required for manufacturing advanced semiconductor equipment, and expects more countries to introduce related policies soon. Semiconductor sector tracking: Digital: CPU/GPU - This week this sector showed differentiation, with Hygon Information Technology down by 4.0%, Loongson Technology Corporation up by 3.2%, and Cambricon Technology down by 16.2%. Cambricon fell by 13.5% on Thursday but rose by 4.0% on Friday. According to the company's official statement, the spread of false information had a significant impact on the stock price. Huafu Securities believes that the domestic computing power fundamentals trend is unchanged and recommends capitalizing on investment opportunities in the fluctuating market. SoC - The SoC sector trended downward this week, with Amlogic down by 4.5%, Rockchip Electronics down by 6.5%, and Alchip Technologies down by 5.2%. Comparing P/E valuations, Huafu Securities found that Bestechnic (Shanghai) Co., Ltd./Espressif Systems/Amlogic/Shenzhen Bluetrum Technology currently have corresponding next year P/E ratios of 32/25/20/14 times, with recent valuations falling, and recommends monitoring. Storage: This week, storage sector targets all experienced a decline, with GigaDevice Semiconductor Inc. down by 6.2%, Shenzhen Longsys Electronics down by 9.7%, and Biwin Storage Technology down by 5.9%. Module giant ADATA announced a consolidated revenue of 3.029 billion RMB in August, with a total consolidated revenue of 26.993 billion RMB in the first eight months of this year, nearly a 40% increase year-on-year. ADATA stated that contract prices have continued to rise steadily in the third quarter, and soft spot market demand factors have gradually improved. Not only can third-quarter revenue develop steadily, but under the advantage of procurement costs in the past few quarters, it is expected that single-quarter gross profit margins and operational performance will continue to maintain good performance. The profitability of various manufacturers in the second half of the year is expected to continue to improve. Analog: The analog sector saw a correction this week, with Shenzhen Goodix Technology down by 5.4%, SG Micro Corp down by 3.1%, CETC Chips Technology Inc. down by 3.9%, and Shanghai Belling Corp., Ltd.d.-1.5%. SG Micro Corp stated that the demand for mobile phones and other consumer electronics has shown a gradual monthly increase since last December, and is expected to continue to slowly rebound in the second half of the year. The industrial sector is relatively stable and is also expected to gradually warm up in the future. Huafu Securities is optimistic about demand recovery in the second half of the year.RF: The RF sector fell this week, with overseas stocks Skyworks/Qorvo down 7.5%/6.7% respectively, and domestic stocks Maxscend Microelectronics/Vanchip/ Wisdom Micro/Grand Kangxi Communication Technologies down 4.9%/12.7%/2.3%/2.6% respectively. According to TrendForce, due to weak demand for smartphones in the peak season, brand manufacturers are generally conservative in their production planning for Q3. It is expected that the total production of smartphones in Q3 2024 will increase only slightly to 293 million units, a year-on-year decrease of 4.9% and a quarter-on-quarter increase of 1.38%. According to Canalys, although global smartphone shipments in Q2 2024 exceeded expectations, based on cost increases, inventory turnover, and challenges in the business environment, there was a slight upward revision to the forecasted global smartphone shipments for 2024 to 1.2 billion units, an increase of 5% year-on-year. Power: In the power sector, China Resources Microelectronics was up 1.7%, while other stocks generally fell. Macmic Science & Technology recently stated that the industrial control line was relatively stable in the first half of the year, the photovoltaic line was slowly recovering, and the capacity utilization rate of the automotive line was relatively high. Huafu Securities expects the power prices to stabilize as downstream demand recovers. Currently, attention is focused on bottom opportunities in the power sector. Equipment: The equipment sector as a whole saw more retracement this week. On September 6th, ASML's official website issued a statement saying, "Due to new government requirements, ASML will need to apply for an export license from the Dutch government rather than the US government for the lithography machines NXT:1970i and 1980i. The immersion DUV system NXT:2000i and its successors already have Dutch export license requirements." Previously, in October 2023, the United States unilaterally restricted the export of certain mid-range models of ASML lithography machines. Huafu Securities believes that the Dutch government's enhancement of control over ASML lithography machine models, rather than the approach of ASML needing to apply to the US government, is better than previous concerns about lithography machines. On September 5th, the US Department of Commerce's Bureau of Industry and Security (BIS) published an interim final rule (IFR) in the Federal Register, tightening control over the export of technologies related to quantum computing, advanced semiconductor manufacturing, GAAFET, and other related technologies. The tightening control over semiconductor equipment by the United States is favorable for opportunities for domestic semiconductor autonomous and controllable alternatives. Manufacturing: This week, Semiconductor Manufacturing International Corporation was down 6.6%, Nexchip Semiconductor Corporation down 3.7%, and Xilinx down 4.4%. Currently, some wafer fabs have maintained good operating rates. For example, Nexchip Semiconductor Corporation stated that it expects the utilization rate in September to exceed 100%, and since March, capacity has continued to be in short supply. Looking ahead to the second half of the year, Huafu Securities expects the overall wafer foundry utilization rate to improve quarter-on-quarter. Packaging and Testing: This week, China Wafer Level CSP was down 4.8%, JCET Group Co., Ltd. was down 8.8%, Tianshui Huatian Technology was down 4.4%, and TongFu Microelectronics was down 7.2%. Forehope Electronic recently stated that there is a significant increase in downstream IoT customers, and the current demand is still relatively optimistic; the PA sector was relatively flat in the second quarter, but is expected to pick up in the second half of the year. Huafu Securities recommends paying attention to the performance improvement of related packaging and testing factories driven by the demand increase of IoT new products and overseas mobile phone major customers in the second half of the year. Focus Portfolio for this month: NAURA Technology Group (002371.SZ), JCET Group Co., Ltd. (600584.SH), SG Micro Corp (300661.SZ), Espressif Systems (688018.SH), Bestechnic (Shanghai) Co., Ltd. (688699.SH), Cambricon (688256.SH), Amlogic (688099.SH), GigaDevice Semiconductor Inc. (603986.SH), Suzhou Novosense Microelectronics (688052.SH), Semiconductor Manufacturing International Corporation (688981.SH), Hwatsing Technology (688120.SH). Risk Warning Technical developments and implementation fall short of expectations; downstream end shipments fall short of expectations; downstream demand falls short of expectations; increased market competition risks; geopolitical risks; electronic industry recovery falls short of expectations.