Shanghai Securities: Electronic semiconductors may experience a comprehensive recovery in the second half of 2024.

Shanghai Securities issued a research report stating that it maintains a "buy" rating on the electronics industry, and the electronic semiconductor industry may usher in a comprehensive recovery in the second half of 2024. The industrial competition pattern is expected to accelerate clearing and recovery, and the industrial profit cycle and related company profits are expected to continue to recover. The report suggests focusing on: oversold stocks with real performance and low PE/PEG ratios in the semiconductor design field, such as Shenzhen Bluetrum Technology (688332.SH); analog chip stocks such as Maxic Technology, Inc. (688458.SH); driver chip stocks such as Shanghai New Vision Microelectronics (688593.SH); semiconductor equipment materials such as Jiangsu HHCK Advanced Materials (688535.SH); folding machine industry chains such as Shenzhen Pacific Union Precision Manufacturing (688210.SH); military electronics such as Unigroup Guoxin Microelectronics (002049.SZ); and Huawei suppliers such as Shenzhen Hui Chuang Da Technology (300909.SZ). Key points from Shanghai Securities: In the third quarter, global tablet and smartphone shipments were strong, and the consumer electronics market continued to rise. On November 6th, according to Canalys, driven by positive factors such as end-of-back-to-school demand, pre-holiday channel inventory preparation, and increased enterprise IT spending, global tablet shipments in Q3 2024 increased by 11% year-on-year to 37.4 million units, achieving growth for the third consecutive quarter. In comparison, according to Counterpoint Research, the global smartphone market in Q3 2024 grew by 2% year-on-year, with shipments reaching 307 million units, marking the fourth consecutive quarter of growth. Although growth in shipments has slowed in recent quarters, global smartphone revenue in Q3 2024 grew by 10% year-on-year, and average selling price also increased by 7%, both reaching historical highs. Counterpoint Research also expects the trend towards higher-end smartphones to continue in the coming years, with an estimated global smartphone average selling price growing at a compound annual growth rate of 3% from 2023 to 2028. While consumer market demand is still affected by factors such as inflation, the trend towards higher-end products and active promotions at the channel end continue to drive the consumer electronics market upwards. AI-driven intergenerational acceleration is updating, and the industry is about to enter a new cycle. On November 6th, according to the Sci-tech Board Daily, Kaixia announced that its North Up Factory's K2 plant in Iwate Prefecture has been fully completed, with K2 expected to start production in the fall of 2025. The production was originally planned for 2023, but due to a decline in industry demand for storage, the production time was delayed by about a year and a half. The K2 plant will mass produce its most advanced 8th generation NAND Flash BiCS8 product. Kaixia stated that benefiting from the AI boom, the demand for NAND is expected to grow steadily after 2025, with high-performance storage like BiCS8 increasing demand, and flash memory demand expected to grow by about 2.7 times in the next five years. As for DRAM, according to the Sci-tech Board Daily on November 5th, SK Hynix plans to gradually reduce the production share of DDR4. The production share of SK Hynix DDR4 has decreased from 40% in Q2 2024 to 30% in Q3 2024, and further plans to reduce to 20% in Q4 2024. Limited capacity will be redirected to AI memory and advanced DRAM products. Looking at the overall DRAM industry, TrendForce estimates that with some suppliers launching new capacity expansion plans after profiting in 2024, the overall DRAM industry will grow by 25% annually in 2025. Risk Warning: Intensification of US-China trade friction, lower-than-expected terminal demand, lower-than-expected domestic substitution.