KGI: The semiconductor cycle has the opportunity to reach the cyclical peak in 2025.

For the outlook of the semiconductor industry in 2025, KGI has put forward three key points. First, there is a chance for the semiconductor cycle to reach its peak in 2025, maintaining the historical pattern of "two years of expansion, two years of contraction" over the past decade. Second, in this cycle, semiconductor revenue growth will surpass capital spending, meaning there will be more room for dividend increases for semiconductor companies. Lastly, it is important to note that only advanced process supply is tight, with Taiwan Semiconductor benefiting from market share expansion and leading the industry in advanced process technology; while in mature processes, oversupply is caused by the active expansion of Chinese wafer factories, leading to a sluggish recovery. KGI released the latest analysis of the market trends in Taiwan and China, pointing out that the semiconductor industry in Taiwan reached a historical high revenue of NT$700 billion in October, a 23% increase compared to the same period last year, with TSMC continuing to be the major contributing factor. The revenue of testing interfaces, wafer foundries, and semiconductor equipment suppliers outperformed other sub-industries. KGI stated that wafer foundries outperformed IC design companies and OSAT (outsourced semiconductor assembly and test) companies, and it is expected that AI will continue to be the main driver of the semiconductor industry's growth cycle in 2025. TSMC continues to widen the gap with all its competitors, while non-AI applications show moderate growth, with revenue growth relying on specification upgrades. In addition, examining the financial statements for the third quarter, AMD's data center revenue surpassed Intel for the first time, with TSMC assisting in the continuous expansion of its AI chips and server CPUs market share. KGI estimated that AMD's CPU market share is expected to reach 40% by the end of 2024, and Intel increasing its outsourcing to TSMC will help maintain its market share in PC CPUs. However, the gap between Intel's wafer foundry and TSMC is further widening, with no major threat seen to TSMC's advanced process technology. Looking ahead to the semiconductor industry in 2025, KGI recommends that investors prioritize investments in advanced process-related giants with increasing AI demand, specification upgrades, and market share expansion. They also caution investors to be conservative in evaluating second-tier wafer foundries with excessive supply and overvalued stocks.