Hong Kong Stock Market Concept Tracking | Semiconductor Industry Recovery by 2025 DeepSeek Drives Domestic Supply Chain (Including Concept Stocks)

The report shows that in the second half of 2024, wafer demand began to recover from the industry downturn in 2023, but due to weak end demand in certain segments, it affected wafer fab utilization rates and wafer shipments for specific applications, with slow inventory adjustment speeds. The recovery is expected to continue into 2025, with stronger improvements in the second half of the year. Chongwei Li, Chairman of SEMI SMG and Vice President of GlobalWafers, said, "Generative artificial intelligence and new data center construction have always been the driving force behind the most advanced foundries and storage devices, but most other end markets are still recovering from excess inventory. As many customers have pointed out in their financial reports, the industrial semiconductor market is still in a strong inventory adjustment phase, which has impacted global silicon wafer shipments." A research report from Galaxy Securities stated that they are optimistic about the explosion of domestic AI computing power demand and the rising ceiling of the semiconductor manufacturing industry chain. 1) DeepSeek achieves cost reduction and efficiency improvement through engineering innovation: On January 20, 2025, DeepSeek released a new open-source deployment model DeepSeek-R1, shaking the technology community at home and abroad. 2) Reducing process dependence, a milestone for the populatization of AI: Traditional AI training often relies on high computing power chips, with NVIDIA's H100 previously in short supply. DeepSeek successfully reduced its dependence on high-end GPUs through technical innovation, making it possible to adapt to domestic chip architecture and provide technical verification scenarios for domestic chips. 3) Igniting domestic computing power, driving the domestic supply chain: The emergence of "small and beautiful" models like DeepSeek provides more choices for developers, content creators, and even small startups, with small models proliferating in the end, further driving demand for domestic computing power. Recently, TSMC once again restricted the chip production and packaging for mainland Chinese IC design companies, forcing chip manufacturing to shift to domestically available advanced processes. The adaptation of DeepSeek and domestic computing power chips not only provides China with the opportunity to surpass in AI development, but also raises the ceiling of the semiconductor manufacturing industry chain in China. Under the combined influence of internal demand explosion and geopolitics, companies in the semiconductor industry chain in China will have more verification opportunities and scenarios, entering a virtuous cycle. Related Hong Kong-listed companies in the semiconductor industry chain: Semiconductor Manufacturing International Corporation (00981), HUA HONG SEMI (01347), CE HUADA TECH (00085), SHANGHAI FUDAN (01385), ZTE Corporation (00763), Zhuzhou CRRC Times Electric (03898), SOLOMON SYSTECH (02878), etc.