Guosheng Securities: The wave of computing power drives capacity expansion, CAPEX welcomes a new round of growth cycle.

Guosheng Securities released a research report stating that the AI wave is driving the continuous high demand for global computing power, leading to a high investment boom in the GPU, HBM, and other chip fields. At the same time, the acceleration of domestic substitution is further boosting the expectations for the expansion of leading companies, and the industry's capital expenditure is expected to enter a new growth cycle. Clean rooms account for 10%-21% of semiconductor capital expenditure, benefiting from the advancement of expansion projects, with demand expected to continue to grow. It is recommended to focus on quality companies such as L&K Engineering (603929.SH), Both Engineering Technology (601133.SH), Acter Technology Integration Group (603163.SH), and Shenzhen Sed Industry (000032.SZ). Guosheng Securities' main points are as follows: Clean rooms are a fundamental engineering aspect of advanced manufacturing, with the electronics industry accounting for over half of its applications. Clean rooms provide a dust-free and stable production environment for high-end manufacturing and are widely used in industries such as semiconductors, new displays, and life sciences. Among the downstream demand, electronics/medical/pharmaceuticals/other sectors each account for approximately 54%/24%/22%. Semiconductor production is significantly impacted by airborne particles, and processes from single-crystal silicon wafer manufacturing to IC packaging require completion in clean rooms with strict cleanliness control technology. In recent years, China's clean room industry has seen steady growth, with market size/new construction area in 2021 at around 214.6 billion/3.577 million square meters, a compound annual growth rate of 19%/14% over 6 years, with the unit price steadily increasing to around 0.6 thousand/square meter. The surge in computing power is driving the recovery of semiconductor capital expenditure, leading to a prosperous trend in clean room construction. Benefiting from the development of AI-driven types, global demand for computing power continues to grow at a high rate, and markets for AI chips such as GPUs and ASICs are expanding rapidly. According to TSMC's guidance, the company's AI business is expected to double further on a high base by 2025, with an expected compound annual growth rate of around 40% in the next 5 years, becoming the core driver of semiconductor market growth. Looking at capacity planning, TSMC's CAPEX guidance for 2025 is expected to increase significantly by 28%-41%. Leading companies like Semiconductor Manufacturing International Corporation and HUA HONG SEMI continue to maintain high CAPEX levels. SK Hynix, Samsung, and Micron are accelerating the expansion of HBM (AI server mainstream storage chips), and industry capital expenditures are expected to significantly rebound, with a total investment expected to reach 185 billion USD for the year, an 11% increase. Benefiting from the progress of semiconductor expansion projects, the demand for clean room construction is expected to continue to grow, with estimated global/China semiconductor clean room investment in 2025 of approximately 194.3/58.3 billion, accounting for around 15% of total industry capital expenditure. The process of domestic chip substitution is speeding up, further boosting the expectations for leading companies' expansion. China is currently the world's largest semiconductor market, but it has a high dependency on imports and urgently needs to improve self-sufficiency. In recent years, various policies have supported the development of the integrated circuit industry in China, significantly accelerating the industry's localization process, especially in the mature process wafer field where the mainland's independent production capacity has increased to 33%, and is expected to reach 45% by 2027. In January of this year, the US imposed an export ban on AI chips, with NVIDIA currently occupying nearly 90% of the market for AI chips. This ban is expected to directly restrict China's import of high-end AI chips and accelerate the domestic substitution process within the industry chain, driving the continued expansion of domestic leading companies' capital expenditures. The penetration of AI at the end increases the iteration of smart phones, and panel leaders actively expand production of high-generation OLED. The display panel industry is another major application area of clean rooms, with global panel shipments expected to moderately rebound by 2024. The mature application of AI at the end accelerates the iteration of AI smart phones and AIPC products, leading to steady growth in industry demand. The mainstream panel technologies include LCD and OLED: in recent years, China's new display industry has accelerated its development, with the mainland's share of global LCD production capacity exceeding 90%, ranking first globally. OLED has relative advantages in high contrast and low power consumption. Its penetration rate in smart phones continues to increase, reaching around 56% in 2024. The penetration rate in large screens such as tablets and PCs is only 3%-4%, indicating ample growth potential. Currently, domestic panel leaders BOE and Visionox Technology Inc. are accelerating the construction of 8.6-generation OLED production lines for medium-sized displays and gradually increasing the global market share of small-sized OLED panels, maintaining high levels of capital expenditure. Risk warning: Semiconductor capital expenditures fall short of expectations, intensifying industry competition, and inadequate policy support for the chip industry, etc.