CITIC SEC: AI super high prosperity drives electronic price increase trend. AI exposure high or benefit from improved supply and demand in specific sub-tracks with stronger certainty.

CITIC SEC released a research report stating that in the recent period, multiple sub-sectors in the electronics industry have notified price increases, involving storage, CCL, BT substrates, wafer foundry, packaging and testing, and other sub-fields. The background for this is the significant increase in upstream metal costs since 2025, combined with the strong demand for AI boosting overall demand. Considering that the background of this price increase cycle is the super high prosperity of AI, with demand for consumer electronics and automotive electronics temporarily under pressure, it is recommended to focus on the segments such as storage, CCL, BT substrates, wafer foundry, and packaging that benefit the most from the rising price trend. CITIC SEC's main points are as follows: Since 25H2, there has been a wave of price increases in multiple sub-sectors of electronic components, mostly due to the significant increase in upstream metal prices putting pressure on costs, and some sectors are also being driven by strong demand from AI. Metals are key raw materials in the electronic field for wafer manufacturing, packaging interconnects, copper-clad laminates, etc., mainly including gold, silver, copper, etc. The futures prices of gold, silver, and copper have risen by more than 50%, 150%, and 50% respectively since 2025, and looking ahead to 2026, with global liquidity being loose and some metal supply constraints, the prices of major metal categories are expected to continue to rise or remain at high levels. Against the backdrop of significant cost increases (combined with strong demand from AI in some sub-sectors), multiple sub-sectors of intermediate electronic components have started a wave of price increases. Since 25H2, we have observed that in fields such as storage, CCL, BT substrates, wafer foundry, packaging and testing, LEDs, power devices, analog chips, passive components, etc., various manufacturers have successively issued price increase notices, and this trend is spreading to more manufacturers. Segments with high exposure to AI or improvements in supply and demand benefit more strongly. From a historical perspective, a general wave of price increases in the electronics industry often heralds the arrival of an overall upward cycle. However, considering that the current status of downstream demand in the industry is characterized by the sustained high prosperity of the AI-related industry, while demand from consumer electronics and automotive electronics is temporarily under pressure (due to factors such as storage price increases leading to shortages), we believe that this current wave of price increases reflects the overall prosperity of the electronics industry at present, but the degree of benefit from price increases in different sub-sectors may vary. Taking into account differences in downstream exposure, cost structure, bargaining power, etc., in this wave of price increases, we recommend paying attention to: Segments with high exposure to AI benefit the most in this round of price increases, such as storage, CCL, BT substrates. 1) Storage: TrendForce predicts that traditional DRAM contract prices will rise by 55% to 60% in 26Q1, and NAND Flash contract prices will rise by 33% to 38%. We expect the current shortage cycle to continue until 27H1. 2) CCL: With the significant increase in upstream copper prices, CCL manufacturers have successfully raised prices downstream in the PCB sector. We expect the price increase to land at around 5% to 10% in 2025, and 26H1 is expected to see a peak in price increases, with an expected price increase of over 10%. 3) BT substrates: Strong storage demand + price increases due to material shortages + significant increase in gold prices. According to price increase actions by Chinese-Taiwanese manufacturers such as Xinxiang, Jingshuo, and Nandian, we estimate that the industry's price increase in 25H2 is approximately 30%, and we expect a further increase of 15-20% in 2026. Segments with improvements in supply and demand relations have relatively higher certainty of benefiting, such as wafer foundry and panels. 1) Wafer foundry: Overseas mature process capacity has contracted, with domestic leading enterprises operating at full capacity and prices being passed on. According to information from the Science and Technology Innovation Board Daily, in December 2025, Semiconductor Manufacturing International Corporation raised prices by about 10% for its 8-inch BCD process for some customers, and we are optimistic about the significant benefits of domestic wafer factories in advanced process businesses due to the release of domestic computing power demand in 2026. 2) Panels: With the fading impact of tariffs and the boost in demand for large sizes driven by the Winter Olympics and the World Cup, profits for large-size LCDs have a high degree of certainty for improvement. Risk factors: Unexpectedly large increases in upstream metal costs; lower-than-expected downstream demand; incomplete transmission of cost increases by intermediate component manufacturers to downstream customers; intensifying market competition; slower-than-expected progress in domestic substitution. Investment strategy: In the recent period, multiple sub-sectors in the electronics industry have issued price increase notices, involving storage, CCL, BT substrates, wafer foundry, packaging and testing, and other sub-fields. The background for this is the significant increase in upstream metal costs since 2025, combined with the strong demand for AI boosting overall demand. Considering that the background of this price increase cycle is the super high prosperity of AI, with demand for consumer electronics and automotive electronics temporarily under pressure. In this current wave of price increases in the electronics sector, we recommend focusing on: 1) Segments with high exposure to AI benefit the most from price increases, such as storage, CCL, BT substrates. 2) Segments with improved supply and demand relations have relatively higher certainty of benefiting, including wafer foundry and panels.