CITIC SEC: The wave of electronic component price increases is expected to continue spreading, recommend paying attention to storage and other segments that benefit the most from the rising trend.

CITIC SEC released a research report stating that since the fourth quarter of 2025, price increases have gradually appeared in the fields of storage, CCL, BT boards, wafer foundry, and testing in the electronic components sector. In the past two weeks, manufacturers in the fields of medium and low-voltage MOS, SOC with built-in storage, and LED driver (analog sub-categories) have also announced price increases. Coupled with the unexpectedly strong downstream replenishment efforts and the continual rise or maintenance of upstream metal prices, it is expected that the price increases in the electronic components industry will continue to spread. It is recommended to continue to focus on the sectors of storage, CCL, BT boards, wafer foundry, and packaging, which benefit the most from the rising price trend, while also recommending attention to sectors such as power devices, analog chips, and passive components, which are relatively low. CITIC SEC's main points are: The unexpectedly strong downstream replenishment efforts, the continuous rise in upstream metal prices, and the long-term low gross profit margins are the underlying reasons for the current wave of price increases. 1) In terms of downstream demand, AI continues to be highly prosperous, and sectors such as automotive and general industry continue to have strong shipping volumes. For example, in the automotive sector, despite pressure on car sales, the localization rate of upstream electronic components is continuing to accelerate, and downstream customers and channels have relatively low inventory levels. Advanced packaging and storage production expansions are squeezing out mature process capacities (TSMC and Samsung plan to reduce production of some mature process capacities). Under this trend, downstream customers have strong replenishment motivation. 2) In terms of upstream costs, metals are the key raw materials in the electronic field for wafer manufacturing, packaging interconnection, and copper-clad boards, including gold, silver, copper, etc. The futures prices of gold, silver, copper have risen by more than 50%, 150%, and 50%, respectively by 2025. 3) In the midstream components sector, since the downturn of the industry cycle in 2022, many sub-sectors in the electronic components field still have relatively low gross profit margins. Against the backdrop of tight downstream supply and demand and the continuous rise in upstream costs, there is a strong demand for price increases. Since the second half of 2025, we have observed that manufacturers in sectors such as storage, CCL, BT boards, wafer foundry, packaging testing, LED, power devices, analog chips, and passive components have successively issued price increase notices, and this trend is gradually spreading to more manufacturers, with some sectors even experiencing multiple rounds of price increases. The wave of price increases in electronic components is expected to continue to spread: Storage: The AI super cycle continues to be in short supply, with a high sentiment of price increases. TrendForce expects traditional DRAM contract prices in the first quarter of 2026 to increase by 55% to 60%, and NAND Flash contract prices to increase by 33% to 38%. The actual price increases have surpassed expectations, with some NAND modules already rising by over 40% since the beginning of the year; meanwhile, niche storage products such as NOR/planar NAND/niche DRAM are showing strong price increases. We expect this cycle of shortages to continue until the first half of 2027. CCL (Copper Clad Laminate): The latest round of price increases in December 2025 has been implemented, and the industry's inventory levels are low. A new round of price increases is expected after the Chinese New Year. Wafer Foundry: Capacity utilization rates are at full capacity, and some categories have begun to raise prices. The first quarter is traditionally a slow season, but the business environment is expected to remain strong. In addition, there is a trend overseas of advanced packaging/storage expansions squeezing out mature process capacities, which is beneficial for the continuous improvement of the domestic supply and demand situation for mature process capacities. Packaging Testing: There is demand for overseas transfers, with large factories operating at 80-90% capacity, and some companies operating at full capacity. There is a phenomenon of customers actively requesting price increases to secure capacity. In addition, the domestic advanced packaging industry is also accelerating its development. Analog Chips: The strong demand from downstream sectors such as automotive and industry has led to ADI (Analog Devices) and TI (Texas Instruments) starting price increases earlier, and under the drive of rising costs, domestic design companies have also expressed a willingness to increase prices. Currently, Fine Made Microelectronics Group has raised prices by 10% for LED drivers. Power Devices: Prices for medium and low-voltage products such as MOS are showing strong momentum, with some manufacturers reporting significantly extended delivery times, and several companies have already announced price increases or are considering them. SOC (Internal System on Chip): SoC products with built-in storage are the first to increase prices, and it is expected that leading SoC manufacturers with stable storage supply will further increase market share and product structure upgrades, leading to significant profit improvement. MCU (Microcontroller Unit): On January 27, 2026, China Micro Semicon (Shenzhen) issued a price increase notice for MCUs and Nor Flash products, with price increases of 15% to 50%. Risk factors: Unexpectedly high increases in upstream metal costs; Lower-than-expected downstream demand; Midstream component manufacturers' failure to pass on cost increases to downstream as expected; Increased market competition; Delays in progress of domestic replacements.