China Galaxy Securities: Semiconductor industry sales hit a new high, sector's long-term logic stable.

China Galaxy Securities released a research report stating that the construction of AI infrastructure both domestically and abroad will continue to maintain strong growth in 2026. At the same time, China is firmly promoting an increase in the localization rate, therefore, they continue to be optimistic about investment opportunities in semiconductors and related components, including domestic computational chips, price increase cycles for storage chips, PCB, semiconductor manufacturing and equipment, advanced packaging, as well as semiconductor material direction. The main points of China Galaxy Securities are as follows: Industry Data Tracking 1) Semiconductors: In December 2025, the global semiconductor industry achieved sales of $78.9 billion, representing a month-on-month increase of 2.7% and a year-on-year increase of 37.1%. Looking at the overall performance of the semiconductor industry in 2025, the global semiconductor sales hit a new high, growing by 25.6% year-on-year to $791.7 billion. In terms of regional performance, except for Japan where semiconductor industry sales decreased year-on-year (-4.7%), all other countries and regions experienced a year-on-year increase in semiconductor sales. 2) Semiconductor Equipment: SEMI predicts that in 2025, global OEM sales of semiconductor manufacturing equipment will reach a historic high, a year-on-year increase of 13.7% to $133 billion, and this growth will continue in 2026 and 2027. In 2025, benefiting from the continuous penetration of advanced packaging, the market performance of semiconductor backend equipment was relatively outstanding, with sales of test equipment and packaging equipment expected to grow by 48.1% and 19.6% respectively. 3) Storage: Due to the double impact of the explosion in AI demand and supply bottlenecks, storage prices overall have been trending upwards. Among them, DRAM, as a core component of AI servers, has seen a more significant price increase. On the demand side, the HBM market required by AI servers is hot. On the supply side, DRAM manufacturers have allocated a large number of production lines to produce HBM, causing a shortage of DDR4 and other standard type DRAM. With the demand-supply gap driving prices upward, it is expected that the trend of rising storage chip prices will continue throughout the year. Industry News 1) Strong storage demand: SK Hynix's DRAM and NAND inventory has dropped to around four weeks of supply. Semiconductor giant Powerchip Technology announced a resolution to establish a long-term DRAM advanced packaging wafer foundry relationship with global memory giant Micron Technology and its global subsidiaries and related companies, signing a series of highly strategic contracts. 2) Breakthrough in cutting-edge technology: Researchers at ASML have found a way to increase the power of key chip manufacturing equipment light sources, which could increase chip output by up to 50% by 2030. SK Hynix recently unveiled a concept for the H3 architecture, which is based on high-bandwidth flash memory. The so-called "H3", a Hybrid HBM+HBF Architecture, integrates high-bandwidth memory (HBM) into the same design. Sector Tracking 1) Performance of the semiconductor index in the past month: Looking at the degree of price changes, the semiconductor industry index underperformed the Shanghai and Shenzhen 300 Index by 3.86 percentage points and underperformed the electronics index by 1.44 percentage points. Specifically, the semiconductor industry index had a price change of -3.15%, the electronics industry index had a price change of -1.71%, and the Shanghai and Shenzhen 300 Index had a price change of 0.71%. 2) Performance of the semiconductor index in the past year: Looking at the degree of price changes, the semiconductor industry index outperformed the Shanghai and Shenzhen 300 Index by 27.08 percentage points and outperformed the electronics index by 1.22 percentage points. Specifically, the semiconductor industry index had a price change of 46.38%, the electronics industry index had a price change of 45.16%, and the Shanghai and Shenzhen 300 Index had a price change of 19.3%. Risk Warning Risks of technological iteration falling short of expectations; International trade risks; Risks of increased market competition; Risks of uncertainty in changes in the international political environment.