Bank of China International: The electronic materials sector is expected to continue to see promising development opportunities. Domestic alternatives and demand-driven market openings are driving the market space.

In its research report, CICC International stated that the field of electronic materials is expected to continue to welcome development opportunities based on the rapid development of downstream industries, continuous iteration of advanced technologies, and the background of domestic substitution. Medium to long-term investment recommendations: The global semiconductor materials market is maintaining a growth trend. In various key semiconductor material aspects, Chinese companies are steadily expanding capacity and technology research and development. In the future, they are expected to gradually achieve scale growth and technological iteration, with the domestication rate of semiconductor materials expected to continue to rise. The demand for AI servers continues to grow, and electronic resins such as PPO, hydrocarbons, bisphenol A resins, and PTFE are expected to become mainstream materials for high-speed copper-clad boards in the AI server era. With the rapid growth of OLED terminal applications, accelerated release of high-generation line capacity, promotion and application of stacked OLED technology, and continuous domestic substitution of related materials, the demand for domestic organic light-emitting materials for OLEDs is expected to maintain a high growth trend. Main points of CICC International: Industry Prosperity The growth of AI-driven material demand and the accelerated layout of domestic material companies. By 2025, global semiconductor sales are expected to reach $795.6 billion, a year-on-year increase of 26.2%, making it one of the strongest growth years in the industry's history. The explosive demand for generative artificial intelligence and high-performance computing, the popularization of storage technologies such as HBM, the upgrading of automotive electronic intelligence, the deployment of IoT devices on a large scale, and the advancement of 6G technology research are core drivers of industry growth in 2025. Benefiting from the expansion of global wafer production capacity and the increased demand for advanced processes brought about by AI high-performance computing, the semiconductor materials market continues to expand. The global semiconductor materials market is expected to reach $70 billion in sales by 2025 and is expected to surpass $80 billion in 2027. In recent years, with the support of national policies and market demand dividends, China's electronic materials industry has entered a rapid development stage, and the process of domestic substitution continues to advance. The product technology level and research and development capabilities of domestic electronic material companies continue to improve, transitioning from breakthroughs in single products to gradual improvements in the industry chain. With the deepening trend of localization and diversification of the global semiconductor supply chain, the localization of the electronic materials industry in China is expected to further advance, with the industry scale expanding rapidly. Electronic material manufacturing companies in China are expected to achieve dual development opportunities of technological breakthroughs and market expansion through technological iteration and deep cultivation of scenarios. Summary of Electronic Materials Industry Performance 1) Total Operating Income: Steady growth in scale, leading growth in semiconductor materials. In 2025, the total operating income of 60 electronic material targets (including SW semiconductor materials and SW electronic chemicals) totaled RMB 118.595 billion (+13.47% year-on-year), mainly benefiting from the release of downstream wafer fab capacity and continued domestic substitution. Looking at the three-tier sub-industries, in 2025, the total revenue of 25 SW semiconductor material targets amounted to RMB 51.290 billion (+15.40% year-on-year), with a growth rate higher than the overall electronic materials industry by 1.93 percentage points, and industry revenue concentrated in leading companies; the total revenue of 35 SW electronic chemical industry targets amounted to RMB 67.304 billion, a year-on-year increase of 12.05%, and the industry scale distribution was more balanced. 2) Net profit attributable to shareholders: Significant structural differentiation, high-end electronic chemicals are profit pillars. In 2025, the total net profit of 60 targets was RMB 7.082 billion (+12.17% year-on-year), with 49 profitable and 11 losses (total loss of RMB 3.124 billion), with losses concentrated in the large silicon wafer track in the semiconductor materials industry, while polishing materials, high-end wet electronic chemicals, and other high-gross-margin products made significant contributions to the net profit attributable to SW electronic chemicals. 3) Gross margin and net profit margin: Profit levels of electronic chemicals are ahead. In 2025, the overall gross margin/net profit margin of the 60 targets were 24.53%/5.96%, a year-on-year increase of +0.04%/+0.04%, with some differentiation in sub-sectors: In 2025, the overall gross margin/net profit margin of SW semiconductor materials were 18.70%/1.53%, a year-on-year decrease of -0.36%/-0.76%, mainly affected by the large silicon wafer category in the semiconductor materials industry; the overall gross margin/net profit margin of SW electronic chemicals were 28.97%/9.35%, a year-on-year increase of +0.47%/+0.74%, with companies in display materials, CMP polishing materials, and other high-gross-margin sectors. 4) Research and development expenses: Continued increase in research and development investment, with a focus on advanced process research and development. In 2025, the total research and development expenses of the 60 targets totaled RMB 7.664 billion (+13.38% year-on-year), with a research and development expense rate of 6.46%, which basically matched the revenue growth rate, to a certain extent showing the industry's stable emphasis on technological breakthroughs, not reducing investment due to short-term profit fluctuations. Research and development investment is mainly concentrated in advanced process-related materials such as 300mm silicon wafers, precursor materials, semiconductor packaging materials, and high-end wafer lithography gum with blank spaces for domestication. Trends in the Electronic Materials Industry: First, the continuous iteration of advanced technologies promotes the continuous expansion of material demand, and the deepening process of domestic substitution of high-end core materials As logic and memory devices evolve towards advanced nodes, the explosion of demand for three-dimensional integration and advanced packaging, and the widespread application of advanced process technologies have led to a significant increase in process steps, driving higher consumption demand for wafer manufacturing and packaging materials. Currently, material domestication has extended from basic categories to mid-to-high-end categories. Second, electronic material companies are transitioning to a platform-based industry chain support, actively expanding material application scenarios and seeking external expansion. Domestic companies are transitioning from single products to industry chain support, gradually increasing the value per customer, strengthening cooperation with downstream partners, and steadily improving competitiveness. Some companies are participating in the integration of upstream and downstream resources in the domestic and overseas industries through strategic investments and acquisitions, establishing commercial partnerships, and so on. In addition, electronic material companies are actively extending their layout to upstream raw materials and core equipment segments, promoting the integrated development of the industry chain. For example, Hubei Dinglong continues to deepen cooperation with mainstream wafer fab customers downstream, solidifying core advantages in polishing pads, while expanding the categories and market coverage of polishing liquids and cleaning liquids, expanding applications in large silicon wafers, silicon carbide, advanced packaging, and enhancing one-stop service capabilities. Third, the international market layout of electronic material companies continues to deepen. Faced with the dual pressures of international technological barriers and trade frictions, domestic companies are accelerating their overseas market expansion through measures such as overseas mergers and acquisitions, establishing overseas production bases, setting up overseas research and development centers and sales outlets, exploring a paradigm of international layout. For example, Jiangsu Yoke Technology's overseas operating entities include Korean companies such as UP Chemical and MITech, with overseas revenue reaching RMB 2.123 billion in 2025, a year-on-year increase of 18.40%.