Caitong: The economy is on the rise, combined with increased autonomy and controllability. The domestic semiconductor component substitution is entering an accelerated phase.

Caitong released a research report stating that the global semiconductor components market is highly concentrated, and the industry is facing a historical strategic opportunity for prosperity and domestic substitution, with ample room for growth. The domestication rate of core categories such as electrostatic chucks and MFC is less than 5%, indicating a huge potential for substitution. The synergy between domestic substitution and industry prosperity is creating a double resonance, providing domestic component companies with a historic opportunity for development. The report recommends focusing on domestic component companies with core technological barriers, deep ties to downstream leading customers, and products in the mass production stage. Key points from Caitong are as follows: The global semiconductor cycle is clearly on an upward trend, injecting strong demand energy into upstream components The explosive growth in demand for AI computing power, high-performance computing, and HBM storage is becoming the core drivers of the current upward cycle. According to QYResearch projections, the global AI chip market is expected to exceed one trillion US dollars by 2025, with a compound annual growth rate of over 20%. The strong demand for end products is directly driving wafer fab capital expenditure into a new cycle of growth. Leading wafer fabs both domestically and internationally are ramping up production capacity, with companies such as TSMC, Semiconductor Manufacturing International Corporation, Changxin Storage, and Yangtze Memory at the peak of capacity expansion. Semiconductor components are the core foundation of equipment manufacturing, accounting for approximately 70% of the total machine cost, directly influencing equipment performance, process accuracy, and production yield. With the current global market highly concentrated, and domestication rate of components in China only around 7.1%, the industry is facing a historical strategic opportunity for prosperity and domestic substitution amidst changes in geopolitical landscapes, increasing supply chain security demands, and upgraded export controls, providing ample room for growth. Domestic substitution is moving from "breakthroughs in individual areas" to "system-wide breakthroughs", creating the best window of opportunity for domestic component companies Currently, US, Japan, and European companies still dominate in most high-end semiconductor component fields. The domestication rate of core categories such as electrostatic chucks and MFC is less than 5%, indicating a significant potential for substitution. As the domestication rate of semiconductor equipment as a whole exceeds 35% and enters a phase of accelerated growth, the demand for domestic support for upstream components is also increasing, driving domestic companies to achieve substantial breakthroughs in key areas such as metal parts, silicon parts, quartz parts, vacuum valves, RF power sources, and precision optics. Companies such as Shenyang Fortune Precision Equipment have the production capacity for 7nm process components, Thinkon Semiconductor Jinzhou Corp. has become a major player in the domestic substitution of silicon electrodes, KAIDE QUARTZ is penetrating the 12-inch production line with high-end quartz products, Konfoong Materials International and Suzhou Kematek, Inc. have supplied electrostatic chucks to leading customers, Sichuan Injet Electric and Shenzhen CSL Vacuum Science and Technology have achieved mass supply of RF power sources, Shanghai GentechGasBox products have broken foreign monopolies to become the major supplier in the domestic semiconductor gas delivery module sector. The synergy between domestic substitution and industry prosperity is providing domestic component companies with a historic opportunity for development. Risk factors: Downstream demand below expectations, technological research and development falling short of expectations, intensifying market competition, supply chain and raw material constraints, international trade and policy control risks, risks related to capacity expansion and operational management.