Sinolink: When will AI support Chinese exports?

Sinolink released a research report suggesting that AI is currently the most certain mainline of China's exports. In the report "AI and Geopolitical Profound Influence on Macroeconomic Data," it was mentioned that in the first quarter, AI goods exports increased by 36.6% year-on-year, accounting for 21.5% of China's total exports. Overall, the capital expenditure on AI in the United States continues to be the main driver of China's exports, and the short-term export growth is expected to remain high. However, semiconductor prices will not skyrocket, and as the base rises, the export price growth of AI-related goods, represented by integrated circuits, may decline in the fourth quarter. Additionally, the peak of export price increases due to crude oil has also passed, and the subsequent price factors may gradually give way to quantity factors in supporting exports. Sinolink's main points are as follows: - China's exports in June increased by 27% year-on-year, reaching a new high for the same period in recent years. Integrated circuits (such as memory and processors) and automatic data processing equipment (such as computers and computer storage components) accounted for 45% of the export of AI-related goods in June, driving the year-on-year exports by 9.4 percentage points, which is the main reason for the sustained high export growth. - AI-related goods exports rely on high price growth. In June, the export amount of integrated circuits increased by 122.7% year-on-year, while the export quantity decreased by only -0.4%, resulting in a high export price growth of 121.8% year-on-year. In May, the export quantity of automatic data processing equipment decreased by -17% year-on-year, while the export price increased by 32.4%. Therefore, maintaining high price growth of AI-related goods exports is crucial for China's export growth. - Current overseas demand orders remain high, but the price increases may slow down. Flash memory (NAND), memory (DRAM), and other spot prices continue to rise, but the month-on-month growth rate has slowed down, and they may peak and fall in the second half of the year. - According to TrendForce consultancy, the price of 32Gb flash memory increased by 346% year-on-year in June, but the month-on-month growth rate fell from over 30% in March to April to around 20% in June to July. The price of 16G DRAM DDR5 increased by 668% year-on-year, but the month-on-month growth rate fell below 10%. TrendForce's latest report predicts that due to the revision of demand for consumer applications and the high price base, the contract price of memory in the third quarter may converge. - The export prices of integrated circuits are significantly positively correlated with memory prices, and as the expansion of production is limited and price increases slow down, it implies that the export growth of AI-related goods such as integrated circuits may begin to decline, especially as the price base rises in the fourth quarter, the price year-on-year support for export growth may weaken. - Taking integrated circuits and automatic data processing equipment as examples, if the price growth rate decreases by 10 percentage points year-on-year, the impetus for export will decrease by 1.1 percentage points. However, it cannot be ruled out that the increase in overseas AI capital expenditure continues to rise, further exacerbating the supply-demand gap, and thereby continuing to support the export growth of AI goods. - Apart from high-price-growth AI goods such as integrated circuits, automatic data processing equipment, cables, and rare metals, other AI goods like semiconductor devices, semiconductor specialized equipment, circuit switches, transformers have export price growth rates not exceeding 10%, but export quantities remain high. - For example, in May, the export prices of semiconductor specialized equipment decreased by -14.3% year-on-year, while the export prices of circuit switches increased by 9.6%. As storage companies invest in expanding production, upstream equipment companies are also beginning to seek price increases, with ASML planning to raise the price of lithography equipment. Therefore, attention should also be paid to whether the prosperity of semiconductors will spread to a broader range of areas such as semiconductor equipment and machinery in the future. If the price hike chain spreads, the support for export of other AI goods may be enhanced. Risk Warning: The prediction of AI goods prices in this article involves some subjective judgment, and actual changes may exceed expectations. Pay attention to changes in subsequent geopolitical conflicts and their unexpected impact on exports. The impact of AI trade on exports is uncertain, so keep an eye on changes in relevant industries.