Caitong: Order transfer and domestic substitution have entered an accelerated realization period, with a focus on flexible varieties during the semiconductor upcycle.

Caitong released a research report stating that domestic semiconductor components are transitioning from being "optional choices" in the supply chain to "essential choices," with the transfer of orders and domestic substitution entering a period of accelerated realization. Looking ahead, downstream equipment companies have full orders and are ramping up deliveries, which will continuously reinforce the prosperity of the components sector along the industrial chain. It is recommended to focus on local component enterprises that possess core technological barriers, are deeply connected with leading downstream customers, and whose products have entered the volume production stage. Caitong's main points are as follows: The supply of domestic and foreign components continues to tighten, with order overflow and domestic substitution entering a golden window for acceleration. The global semiconductor equipment market outlook continues to be upgraded. According to SEMI's forecast, global semiconductor equipment sales are expected to reach $165.9 billion in 2026, a year-on-year increase of 23.2%, setting a historic high, and this prosperity is fully transmitting to the upstream component segment. Currently, the supply constraints from leading overseas component companies are becoming increasingly evident. Kyocera is undertaking large-scale advanced orders from equipment manufacturers and is gradually expanding production, with a new factory expected to start production in September 2026 to alleviate delivery pressure; the global vacuum valve leader VAT Group added over 700 employees in the first half of the year to accelerate capacity ramp-up. The growth rate of overseas supply capacity is lagging behind the rapid increase in downstream demand, thereby pushing component orders from equipment manufacturers to gradually overflow, creating valuable opportunities for customer introduction and product validation for domestic manufacturers. Domestic components are transitioning from being "optional choices" in the supply chain to "essential choices," with the transfer of orders and domestic substitution entering a period of accelerated realization. The procurement and demand for components have a long whip effect, and the performance elasticity of the sector is expected to be released first. Components are located upstream in the equipment industrial chain, and their demand is magnified through advance orders placed by equipment manufacturers. Currently, the components sector has fully entered a prosperity upcycle, with overall order growth among sector companies being outstanding. For example, VAT Group's orders in the second quarter increased by 102% year-on-year, while its operating revenue grew by 3% during the same period. Looking ahead, downstream equipment companies have full orders and are accelerating shipments, and the high prosperity will continuously transmit upstream along the industrial chain, further enhancing the prosperity of the components sector. Capacity utilization continues to rise, and profitability improves significantly. The semiconductor components industry has typical heavy asset characteristics, with a high proportion of fixed costs, making the ramp-up of capacity utilization extremely significant for marginal improvement in profitability. As downstream demand continues to climb, some companies are showcasing the ongoing effects of scale, for instance, Shenyang Fortune Precision Equipment's production bases are gradually releasing capacity, and large-scale production is driving unit cost optimization, with the companys gross margin rising to 27.1% in Q1 2026, a substantial increase of 13.9% quarter-on-quarter; Suzhou Kematek, Inc.'s tracking rating report disclosed in July 2026 shows that its structural component capacity utilization exceeds 90%, creating a positive cycle between strong demand and efficient operation of capacity. The industry has currently entered a phase of simultaneous increase in volume and price, and the continued rise in capacity utilization drives down fixed costs rapidly. Under the transmission logic of "demand expansiontightening supply and demandprofit expansion," the components sector is expected to witness an accelerated release of profitability elasticity. Risk warnings: Risks of fluctuations in downstream demand, intensifying industry competition risks, as well as supply chain and domestic risks.