China Semicap_ Revised up logic but revised down DRAM

Summary of China Semiconductors Conference Call Industry Overview - The conference call focused on the China Wafer Fab Equipment (WFE) industry, providing updates on demand projections and market dynamics for 2024, 2025, and 2026 [2][20][34]. Key Points Demand Projections - 2024 WFE Demand: Revised up from USD 43 billion to USD 45 billion due to stronger-than-expected imports, particularly in the second half of 2024, which totaled USD 38 billion [3][31]. - 2025 WFE Demand: Slightly revised up from USD 35 billion to USD 36 billion, with expectations of a -20% year-over-year decline due to tighter export controls affecting DRAM WFE [4][28][32]. - 2026 WFE Demand: Projected to be flattish, with a slight increase from USD 35 billion to USD 36 billion [4][28]. Import Dynamics - Import Surge: December 2024 saw a record high in imports, primarily from non-US vendors, contributing to the overall increase in WFE imports [3][38]. - 2024 Imports: Total WFE imports to China reached USD 38 billion, with a significant contribution from local vendors estimated at USD 7 billion [31]. Market Share and Self-Sufficiency - China's Global WFE Share: Expected to increase to 42% in 2024, but projected to decrease to 33% in 2025 due to a decline in imports and global overcapacity [28][32]. - Domestic Substitution: Anticipated to accelerate, with self-sufficiency expected to reach approximately 36% by 2026, driven by government subsidies and local co-development efforts [5][25][29]. Company Insights - Leading Domestic Suppliers: Companies such as NAURA, AMEC, and Piotech are rated as outperformers, benefiting from domestic substitution trends [6][9][10][11]. - Global Suppliers: Major global vendors like ASML and Applied Materials expect their China revenue share to normalize in 2025, with guidance indicating a decrease in reliance on the Chinese market [17][36]. Export Controls Impact - DRAM WFE Spending: Expected to decline in 2025 due to recent updates in US export control rules, which have led to significant changes in equipment sales and engineering support for Chinese fabs [4][32]. Technology and Capacity Expansion - Capacity Expansion: Chinese foundries are planning to expand capacity for matured logic, with local fabs pushing for supply chain resiliency through co-development with local WFE suppliers [32][33]. Additional Insights - Market Dynamics: The call highlighted the competitive landscape, with local vendors gaining market share at the expense of global suppliers due to lower pricing and improved technology capabilities [4][5][25]. - Investment Implications: The report suggests a cautious outlook for global vendors while maintaining a positive view on domestic suppliers due to the ongoing trend of localization and self-sufficiency [9][10][11]. This summary encapsulates the key insights and projections discussed during the conference call, focusing on the dynamics of the China WFE industry and the implications for both domestic and global suppliers.