Equity Research China Technology 20 February 2025 China Technology CBO - China Brief Overnight - 2/20/2025 DeepSeek denies speculation that it is considering outside funding; Five ministries issue three-year plan to promote consumption of automobiles, electronic products and home appliances; BYD was the best-selling EV brand in major Latin American markets in 2024 Our daily product rounds up key stories from the Chinese language media overnight, focusing on developments in the technology space. See our late ...

Flash | 20 Feb 2025 10:55:55 ET │ 11 pages China Battery Materials Lithium into 3rd week of Feb – Looming pressure on ASP amid rising inventory CITI'S TAKE Lithium prices surprisingly remained largely flattish WoW last week, hovering at ~Rmb76k/t for battery-grade, even as we saw the supply was scheduled to come back online as expected (+17% WoW). We believe the transactions in the spot market should be limited, and downstream players are holding a wait-and-see attitude, evidenced by (1) downstream inventor ...

Summary of Key Points from the Conference Call Industry Overview - The focus is on the small-cap perspective in tech-related subindustries, particularly semiconductor-related companies [3][4] - The overall industry view is categorized as "In-Line" by Morgan Stanley MUFG Securities [1] Semiconductor Industry Insights - There is no change in earnings growth trends at semiconductor testing and cutting-edge package companies [5] - Orders for electrical power equipment have been increasing due to production capacity constraints and future delivery projects, with demand driven by the replacement of aging equipment, renewable energy, data centers, and power grid battery systems [7] - The market for front-end semiconductor processing equipment (SPE) is dull in 2025, with risks including a slowdown in China and ongoing adjustments in SPE for power chips [8] - Strong demand for high-bandwidth memory (HBM) in DRAM SPE is noted, but a cautious outlook is maintained for commodity DRAM [8] - A recovery in NAND is observed after a prolonged downturn, with advancements in cryogenic etching and hybrid bonding technologies [8] - Demand for photoresist-related materials remains strong, particularly for EUV applications [8] - The timing of recovery in automotive and industrial equipment demand has been delayed, with strong demand noted only for testing-related components [9] Market Forecasts - Forecasts for various end markets indicate fluctuations in unit sales, with notable projections for servers, PCs, smartphones, and light vehicles [10] - For example, smartphone sales are projected to decline from 1,206 million units in 2023 to 1,164 million in 2024, before recovering to 1,283 million by 2026 [10] - The forecast for electric vehicles (BEV) shows significant growth, with projections increasing from 8 million units in 2024 to 14 million by 2026 [10] Stock Price Trends - Stock price trends for semiconductor equipment-related companies are tracked, with various companies showing different performance metrics [12][15][21] - The Nikkei average serves as a benchmark for comparison, with specific companies like Tokyo Electron and ASML highlighted for their stock performance [13][14] Company-Specific Performance - Detailed sales performance data for specific companies in the semiconductor supply chain is provided, showing year-over-year changes in sales [27][28] - For instance, Shinko Electric Industries reported a significant decline in plastic packaging sales, dropping by 40% in one quarter [28] - Other companies like AJINOMOTO and Taiyo Holdings also show varying performance metrics, indicating a mixed outlook across the sector [28] Conclusion - The semiconductor industry is experiencing a complex landscape with both challenges and opportunities, particularly in the context of evolving technologies and market demands [8][9] - Continuous monitoring of demand trends, stock performance, and company-specific earnings will be crucial for investors looking to navigate this sector effectively [8][27]

Summary of J.P. Morgan's North America Commodities Research Call Industry Overview - **Industry**: Oil and Commodities - **Date**: February 20, 2025 Key Points Oil Demand and Supply Dynamics - Global oil demand increased by **1.4 million barrels per day (mbd)** in February, averaging **103.4 mbd** through February 19, 2025, which is **400 kbd** short of the projected **1.8 mbd** rise for the month [5][6][12] - OPEC is considering delaying monthly supply increases scheduled for April, indicating a cautious approach due to anticipated growth in non-OPEC+ supply [5][6][12] - The Ukrainian drone attack on the Kropotkinskaya pumping station is expected to reduce crude oil flow from Kazakhstan by **30%**, leading to a **360 kbd** drop in Kazakh oil exports [5][6][12] Inventory and Stock Analysis - CPC crude stocks have remained steady at **2.5 million barrels (mb)** since February 11, 2025, despite the disruption [6][12] - OECD commercial oil stocks recorded a net draw of **4.5 mb** in the second week of February [6][12] - The rerouting of Kazakh crude oil to Baltic Sea ports is expected to draw down Europe’s commercial crude storage by **10.5 mb** over a **60-day period** [5][6][12] Regional Insights - In the U.S., diesel cracks have retreated from recent highs due to lower product exports to Latin America, while gasoline consumption is expected to rise from **8.3 mbd** to above **9 mbd** during the peak travel season [5][6][12] - Four economies reported oil consumption statistics, with notable declines in Portugal and France, while India showed a significant increase of **170 kbd** year-over-year in January [5][6][12] Price Movements - Oil prices are on track to end the week higher, with global crude prices rising by **$1.60-1.80 per barrel** since last Friday's close, driven by supply uncertainty and frigid weather in the U.S. [5][6][12] - Brent crude has advanced to nearly **$77 per barrel**, aligning with the fair value estimate for February [5][6][12] Future Projections - The ongoing cold weather in the U.S. and increased industrial activity in China are expected to help close the gap in oil demand projections for February [5][6][12] - Gasoline cracks are projected to average **$22 per barrel** in Q2 2025, up **$2 per barrel** from current levels [5][6][12] Additional Insights - The Atyrau-Samara pipeline has a spare capacity of **157 kbd**, while the Kazakh-China pipeline has a total capacity of **400 kbd**, indicating potential for rerouting crude oil flows [5][6][12] - Despite the BTC pipeline having considerable spare capacity, tanker bottlenecks in the Caspian Sea may restrict substantial transfers [5][6][12] This summary encapsulates the critical insights from the J.P. Morgan North America Commodities Research call, focusing on oil demand, supply dynamics, inventory levels, and price movements.

Summary of the Conference Call on US Reshoring and Humanoids Industry Overview - **Industry**: Multi-Industry, focusing on US Manufacturing and the impact of Humanoid robots on reshoring efforts in North America [1][3][10] Key Points and Arguments 1. **Reshoring Opportunity**: The US has a $10 trillion reshoring opportunity, significantly enhanced by the introduction of Humanoid robots, which can lower manufacturing costs and drive protectionism [1][10][29] 2. **Cost Comparison**: There is a mid-single-digit (MSD) cost delta between US manufacturing and Chinese exports, which can be offset with approximately 20% Humanoid penetration [1][14][39] 3. **Total Cost of Ownership (TCO)**: Humanoid adoption could lead to around 85% TCO savings compared to US human workers, allowing the US to achieve cost parity with China at about 20% Humanoid penetration [5][13][36] 4. **Market Growth**: The Humanoid market is projected to grow into an $80 billion industry over the next decade, contributing approximately 50 basis points (bps) of annual growth to the US industrial economy [21][58] 5. **Power Supply as Competitive Advantage**: The US's abundant low-cost hydrocarbons position it favorably in terms of power supply for manufacturing, which is expected to become a critical factor as Humanoids are deployed [23][68] 6. **Electricity Demand Growth**: The adoption of Humanoids is anticipated to reverse the decline in US manufacturing electricity consumption, contributing to a projected 2% annual growth in electricity demand from 2025 to 2050 [23][65] 7. **Investment Trends**: The US has experienced a significant under-investment in manufacturing over the past 25 years, with a cumulative shortfall of approximately $3 trillion since 2000 [55][60] 8. **Geographic Shift in Manufacturing**: The reshoring process is expected to shift manufacturing activity back to the US, enhancing market share and profit margins for US industrials [8][72] 9. **Preferred Stocks**: ETN and ROK are identified as preferred stocks within the reshoring theme, with other beneficiaries including HUBB, FAST, FTV, and TT [8][72] Additional Important Insights - **Historical Context**: The US manufacturing sector has lost share over the last 45 years as capital expenditures chased low-cost labor, but this trend is expected to reverse with the rise of Humanoid technology [7][30] - **Sensitivity Analysis**: A sensitivity analysis indicates that achieving a 20% global manufacturing share by 2050 could be conservative, given the US's significant share of global GDP and goods consumption [17][50] - **Labor Market Dynamics**: The production of Humanoids is projected to require a substantial fixed asset base, with an estimated annual capital expenditure of $25 billion over the next decade [58][59] This summary encapsulates the critical insights from the conference call regarding the potential impact of Humanoid robots on US manufacturing and reshoring efforts, highlighting both opportunities and challenges in the evolving industrial landscape.

Asia Pacific Equity Research February 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. Humanoid Robots: Hype or the Next Frontier? Karen Li, CFA AC Head of HK Equity Research, Head of Asia Infra, Industrials and Transport +852 2800 8589 karen.yy.li@jpmor ...

February 20, 2025 02:43 PM GMT Asia Technology | Asia Pacific Memory – False Dawn, No Recovery HBM revisions – more excess capacity. We update our HBM TAM analysis with the latest GPU/ASIC shipment numbers as well as improved yield rates from suppliers. We forecast 2025e HBM TAM at US$29bn while current capacity implies 66% oversupply at full capacity. Our previous CoWoS implied GPU shipment scenario is our bull case, which implies a US$81bn TAM in 2027e and our bear case assumes more aggressive pricing com ...

V i e w p o i n t | 20 Feb 2025 13:46:23 ET │ 13 pages China Humanoid Robot What's New from China Industrials – AI and Humanoid Supply Chain Tour | The Humanoid Robot We Know CITI'S TAKE During our trip on 18-19 Feb, we visited three humanoid robot-related companies – Orbbec (688322.SS), Dobot (2432.HK), and UBTECH Robotics (9880.HK) – and had insightful discussions with them. We summarize the key points and stock implications as below. We also list (potential) humanoid robot supply chain companies in Figur ...

Price Target BABA 104.00 USD 9988.HK 102.00 HKD Alibaba Q3: All-In on AI AI-libaba? Alibaba's Q3 results were solid… though probably a sideshow compared with guidance for massive AI-related capex, Cloud revenue acceleration "driven by AI", and pursuit of AGI(!). Group revenue of RMB280bn was in-line with our estimate, and slightly ahead of consensus (RMB281bn and RMB277bn), while RMB54.9bn of adjusted EBITA split our estimate and consensus (RMB56.5bn and RMB53.6bn). 9.4% CMR growth (to RMB101bn) was slightl ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: IT Hardware, specifically focusing on the App Store and smartphone demand, particularly iPhone and notebook builds in North America. Core Insights and Arguments 1. **App Store Revenue Growth**: - App Store net revenues are growing at 9.3% year-over-year (Y/Y) month-to-date (MTD) as of February 17, 2025, which is a deceleration from January's growth of 18% Y/Y, attributed to tougher year-over-year comparisons [2][1] - Major markets like China (+5.2% Y/Y MTD), Japan (+13.3% Y/Y MTD), and the US (+6.6% Y/Y MTD) are all experiencing deceleration compared to January [2][1] - Gaming revenue is declining by 1% Y/Y MTD, contrasting with a 14% growth in January, while non-gaming revenue is growing at 22% Y/Y MTD, indicating a shift in consumer spending [2][1] 2. **iPhone Build Forecast**: - The forecast for C1Q25 iPhone builds remains unchanged at 48 million units, flat Y/Y, with an expected shipment of 51 million units, aligning closely with the forecast of 50.5 million units [3][1] - Emerging tailwinds for iPhone demand include increased visibility at the assembly side and national subsidies in China, which may lead to upward revisions in iPhone builds [3][1] 3. **Notebook ODM Builds**: - Notebook ODM builds for C1Q25 are projected at 28.9 million units, reflecting a 1% Y/Y increase, which is 9 points above normal March quarter seasonality [10][1] - This translates to an expected 42.8 million notebook shipments, slightly above the current forecast of 42.5 million units [10][1] 4. **Cloud Capex Tracker**: - The Cloud Capex Tracker indicates a consistent 32% Y/Y growth for calendar year 2025, unchanged from previous forecasts [8][1] 5. **Apple Retail Store Status**: - As of February 19, 2025, 522 out of 525 Apple retail stores are open globally, indicating a 99% operational rate [45][1] Additional Important Insights 1. **Consumer Electronics Engagement**: - There is a notable bifurcation in consumer hardware engagement, with Garmin's MAUs growing by 21% Y/Y, while GoPro, Sonos, and Cricut are seeing declines in MAUs, indicating challenges in the consumer electronics sector [10][1] 2. **Job Postings in Consulting**: - IBM Consulting job postings have shown a recent uptick, but overall postings are still down 32% from the end of the previous quarter, suggesting a cautious outlook for consulting revenue [10][1] 3. **Taiwan Suppliers Monthly Sales**: - Sales at Apple's Taiwanese supply chain partners grew by 14.5% Y/Y in January, although this is below the trailing two-year historical seasonality for the month [28][1] 4. **iPad Build Estimates**: - The forecast for iPad builds in March is estimated at 9.5 million units, which is a 17% Y/Y decline [38][1] 5. **Lead Time Tracking for iPhones**: - Lead times for the iPhone 16 series are comparable to previous models, indicating stable demand post-launch [60][1] This summary encapsulates the key points from the conference call, highlighting the current state of the IT hardware industry, particularly focusing on Apple's performance and market dynamics.