Tokai Securities: Storage prices rise, semiconductor equipment localization melody deepens

The Zhitong Finance App learned that Donghai Securities released a research report saying that global semiconductor demand improved in March, mobile phones, tablets, and wearable devices maintained a slight increase, TWS headsets, smartwatches, and smart homes grew rapidly, AI servers and new energy vehicles maintained rapid growth, and demand may continue to recover in April; on the supply side, although short-term supply is still relatively abundant and corporate inventory levels are high, overall prices have shown an upward trend. It is expected that the supply and demand pattern will continue to improve in April. Looking at the segmented circuit, recently, under the catalyst of conferences such as MWC and GTC, cloud-based AI chips and endside AI applications are in full bloom. The AI concept is still an area with strong long-term investment and innovation, so it is recommended to keep an eye on it; in the context of international trade policy tightening, domestic semiconductor equipment, key components, and high-end chips will fully benefit from domestic alternative logic catalysis. Overall, focus on the leading brands of segmented racetracks.

The main views of Donghai Securities are as follows:

The rise and fall rate of the electronics sector in March was -4.37%, and the rise and fall rate of the semiconductor sector was -5.70%; at the end of March, semiconductor valuations were in history for 5 years

In terms of quantiles, PE is 73.25% and PB is 47.27%. Among Shenwan's 31 industries, Shenwan's electronics industry rose and fell -4.37%, of which semiconductor rose and fell -5.70%, while the Shanghai and Shenzhen 300 rose and fell -0.07% during the same period. Looking at the current 5- and 10-year quantiles of semiconductor history, PB is 47.27% and 65.16%, PS is 61.02% and 75.85%, respectively, and PE is 73.25% and 65.26%, respectively. The electronics industry still ranked first in the 2024Q4 stock market capitalization of public fund holdings, reaching 445.739 billion yuan. The scale of semiconductors allocated by public funds has long occupied about 60% of the electronics industry, rising to 67% in 2024Q4. The market value of semiconductors held by public funds accounts for 11.38% of the total market value of public fund stocks. Most of the key individual stocks are leaders in the semiconductor industry segment with a market value of 15 billion yuan or more.

The supply of semiconductors was still relatively abundant in March. Demand continued to grow, overall prices rose, and demand may pick up further in April

According to WSTS, global semiconductor sales in February 2025 were 17.10% year-on-year, and the growth rate narrowed seasonally. The cumulative year-on-year ratio for January-February 2025 was 17.48%, reflecting an overall recovery on the demand side. Looking at the prices of memory chips and storage modules, Sandisk, Changjiang Storage, and Micron have successively released price increases. The storage supply and demand structure is expected to improve as the original manufacturer cuts, smartphone inventory removal, and demand growth brought about by AI. The overall rise and fall range of storage module prices in March 2025 was 1.40%-33.33%; the DRAM memory chip price range was 5.34%-11.50%. Looking at the inventory and inventory turnover days of leading global companies, overall inventories have declined slightly but remained high in recent years, and the number of turnover days remained at a high level for 8 consecutive quarters; on the supply side, Japan's semiconductor equipment shipments in February increased 29.82% year on year, which may indicate that production capacity expansion in 1-2 years was quite positive. The price of wafers in 2024Q4 has rebounded slightly, 12-inch high-end production capacity has increased, and capacity utilization has declined slightly, but overall it is still plentiful. Overall demand continued to grow in March, supply was relatively abundant, chip prices bottomed out and corporate inventories were still high. The overall supply and demand pattern is expected to improve in April 2025.

Among downstream semiconductor demand, demand for mobile phones, TWS headsets, and AI servers recovered relatively well. 2025Q1 benefited from the national subsidy policy, and overall demand gradually improved

Mobile phones, PCs, tablets, automobiles, servers, smart wearables, etc. account for more than 80% of global downstream semiconductor demand, and daily sales of downstream electronic products will affect changes in demand for upstream semiconductors. Global smartphone and PC shipments in 2024Q4 were 2.38% and 2.68% year on year, respectively; smartphone shipments in mainland China were 37.91% year on year; China's new energy vehicle sales were 87.00% year on year in February and 52.24% year on year in January to February 2025; global NEV sales were 46.45% year on year in February and 30.40% year on year in January-February 2025. New energy vehicles continued to penetrate at a high speed, driving demand for semiconductors, but due to sufficient supply, power, simulation, MCU and other products Prices remain low. As global investment in AI continues to increase, AI server shipments are expected to continue to grow at a rate of more than 25% over the next 3 years. Capital expenses of overseas representative cloud service vendors will maintain a high growth trend in 2024Q4, and demand for computing power chips and high-end storage may continue to increase. In terms of global smart wearables, 2024Q4TWS earphones increased 13% year over year, and wearable wrist devices increased 4.1% in 2024, driving a steady rise in semiconductor demand in related industry chains.

At the MWC and GTC conferences held in March, AI cloud and terminal products were unveiled, and new products from conductor equipment manufacturers were released at the Semicon conference; financial reports such as Ali and Tencent were released, and domestic cloud companies' AI-related capital expenses remained high

MWC2025, which was held on March 3-6, showcased many AI end-side products, including various new AI glasses. According to IDC, global smart glasses shipments are expected to reach 12.8 million units in 2025, an increase of 26% over the previous year, and AI glasses are expected to become a new growth point for AI end-side applications; the Nvidia GTC conference was held on March 17-21, and the Blackwell Ultra and Rubin architectures were released to provide a more efficient hardware foundation for the next generation of AI training and reasoning; Semicon China held on March 26-28 In 2025, there are many highlights of new domestic semiconductor equipment products, represented by Xinkailai, which is expected to gradually solve the “stuck neck” problem of key equipment in the semiconductor industry chain; financial reports from domestic cloud vendors have been released one after another. Ali's 2024Q4 capital expenditure is expected to reach 31.8 billion yuan, and capital expenditure for the full year of 2025 is expected to exceed 150 billion yuan. Tencent's capital expenditure for the full year of 2024 will exceed 76.7 billion yuan, an increase of 221% over the previous year. It is expected that capital expenditure in 2025 will account for a lower double-digit percentage of revenue.

Investment advice: Industry demand is slowly recovering, and prices are picking up; autonomous and controllable efforts are still increasing under overseas pressure, but the layout is slowly falling

Recommended attention: (1) Lexin Technology, Hengxuan Technology, Rockchip, and Jingchen shares in the AIOT sector, which benefit from strong overseas demand. (2) AI innovation-driven sector. Computing power chips focus on the Cambrian period, Haiguang Information, Longxin Zhongke, and optical devices focus on Yuanjie Technology, Changguang Huaxin, Zhongji Xuchuang, Xinyisheng, Guangxun Technology, and Tianfu Communications. (3) The semiconductor equipment, components, and materials industry produced domestically in the upstream supply chain will replace expectations. Focus on Beifang Huachuang, Zhongwei, Tuojing Technology, Huahai Qingke, Fuchuang Precision, Xinlai Applied Materials, China Shipbuilding Special Gas, Walter Gas, Anji Technology, Dinglong Co., Ltd., and Jingrui Electric Materials. (4) The automotive electronics sector benefiting from the high growth of new energy vehicles and localization opportunities. Focus on the power sector's new clean energy, Yangjie Technology, Star Semiconductor, Macron Technology, Silanwei; Guoxin Technology, GigaYi Innovation, etc. in the MCU market; Vail shares, Starway, and Geke Micro in the CIS; Beijing Junzheng, Jiang Bolong, and Baiwei storage; and analog chips such as Shengbang Co., Ltd. and Nanowei.

Risk warning: (1) downstream demand recovery falls short of expected risk; (2) domestic substitution process falls short of expected risk; (3) product development progress falls short of expected risk