"Thought They Were Latecomers": Should Samsung and SK Hynix Be Worried? China's Semiconductor Surge [Click e-Stock]

All Players Benefit From Memory, Foundry, and Equipment Makers
Supplier-Dominated Market Emerges... Narrowing the Technology Gap

Reuters Yonhap News

The expansion of artificial intelligence (AI) is presenting Chinese chipmakers with unprecedented growth opportunities. A shortage of DRAM supply is widening opportunities for memory manufacturers, and foundries are also actively ramping up capacity. Industry analysts note that even equipment makers are benefiting, further strengthening the internal ecosystem.

On May 27, Mirae Asset Securities assessed that both AI-driven demand and domestic substitution have fueled a semiconductor boom in China. CXMT reported first-quarter revenue of 50.8 billion yuan (approximately 11.2609 trillion won), a 719% increase from the same period last year. Operating profit reached 35.4 billion yuan, turning from a loss to a profit year-on-year. The company set a target for the second half of the year at 115 billion yuan in revenue, which would represent a 645% year-on-year increase. The ongoing DRAM supply shortage is further expanding opportunities for latecomers like CXMT.

Gigadevice also saw its operating profit surge more than tenfold year-on-year, driven by an increase in average selling prices (ASP) for legacy memory products. The role of Chinese chipmakers is expanding amid the global AI infrastructure investment cycle.

The environment for Chinese foundries is also becoming increasingly favorable. As global foundries and integrated device manufacturers (IDMs) focus on AI-centric product manufacturing, supply for legacy process nodes has declined. As a result, orders are returning to China, which has relatively greater production capacity. Combined with robust domestic demand for local substitutes, this has created a supplier-driven market. SMIC and Hua Hong Semiconductor have both forecasted price increases for the year. They expect gross profit margins (GPM) to continue rising steadily in the second half of the year.

Surging demand is driving aggressive capacity expansion. CXMT plans to allocate 7.5 billion yuan from its initial public offering (IPO) proceeds of 29.5 billion yuan to upgrade existing fabs and 13 billion yuan to develop next-generation processes and products. SMIC intends to invest around 8 billion dollars this year in facility expansion. Hua Hong Semiconductor is expanding specialized 12-inch process equipment, focusing on its Wuxi fab.

The beneficiaries of these capital investments are expected to include Chinese equipment makers. NAURA Technology Group, a leading Chinese semiconductor equipment manufacturer, projected that capital investment in semiconductor equipment in China would remain high this year and next. The company emphasized that the localization rate of equipment is rising across newly constructed fabs in China. Against this backdrop of favorable demand, Chinese companies are continuing intensive research and development (R&D) investment and are expected to narrow the technology gap with global leading firms.

Kim Younggeon, a researcher at Mirae Asset Securities, commented, "The virtuous cycle of strong demand and expanded investment in the AI cycle is driving sector-wide performance for Chinese semiconductors. Based on solid demand, CXMT, SMIC, Hua Hong Semiconductor, and NAURA are all expected to sustain earnings growth through next year."

This content was produced with the assistance of AI translation services.