Shenwan Hongyuan Group Co., Ltd. has released a report indicating that China's AI chip market is experiencing explosive growth, with the expansion of advanced process technology exceeding expectations. High-end AI chips are also placing greater demands on back-end support capabilities, leading to a surge in demand for 2.5D/3D advanced packaging platforms, particularly creating a supply shortage for CoWoS-related capacity. Furthermore, the localization of equipment has entered an accelerated phase, with the proportion of semiconductor manufacturing equipment sourced domestically within Mainland China increasing from 25% in 2024 to 35% in 2025. Beyond commodity memory, the specialized memory segment presents opportunities for industry restructuring as original memory manufacturers scale back supply. The key viewpoints from Shenwan Hongyuan Group Co., Ltd. are as follows:
The rise of domestic computing power chips is reshaping the advanced manufacturing landscape. The rapid growth of China's AI chip market and the faster-than-expected pace of advanced process expansion are notable. According to TrendForce forecasts, the share of local Chinese 7nm/6nm process platforms is expected to expand to nearly 20% by 2026. With process iteration, N+3 and more advanced technologies are anticipated to extend from consumer applications into the computing power sector. Additionally, high-end AI chips require enhanced back-end support capabilities, causing demand for 2.5D/3D advanced packaging platforms to skyrocket, especially resulting in tight capacity for CoWoS-related services.
The entire semiconductor supply chain is entering a peak period for capital expenditure, from which domestic equipment manufacturers are benefiting. SEMI forecasts that the semiconductor equipment market in Mainland China will continue to lead all regions through 2026, accounting for approximately 30% of global investment. Local equipment suppliers are consistently benefiting from this high-intensity capital spending. The push for equipment localization is accelerating. Data from the semiconductor industry association shows the proportion of domestically produced equipment used in Mainland China's semiconductor manufacturing has risen from 25% in 2024 to 35% in 2025.
The memory market is entering a super cycle, with domestic manufacturers beginning to play a prominent role. AI-driven demand for memory spans all sectors, and by 2026, servers are projected to become the largest downstream application for memory. Limited new capacity additions within the year are expected to keep memory prices elevated. During this memory super cycle, Chinese memory makers are advancing into the top tier, and the potential listing of ChangXin Memory Technologies could represent a milestone for self-sufficiency. Beyond commodity memory, the specialized memory segment offers restructuring opportunities as original manufacturers reduce their supply focus.
Recommended focus areas and companies include: 1) Computing Power Chips: Moore Threads, MetaX, VeriSilicon, Brite Semiconductor; 2) Advanced Manufacturing/Packaging: SMIC, Hua Hong Semiconductor, Yandong Micro, Nexchip, Tongfu Microelectron, SJSEMI, Wayz Chips, Yonggui Silicon, JCET, Tianshui Huatian Technology; 3) Semiconductor Equipment/Components: NAURA, AMEC, Piotech, Changchuan Technology, Skyverse, Hwatsing, Kingsemi, JFM; 4) Memory Chips and Support: ChangXin Memory Technologies, GigaDevice, Montage Technology, Shenzhen Kaifa Technology, Nexwise, CR Micro, Hefei Chipmore Technology.
Risk warnings include potential changes in industrial policy, risks associated with international trade friction, and the risk that technological iterations of process platforms may fail to meet market demand.