From memory shortages to computing power crunch: How far can Asia's semiconductor industry go?

Livestream Recap: The AI positive feedback loop is now closed, and Asia’s semiconductor computing power dividend has entered a phase of certain realization.

Semiconductors form the foundational bedrock of every industrial revolution (00:02:25 ~ 00:06:12).

Humanity has undergone three industrial revolutions over the past forty years—the PC era, marked by IBM's 8088 chip; the mobile internet era, symbolized by the iPhone 4S A5 chip; and today’s AI era, which similarly relies on semiconductors as its underlying foundation. Asia collectively produces more than 75% of the world’s chips, $EFund A SEMICON ETF (03486.HK)$ covering four regions—Japan, South Korea, Taiwan, and mainland China—with a focus on two sub-sectors: semiconductor manufacturing and equipment.This provides unique advantages in terms of industrial purity and geographic balance.。

Investment rationale across the four regions: each possesses irreplaceable industrial barriers (00:10:02 ~ 00:18:40).

Mainland China:Domestic substitution has transitioned from a 'narrative-driven' phase to one 'visible in financial statements.' According to the 2025 Semiconductor Industry Policy Assessment Report, the procurement share of domestically produced equipment continues to rise steadily, $HUA HONG SEMI (01347.HK)$ 、 $SMIC (00981.HK)$ with key companies showing tangible improvements in revenue, gross profit, and order books. As we enter the 2025 data boom period, the logic behind domestic substitution has become highly certain.

South Korea:High Bandwidth Memory (HBM) is the most critical and certain demand driver for AI computing power. Globally, there are only three HBM players ( $SK Hynix (000660.KR)$ 、 $Micron Technology (MU.US)$ 、 $Samsung Electronics (005930.KR)$ ), whose combined market share exceeds 95%; $SK Hynix (000660.KR)$ HBM4 has the most stable yield and holds the highest market share. Demand throughout 2026 is highly certain, and long-term supply agreements further ensure sustained high gross margins.

Japan: $Tokyo Electron Device (2760.JP)$ It dominates front-end semiconductor processes globally—its market share in track-and-develop equipment has consistently exceeded 90% for years, and it ranks among the top two worldwide in specialized segments such as dry etching, deposition, and cleaning, making its position in the supply chain irreplaceable.

Taiwan: $Taiwan Semiconductor (TSM.US)$ It pioneered the advanced-node foundry business model and possesses strong pricing power to continually pass cost increases upstream to customers, making its dominant position extremely difficult to displace in the near term.

Current assessment: The final piece of the AI virtuous cycle has fallen into place (00:18:40 ~ 00:28:40)

Market skepticism at the beginning of the year regarding AI’s return on investment (high capital expenditures not yet translating into profitability at the application layer) was partially resolved by the end of Q1. Anthropic’s ARR surpassed OpenAI’s, with application-layer ARR exceeding USD 30 billion in March–April; revenue from the AI coding segment (including Claude Code, etc.) surged significantly; and weekly global token usage via OpenRouter entered a super-acceleration phase.

Positive feedback loop: Surging downstream token consumption → sustained price increases in midstream computing power leasing → upstream semiconductor orders exceeding expectations with high certainty

Recent catalysts: CXMT’s IPO approval + Huawei’s 'Tao’s Law' (00:28:32 ~ 00:34:43)

CXMT’s IPO approval:Raised nearly RMB 30 billion, of which approximately RMB 20 billion is explicitly allocated for equipment procurement, directly catalyzing Hong Kong-listed semiconductor equipment and packaging/testing stocks. CXMT will not replace existing foundries but will instead deepen ecosystem integration through expanded orders, creating incremental demand for Huahong and SMIC.

Huawei’s 'Tao’s Law':Follows a 'trading space for time' approach—enhancing system efficiency of mature process nodes via logic folding (temporal compression), rather than redesigning the underlying physical architecture. This provides clear near-term tailwinds for advanced packaging and domestic substitution in packaging/testing, though whether it can fully bridge the physical performance gap with leading-edge process nodes remains to be validated over time.

Core conclusion: Tao’s Law accelerates China's domestic substitution trajectory—it is an accelerator, not an endpoint.

Selected Q&A

Q: Can Huawei’s Tao’s Law truly close the process node gap with Taiwan Semiconductor?

A:"Tao's Law"focuses on performance gaps rather than physical node differences, representing system-level optimization built upon mature process technologies. It is difficult to directly compete with advanced nodes in the short term. However, this alternative innovation approach itself is commendable and will reliably boost demand for packaging and testing services.Overall assessment: avoid excessive optimism, but there’s no need for pessimism either. The direction of domestic substitution is clear, and the pace is accelerating—patience and time are required.

Q: Has the memory market reached a cyclical peak?

A:We remain cautiously optimistic regarding the current phase.First, revenue growth has outpaced share price appreciation, meaning valuations are still in a "the higher it goes, the cheaper it gets" state. Second, Samsung’s adoption of a more aggressive HBM4 process has led to unstable yields, compounded by labor strikes, further solidifying SK hynix’s technological lead. In the HBM segment, SK hynix remains the most certain leader.

Q: What is the outlook for AI computing power leasing prices?

A: The supply-demand gap continues to widen, primarily due to NVIDIA's extended delivery lead times for spot shipments. The key variable is the ramp-up pace of domestic computing capacity (e.g., Ascend) in the second half of the year—if domestic supply increases significantly, the upward slope of leasing prices could moderate.The trend toward domestic substitution is real and accelerating; we maintain a neutral-to-optimistic overall stance.

The above content is summarized from a live broadcast transcript and is for reference only; it does not constitute investment advice. Feel free to leave comments and join the discussion!

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