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Although semiconductors are still cold, with significant performance differences, the outlook remains positive

A nearly 20 percent drop in smartphone production in the first quarter was followed by a 6.6% drop in the second quarter to just 270 million units. In the first half of 2023, global smartphone production totaled 520 million units, a 13.3% drop from a year before, and individual quarters and the first half hit a record low.

The decline in smartphone demand has a significant impact on the semiconductor industry, since smartphones are one of the most important downstream applications. Moreover, the United States unilaterally imposed advanced semiconductor industry restrictions on China in the first half of 2023, leaving many of the world's leading semiconductor manufacturers feeling a chill.

Micron Technology (MU. U.S.) has suffered three consecutive quarterly loss of net profit, as have Samsung and SK Hynix. TSM. Leading foundry America suffered a drop in both revenue and net profit.

In contrast, under the strict restrictions in the United States, domestic semiconductors have accelerated the pace of students' independent innovation and research and development, thereby providing a "domestic alternative" advantage during the winter of the development of the cultural industry, and then backing by the Chinese economic market, the situation is improved.

There are many links in the domestic semiconductor industry chain, so the half-year performance of listed companies in different links can also be "hot and cold".

The equipment industry is more profitable than the materials industry.

Equipment and materials dominate the upstream semiconductor industry, according to the market classification.

The industry classification of the flush shows that there are 17 equipment companies and 16 material companies in the semiconductor industry of the A-share market, which means 33 companies are involved in the upstream link. All semiconductor concept companies are not included in the industry classification of the flush).

In the first half of 2023, NAURA (002371.SZ) achieved a net profit of 1.799 billion yuan, surpassing its competitors in terms of economies of scale. As a leading domestic enterprise in China, NAURA offers a comprehensive product line of semiconductor technology equipment across the IC, photovoltaic, LED, and panel data industries. This includes various types of etching, PVD, CVD, oxidation, annealing, cleaning, ALD, transmission, and curing equipment.

Following this is the micro and medium 688012. In the first half of the year, the company made 1.003 billion yuan in net profit. In addition to its leading position in domestic semiconductor equipment, the company produces capacitive plasma etching equipment, inductively coupled plasma etching equipment, MOCVD equipment, and VOC equipment.

The semi-annual net profit of Meisheng Shanghai, Huahai Qingke, and Jacques Technology is also in the range of 300 million to 500 million yuan.

It should be noted that from the perspective of the net profit scale of the upstream link every six months, the top four are semiconductor equipment companies, and their profitability is more prominent than that of material companies, known as the "semiconductor industry."

Further, in the upstream link, four companies have semi-annual net profit losses within 100 million yuan, including Zhongjing Technology, Linnawei, Shengong, and Tian Yue Advanced.

Six semi-annual net operating profits doubled in terms of growth and development, including Jingsheng Shares, Zhongke Flytest, Shanghai Silicon Industry, North China Chuang, micro and micro companies, Huahai Qingke, of which five are related to equipment management.

In the first half of the year, another 182,023 companies saw their net profits fall, including relatively poor performers Shengong, Helin, and Zhongjing.

In addition to performance, the share price also reflects it. 26 of the 33 upstream companies saw their stock prices rise in the first half of the year, of which six rose by over 50%. These companies included Topcrystal Technology, Jinhaitong, Huahai Qing, Xinyuanwei, Zhongwei Company, and Fulede.

In recent years, China's semiconductor equipment market has expanded significantly due to the development of the economy.

Recent years have seen a rise in domestic substitution, and domestic equipment manufacturers have ushered in periods of outbreak and concentrated listing, which have been significantly improved. As per SEMI's data (International Semiconductor Industry Association), in 2022, 35% of semiconductor equipment in Chinese fabs will be locally produced, an increase from 21% in 2021.

Nevertheless, the 35% localization rate indicates that there is still room for improvement and development, which means enterprise equipment manufacturers still have a relatively high level of certainty about future performance.