China Galaxy Securities: Semiconductor industry sales reach a new high, long-term logic remains stable.

China Galaxy Securities released a research report stating that the construction of domestic and foreign AI infrastructure is expected to continue to remain strong in 2026. Furthermore, the domestic market is firmly promoting the increase in domestic production rates. Therefore, they continue to be optimistic about investment opportunities in semiconductors and related components, including domestically-produced computing chips, price increases in memory chips, PCB, semiconductor manufacturing and equipment, advanced packaging, as well as semiconductor materials. Key points from China Galaxy Securities: Industry data tracking: 1) Semiconductors: In December 2025, the global semiconductor industry achieved sales of $78.9 billion, an increase of 2.7% month-on-month and 37.1% year-on-year. Looking at the overall performance of the semiconductor industry in 2025, global semiconductor sales hit a new high, growing by 25.6% year-on-year to $791.7 billion. In terms of regional performance, except for a decline in semiconductor sales in Japan (-4.7% year-on-year), all other countries and regions saw an increase in semiconductor sales. 2) Semiconductor equipment: SEMI predicts that in 2025, global OEM sales of semiconductor manufacturing equipment will reach a new high, increasing by 13.7% year-on-year to $133 billion. This growth is expected to continue in 2026 and 2027. Benefiting from the continued penetration of advanced packaging in 2025, the market performance of semiconductor backend equipment has been relatively outstanding, with sales of testing equipment and packaging equipment expected to increase by 48.1% and 19.6% respectively. 3) Memory: Due to the surge in demand for AI and supply bottlenecks, memory prices have been on the rise. DRAM, as a core part of AI servers, has seen a more significant price increase. On the demand side, there is high demand for HBM in the AI server market. On the supply side, DRAM manufacturers are using a large amount of production lines to produce HBM, leading to a shortage of standard DDR4 DRAM production capacity. With the catalyst of supply and demand imbalances, the upward trend in DRAM prices is significant, and it is expected that memory chip prices will continue to rise throughout the year. Industry news: 1) Strong demand for memory: The DRAM and NAND inventory of SK Hynix has decreased to about four weeks of supply. Semiconductor giant UMC announced a resolution to sign a series of highly strategic contracts with global memory giant Micron Technology and its global subsidiaries and affiliates, establishing a long-term partnership in advanced packaging wafer outsourcing. 2) Breakthrough in cutting-edge technology: Researchers at ASML have found a way to increase the power of the light source of key chip manufacturing equipment, which could increase chip production by up to 50% by 2030. SK Hynix recently unveiled a concept called H3 architecture, centered around high-bandwidth flash memory. The so-called "H3" Hybrid Architecture integrates high-bandwidth memory (HBM) into a single design. Sector tracking: 1) Performance of the semiconductor index in the past month: Looking at the level of price changes, the semiconductor industry index underperformed the Shanghai and Shenzhen 300 Index by 3.86 percentage points and the electronics index by 1.44 percentage points. Specifically, the semiconductor industry index had a price change of -3.15%, the electronics industry index had a price change of -1.71%, and the Shanghai and Shenzhen 300 Index had a price change of 0.71%. 2) Performance of the semiconductor index over the past year: Looking at the level of price changes, the semiconductor industry index outperformed the Shanghai and Shenzhen 300 Index by 27.08 percentage points and the electronics index by 1.22 percentage points. Specifically, the semiconductor industry index had a price change of 46.38%, the electronics industry index had a price change of 45.16%, and the Shanghai and Shenzhen 300 Index had a price change of 19.3%. Risk warning: Risks of technological iteration falling below expectations; risks associated with international trade; risks due to intensified market competition; risks associated with uncertainty in international political environments.