Boiling! This trillion-dollar industry is suddenly taking off, with major positive news emerging from overseas! Chinese technology has once again achieved a significant breakthrough, backed by strong support from international banking giants—could this be the start of a new rally?

　　Today, A-shares finally stabilized somewhat, with semiconductors emerging as the main driver of bullish momentum. From a market perspective, the third‑generation semiconductor sector continued to surge in the afternoon, with Taiji Shares and Luxiao Technology both hitting their daily limit up, Jucan Optoelectronics climbing more than 13%, and Yangjie Technology, Huawei Electronics, Qianzhao Optoelectronics, CR Micro, and Xinjieneng all posting gains exceeding 8%. The trillion‑dollar smart IoT (AIoT) sector is now entering a new uptrend, with stocks like Silan Micro seeing substantial gains. So, what exactly happened—and why have semiconductors suddenly surged?

　　This afternoon, foreign media suddenly reported that China will intensify its competition with the United States in the chip sector. China will support chip R&D and manufacturing projects, including the formulation of a series of relevant financial and policy support measures to help domestic chip manufacturers overcome the impact of U.S. sanctions. Meanwhile, according to news from the Institute of Microelectronics on June 17, the University of Science and Technology China recently announced in an official statement that the team led by Academician Guo Guangcan has made significant progress in research on photonic quantum chips.

　　At this critical juncture, Goldman Sachs suddenly released a research report stating that, driven by robust demand at mature nodes, favorable price trends, and the continuously growing needs of local design house clients, it is reaffirming its “Buy” rating on SMIC (00981) with a target price of HK$33.3.

　　So, has the semiconductor market already taken off?

　　Semiconductor Boiling

　　From the market perspective, the semiconductor sector continued to surge in the afternoon session, with Taiji Shares, Jucan Optoelectronics, and Allwinner Technology all hitting their daily limit up. Nearly 30 stocks within the sector saw gains exceeding 10%.

　　This trend also boosted the STAR Market. Companies such as Zhongwei Co., Ltd., HuaRun Microelectronics, and Jingchen Co., Ltd. all saw substantial gains, with the STAR 50 Index surging more than 5% at one point in the afternoon.

　　This morning, a leading research institute released a research report stating that the AIoT trend has officially taken off, with a strong focus on massive, trillion‑dollar market segments. The global AIoT market is valued at US$370 billion, with semiconductors accounting for 10% of that total—representing a substantial market opportunity of RMB 250 billion—and potentially giving rise to top-tier SoC companies with market capitalizations reaching hundreds of billions of yuan. Driven by the pandemic’s role in educating consumers, downstream application demand has surged rapidly; take Xiaomi’s AIoT platform as an example: in Q1 2021, the number of connected devices grew by 40% year-on-year. The institute expressed optimism about main control chip companies that are well positioned to benefit from the rapid growth in demand within the AIoT space.

　　In addition, the MCU shortage has exceeded expectations, accelerating the shift toward domestic substitution. China’s MCU market is valued at 50 billion RMB and has long been dominated by overseas suppliers; against the backdrop of supply shortages, domestic MCU manufacturers are rapidly gaining market share, making domestic substitution an irreversible trend backed by strong fundamentals driving both volume and price growth. With a substantial gap between MCU supply and demand, this imbalance is gradually spreading to industrial control and consumer applications—since the beginning of the year, MCU prices have risen by roughly 30%–50%; moreover, several companies have issued price increase notices for Q3. Based on comprehensive analysis, the supply-demand gap is not expected to ease until 2023.

　　Goldman Sachs also released a research report expressing a bullish outlook on SMIC. They believe that, driven by robust demand for mature nodes, favorable price trends, and the continuously growing demand from local design house clients, they are reiterating their “Buy” rating on SMIC (00981) with a target price of HK$33.3.

　　Goldman Sachs stated that 40nm wafers will become the company’s primary growth driver in 2021–22, with revenue increasing by 32% and 27% year-on-year in 2021 and 2022, respectively, driven mainly by growing customer demand—including for CMOS image sensors (CIS), Wi‑Fi, Bluetooth, microcontrollers (MCU), and wireless RF. In addition, the firm expects the 40nm wafer business to account for 16% and 18% of the company’s total revenue in 2021 and 2022, respectively, contributing 19% and 21% of overall net profit.

　　A major positive development or a trigger.

　　This afternoon, foreign media suddenly reported that China will appoint dedicated officials to lead efforts to prioritize the support and development of the semiconductor industry in response to external sanctions pressure.

　　According to reports, this massive portfolio spans trade, finance, and technology, leading the development of so‑called third‑generation chip technologies and capabilities, while also spearheading the formulation of a series of financial and policy support measures for this technology, sources familiar with the matter reveal.

　　According to foreign media reports, this is an emerging field that relies on newer materials and devices beyond traditional silicon. At present, no single company or country dominates this sector, making it one of the best opportunities to circumvent the barriers imposed by the United States and its allies on the chip manufacturing industry.

　　The sanctions imposed during the tenure of former U.S. President Donald Trump have already stifled Huawei Technologies’ smartphone business and will hinder the long‑term efforts of chipmakers—from Huawei’s HiSilicon to SMIC—to transition to more advanced wafer fabrication technologies, thereby threatening China’s technological capabilities.

　　“China is the world’s largest chip consumer, so supply chain security is of paramount importance,” said Gu Wenjun, Chief Analyst at research firm ICwise. As competitors such as the United States, Japan, and South Korea vie to bolster their own industries, China’s initiative to support the semiconductor sector has become increasingly urgent.

　　On May 14 of this year, the 18th Meeting of the Leading Group for National Science and Technology System Reform and Innovation System Development was held in Beijing. Liu He, Member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Head of the Leading Group for National Science and Technology System Reform and Innovation System Development, presided over the meeting and delivered a speech. The Ministry of Science and Technology reported on the preparation of the National Science and Technology Innovation Plan for the 14th Five-Year Plan period, and responsible officials from the member units of the Leading Group and relevant departments engaged in discussions. The meeting also held a special session to discuss potential disruptive technologies for integrated circuits in the post-Moore’s Law era.

　　According to a report from Core Research Institute on June 17, the University of Science and Technology China recently announced via its official channels that the team led by Academician Guo Guangcan has made significant progress in photonic quantum chip research, achieving quantum interference for the first time in a topologically protected photonic crystal chip, bringing us one step closer to realizing mass production of photonic quantum chips. This could represent an important technological breakthrough.

　　Is the semiconductor market poised to rebound once again?

　　According to recent brokerage research reports, the industry generally holds high expectations for the STAR Market. Most of the heavyweight stocks on the STAR Market belong to the semiconductor sector, such as SMIC and AMEC. Therefore, being bullish on the STAR Market largely reflects optimism about these core technology stocks. So, is the semiconductor market cycle about to reemerge?

　　From a fundamental industry perspective, the global semiconductor equipment sector continues to gain momentum, with advanced process technologies serving as the primary driver. In March 2021, North American semiconductor equipment manufacturers recorded their highest-ever shipment value, and shipment revenue in the first quarter saw accelerated growth. The top eight global semiconductor equipment companies reported a 11.5% quarter-over-quarter increase in revenue for the first quarter, along with a 45.1% year-over-year rise.

　　From a domestic perspective, the process of replacing imported semiconductor equipment with domestically produced alternatives has become increasingly clear. According to BOC Securities, domestic equipment manufacturers are gradually achieving breakthroughs in “zero”‑based technologies—for example, securing bids for i‑line lithography machines, receiving bulk orders for ion implanters, and obtaining repeat orders for film thickness measurement and morphology inspection equipment. Amid the latest round of robust growth in the global semiconductor equipment industry, we remain optimistic about domestic brands in equipment categories such as PVD, etching, cleaning, CMP, and thermal processing, while lithography, photoresist coating & development, metrology, CVD, and ALD are poised to seize emerging opportunities for cultivation. Driven by the dual forces of ongoing external disruptions and supportive internal policies, statistics based on data from the China International Tendering Network show that the localization rate of equipment on major domestic wafer production lines has reached 13%. Among these, the localization rates for de‑gumming, CMP, etching, cleaning, thermal processing, and PVD have reached 66%, 24%, 23%, 22%, 22%, and 14%, respectively. Leading domestic players like AMEC and Shengmei are expected to accelerate their international expansion. In the testing equipment sector, domestic brands are beginning to enter the SOC and memory testing markets, while Jingsheng and Jingneng have both achieved significant breakthroughs in silicon wafer growth and processing equipment.

　　Right now, the only variable affecting tech stocks—including semiconductor stocks—may be liquidity. Historical market trends show that tech stock valuations are heavily influenced by Treasury yields. During the semiconductor rally that kicked off at the end of 2019, Treasury yields were on a downward trend, falling as low as around 2.5%. This directly fueled a major bull run in tech stocks. However, the direction of Treasury yields remains uncertain; recently, yields have rebounded from below 3.1% to above 3.15%. Moreover, with uncertainty surrounding the trajectory of U.S. Treasury yields, the sustainability of chip stocks will be put to the test to some extent.