Key Takeaways
A new report from brokerage CLSA forecasts China's semiconductor memory market will expand to $111 billion by 2029, driven by a surge in demand for artificial intelligence applications and a national push for domestic production.
"Emerging AI applications will drive rapid growth in global and China memory demand simultaneously," CLSA said in its report. The firm noted that pricing power is improving across the supply chain amid an unprecedented memory shortage.
The report projects that from 2024 to 2029, China's semiconductor memory revenue will rise at a compound annual growth rate (CAGR) of 22 percent, while shipment volume will grow at a 12 percent CAGR. This growth is set against a backdrop of increased capital expenditures in the sector.
The analysis highlights a major trend of "domestic substitution," where Chinese firms are increasingly favored to build out the local AI hardware ecosystem. This localization push is expected to benefit foundries like SMIC (00981.HK) and Hua Hong Semiconductor (01347.HK) as they capture a larger share of the AI chipset production.
CLSA identified several companies poised to gain from the intersecting trends of AI adoption and localization.
Reflecting this bullish outlook, the brokerage raised its price target for AI hardware maker Zhongji Innolight to RMB 1,278 from a previous RMB 1,010.
The report suggests the trend of domestic substitution is a powerful tailwind for China's semiconductor industry, insulating it from some global pressures and creating a distinct investment thesis. Investors will be watching upcoming earnings from these firms to see how the forecast translates to financial results.
This article is for informational purposes only and does not constitute investment advice.
