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Material sector: Dual impact of price hikes and export controls
Three Japanese firms — JSR, Tokyo Ohka Kogyo (TOK) and Shin-Etsu Chemical — jointly raised photoresist prices for global customers effective October 1. The baseline increase stands at 15%; long-term contracts for high-end ArF photoresist are hiked by 16%–22% (up to 24% for immersion ArF used in HBM), while spot orders see a 32%–38% rise. Pricing for g/i-line photoresist remains unchanged.
In addition, Japan brought ArF and EUV under export controls starting November 2025. China’s import dependency for photoresist sits at roughly 90%, with 67% sourced from Japan. The validation cycle for domestic substitution has been shortened from 3–5 years to 12–18 months. Localization rates are approximately 30% for g/i-line, 10% for KrF and only 2% for ArF (exclusive report from Jwei).
Rising value weight of advanced packaging
GlobalFoundries announced a USD 2 billion, five-year agreement to expand silicon interposer capacity at its Malta, New York fab to supply TSMC’s CoWoS ecosystem, with volume ramp scheduled for H1 2028. Counterpoint estimates TSMC’s CoWoS supply-demand gap at around 20% in 2026, narrowing to 10% in 2027. Yole projects the global advanced packaging market to grow from USD 44.3 billion in 2022 to USD 78.6 billion in 2028, representing a CAGR of roughly 10%.
Persistent shortage of optical chips
Everlight Opto stated Morgan Stanley’s “FCC 65%” clause is not formal regulation; domestic 800G / 1.6T optical chips remain extremely tight in the short run. AOI told investors current policies do not restrict optical components, and CPO-supporting FAU and ELS products have achieved stable mass production and delivery. Dongshan Precision noted part of the optical chips deployed in its optical modules are self-developed and manufactured in-house.
Memory leaders riding the supercycle
Micron raised the cap of its share repurchase program to USD 35.16 billion, effective December 9. Samsung posted Q3 sales of KRW 195 trillion and operating profit of KRW 107.4 trillion, surging 783% YoY to mark its most profitable quarter on record.
Q3 earnings delivery across compute supply chain
Kingboard Electronics guided Q3 net profit of RMB 912 million – 1.089 billion (+205%–265% YoY), backed by robust orders for high-speed optical module and AI server PCBs. Amlogic projected Q3 net profit growth of 223%–248%, with full-year revenue poised to top RMB 10 billion. Guanghe Technology reported a 100%–107% YoY jump in net profit for the first three quarters; Bench Electronics recorded 190%–335% YoY growth over the same period.
In-depth Analysis
Optical Communications / Optical Chips: Everlight Opto clarified that the “FCC 65%” clause is not an official regulation; 800G/1.6T optical chips remain in acute short supply in the near term. AOI responded to overseas import/export rumors, stating that existing policies do not restrict optical components, and its North America revenue accounts for merely 1.28% of total revenue. FAU and ELS for CPO have achieved stable mass production with viable performance and yield levels. Dongshan Precision confirmed that part of the optical chips used in its optical modules are self-developed and manufactured in-house, with ample compliance headroom. Domestic substitution for optical module analog chips is drawing attention. Global demand for optical module analog chips will exceed RMB 10 billion in 2026, while domestic market share for both TIA and Driver remains below 5% (Jwei).
Advanced Packaging & Testing: Details of the USD 2 billion silicon interposer agreement between GlobalFoundries and TSMC were unveiled. ASE Group (Taiwan), together with mainland players JCET, TFME and Huatian Technology, will take spillover advanced packaging orders (TFME has already mass-produced Chiplet products for AMD). TSMC’s 5th-generation CoWoS expands interposer area from approximately 870 mm² to 2,500 mm² via mask stitching. Line width/space for advanced packaging masks has shrunk to 2 μm and is approaching 1 μm. On earnings, Guanghe Technology projected 100%–107% YoY net profit growth for the first three quarters, driven by computing PCBs. Biwin Storage secured RMB 600 million financing for packaging and testing (via Xincheng Hanqi).
SiC / Power Semiconductors: No major updates today.
Memory & Compute Chips: Micron raised its share repurchase programme ceiling to USD 35.16 billion. Its CEO said HBM demand growth will continue to outpace conventional DRAM through 2028. Samsung posted a 783% YoY jump in Q3 operating profit. Dapu Micro recorded H1 revenue of RMB 4.722 billion (+531.17% YoY) and turned profitable on enterprise SSD business. On domestic GPUs, Alibaba Pingtouge is reported to release its Zhenwu V900 ahead of schedule (Jwei).
Equipment & Materials: Photoresist domestic players: Beijing K.Hwa KrF photoresist supplies memory fabs; Nanda Optoelectronics has multiple ArF grades qualified by logic and memory wafer foundries; Xuzhou Bokang achieves mass production of KrF/ArF photoresist. CMP polishing materials are still dominated by overseas incumbents, yet two leading domestic vendors are making breakthroughs (JWEI Consulting report). The first batch of equipment has arrived this month at ESWIN’s silicon materials base in Wuhan.
Wafer Foundry: TSMC reported September revenue of TWD 511.86 billion (+54.6% YoY). Investors are watching its earnings call on October 15, focusing on CoWoS capacity expansion, advanced node output and AI revenue outlook.
Policy / Macro Environment: NDRC held a press briefing on the Opinions on Developing New-Quality Productivity. The revised Regulations on the Protection of Layout-Designs of Integrated Circuits will take effect on October 15. Japan now adopts case-by-case approval for photoresist exports. The review cycle has extended from 15 working days to 85 working days, and rejection rates have risen to 79.2%.
Daily Investment Tips
1. Rising certainty of domestic substitution for semiconductor materials: Driven by the combined impact of photoresist supply risks and price hikes, there exists a massive supply gap for domestic products in high-end ArF/KrF segments. Accelerated qualification cycles create market penetration opportunities for suppliers including Beijing K.Hwa, Nanda Optoelectronics and Xuzhou Bokang. It should be noted, however, that these high-end products are yet to turn profitable; realization of related dividends will take time, and investors should watch out for risks of valuation rally ahead of fundamentals.
2. Strengthened "pick and shovel" logic in packaging segment: Industrial value is shifting toward packaging, equipment and materials. The CoWoS supply-demand gap will persist through 2027. Investors may track OSAT players capturing spillover orders, alongside silicon interposers, inspection & test equipment, and ABF/substrate supporting materials. Still, caution is warranted for the supply-demand inflection point once GlobalFoundries’ capacity expansion comes online in 2027, which will narrow the gap.
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