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Memory supercycle transmits to end markets: Per Jwei reports, bulk SSD prices rose roughly 20% quarter-on-quarter and nearly fourfold year-on-year between July and September, hitting record highs for six consecutive quarters. Vendors prioritize supply allocation for AI customers, resulting in severe shortages of SSDs for PCs. Gartner data shows global PC shipments in Q3 2026 fell 22.4% YoY, marking the lowest level since Q1 2023.
Upgrade of optical interconnect standards: NVIDIA and Cisco jointly released the USFP pluggable optical module specification, delivering up to 12.8 Tb/s per module with a 4x improvement in bandwidth density. Linktest Instruments projected 1,866%–2,073% YoY net profit growth for the first three quarters, corroborating the robust boom driven by capacity expansion for optical modules and optical chips.
Tight supply-demand across equipment chain: ASML will implement a uniform 10% price hike for EUV/DUV components supplied to South Korea, effective January 2027, which Samsung and SK Hynix have accepted. Weida Nano plans a private placement to raise up to RMB 4.944 billion to expand semiconductor equipment capacity.
Rising value of domestic foundry services: Bai Peng, Chairman of Hua Hong Grace, stated that the global IC market will exceed USD 1 trillion in 2026, with mature-node foundry market size surpassing USD 60 billion. China accounts for one-third of global wafer foundry capacity, targeting a 20%–50% global market share across five major specialty processes by 2030.
Accelerated EDA supply-chain localization: Empyrean Technology noted that domestic commercial EDA tools cover around 85% of requirements, with roughly 10% reaching world-class standards. Process node ecosystem coverage is expected to rise from 50% to 80% within the year.
In-depth Analysis
Optical Communications / Optical Chips: NVIDIA and Cisco jointly released USFP, a new pluggable optical module form factor, the industry’s first module supporting 400 Gb/s electrical signalling per lane. The module delivers a maximum capacity of 12.8 Tb/s, representing a 4x uplift in bandwidth density and 1.3x improvement in energy efficiency versus existing 200 Gb/s-per-lane products. Together with TE Connectivity and Amphenol, they built a multi-source hardware ecosystem targeting network expansion for AI factories.
Linktest Instruments projects net profit of RMB 1.9–2.1 billion for the first three quarters, up 1,866%–2,073% year-on-year (Q3 up 197%–241% quarter-on-quarter). The strong growth is driven by robust demand for optical module and optoelectronic component test equipment amid continuous capacity expansion by optical module and optical chip vendors. CITIC Securities reaffirms that CIOE validates the strong prosperity of the optical communications sector. Leading players are actively rolling out capacity plans, and the whole industrial chain remains in a rapid growth phase.
Advanced Packaging & Testing: Goldman Sachs raised ASMPT’s target price by 3% to HKD 183. It is bullish on the company’s TCB (Thermal Compression Bonding) and photonics equipment, which will benefit from rising adoption of GPUs, ASICs and HBM as well as shrinking technical pitch. Advanced Micro-Fabrication Equipment Inc. plans to inject no more than RMB 35 million into Qinghe Crystal, a supplier of wafer bonding, chip bonding and surface treatment equipment, to deepen its layout in advanced packaging bonding tools. No major updates today for upstream ABF films / IC substrates, CBF/NBF/GBF build-up films, nor for OSAT players including ASE Group, JCET and TFME.
SiC / Power Semiconductors: Navitas Semiconductor partnered with NVIDIA to co-develop 800V-to-12V power conversion boards for next-generation AI infrastructure, accelerating GaN penetration in power supply systems for AI data centres. CITIC Securities is bullish on RF GaN. It notes Wolfspeed secured a USD 1.5 billion conditional loan commitment from the US Department of Defense and is heavily investing in GaN products. Yole forecasts the global RF GaN market will grow from USD 1.3 billion in 2025 to USD 2.4 billion in 2030. Shifting SiC-based GaN production to 6-inch wafers stands as a key industry trend.
Memory & Compute Chips: Jwei reports bulk SSD transaction prices rose roughly 20% quarter-on-quarter and nearly fourfold year-on-year between July and September, climbing for six consecutive quarters to hit all-time highs. Vendors prioritise allocation for AI-grade products, creating severe shortages of PC-oriented SSDs. The US memory segment plunged on Oct 12: SanDisk -6.74%, Micron -4.31%, SK Hynix -4.09%, while the Philadelphia Semiconductor Index fell 2.07%.
Preliminary Gartner data puts global PC shipments at merely 55.4 million units in Q3 2026, down 22.4% YoY. TSMC will release its Q3 earnings report on Oct 16. Sixteen analysts forecast a 65% YoY jump in net profit to TWD 746.3 billion, marking six straight quarters of record highs (Q3 revenue TWD 1.49 trillion, +51% YoY). On domestic computing hardware, Muxi’s Xisuo X302 scientific intelligence GPU won the Innovation Achievement Award at the China IC Expo during CIIF. Biren Technology unveiled the Tianhai 300 IXL144, a supernode solution with 144 GPUs in a single rack.
Equipment & Materials: ASML decided to implement a uniform 10% price hike for replacement parts supplied to South Korea, covering all EUV and DUV components including consumables and core assemblies. The price increase takes effect for deliveries starting January 2027 and has been accepted by Samsung and SK Hynix. Wafer fabs will face higher routine maintenance costs, reinforcing the case for domestic substitution of semiconductor equipment components.
Weida Nano plans a private placement to raise up to RMB 4.944 billion, funding industrialisation of advanced semiconductor equipment and a cutting-edge thin-film deposition R&D centre. Advanced Micro-Fabrication Equipment Inc. disclosed it has maintained average annual revenue growth above 35% for 14 consecutive years. Its 2025 R&D investment reached RMB 3.74 billion, accounting for 30.2% of revenue. Its etch tools achieved 94%–99% coverage in mature logic, 3D NAND and DRAM processes. Its chairman Yin Zhiyao warned that “we need to be alert that AI may be a bubble”. Jingzhida broke ground on its memory test equipment intelligent manufacturing project in Longhua, Shenzhen on Oct 10.
Wafer Foundry: Bai Peng, Chairman of Hua Hong Grace, stated at China IC Expo that the resonance between AI computing demand and the memory supercycle will push the global IC market above USD 1 trillion in 2026. The mature-node foundry market for processes at 22nm and above will exceed USD 60 billion in 2026, accounting for roughly 27% of the global total. China’s wafer foundry capacity accounts for one-third of worldwide supply. The firm targets global market shares by 2030: eFlash 30%, SPI NOR 50%, BCD 20%, CIS 40%, discrete devices 35%. Hua Hong Grace completed the equity transfer for its acquisition of a 97.5% stake in Huali Microelectronics, making Huali Micro its wholly-owned subsidiary. Yuexin Semiconductor (301660.SZ) was listed on ChiNext today.
Policy & Macro Environment: Domestic EDA supply-chain buildout accelerates. Liu Weiping, Chairman of Empyrean Technology, stated commercialised domestic EDA tools cover approximately 85% of requirements, with nearly 10% reaching world-class standards. Process node ecosystem coverage currently stands at ~50% and is expected to rise to 80% within the year. He outlined three priorities: supporting indigenous advanced processes, adapting to fold design methodologies, and rebuilding tool efficiency with AI.
With support from the Haidian District Government in Beijing, PICC issued China’s first insurance policy covering financial losses from first silicon tape-out failures, to mitigate risks associated with initial chip tape-out. Goertek terminated the spin-off of Goertek Micro for a Hong Kong IPO.
Daily Investment Tips
1.Risk factors: Memory price hikes have clearly weighed on end-market demand (global PC shipments fell 22.4% YoY in Q3 2026). If the “price hike – production cut – negative demand feedback” cycle persists, it may spill over to smartphones, PCs and their supporting chips. Meanwhile, the Chairman of Advanced Micro-Fabrication Equipment Inc. warned that AI may contain a bubble. Investors should watch for cyclical volatility amid high valuations in the equipment and computing power segments.
2. Opportunities: The 10% price increase of ASML components, together with the global wave of rising material prices, has boosted the certainty of domestic semiconductor spare parts (RF power supplies, electrostatic chucks, precision metal components, etc.) and optical interconnects (new USFP standard, 1.6T optical modules, optical chip test equipment). We recommend focusing on two main themes: domestic substitution and AI interconnects.
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