The capital market on December 18 witnessed a remarkable resurgence in the semiconductor sector, reminiscent of a mighty lion awakening from a lengthy slumberAfter a period of dormancy, numerous semiconductor stocks surged, showcasing a spirited revival that caught the attention of investors and analysts alikeNotably, Zhongwei Semiconductor (688380.SH) led the charge with an impressive 14.36% spike in its stock price, signifying strong market confidence and bullish expectations surrounding the companySimilarly, Vulcan Technologies (688766.SH) followed suit, climbing by 12.6%, standing out in that day’s market activity.

Other industry players also benefited from this resurgenceFor instance, Zhaoyi Innovation (603986.SH) reported a stable 10% increase, reflecting its solid position and growth potential within the sectorMeanwhile, Cambricon Technologies (688256.SH), recognized for its unique advantages in artificial intelligence (AI) chip manufacturing, saw its shares rise by 8.34%, hinting at optimistic market sentiments towards AI chip-related enterprises

Though Zhongwei Company (688012.SH) experienced a more modest growth of 1.78%, it nonetheless made its presence felt amidst the overall positive trend.

Additionally, several other companies, including SMIC (688981.SH), Goke Microelectronics (688262.SH), Chipone Technology (688521.SH), Anlu Technology (688107.SH), and BGI Genomics (301269.SZ), also recorded increases, adding to the sense of vitality that had once again enveloped the semiconductor sector.

On December 17, a noteworthy announcement came from the U.SDepartment of Defense, which stated that it had removed Zhongwei Semiconductor Equipment (Shanghai) Co., Ltdand IDG Capital from the list of Chinese military companies on December 13. This development significantly alleviated concerns regarding policy restrictions that could impede the international business operations of these firms.

Zhongwei’s business primarily focuses on the research, development, production, and sales of high-end semiconductor equipment, maintaining close cooperation with overseas supply chain enterprises

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In late January, the U.SDepartment of Defense included Zhongwei in the military company list under Section 1260H of the National Defense Authorization Act for Fiscal Year 2021. Following this designation, the company filed a formal complaint against the U.SDepartment of Defense in federal court back in AugustApproximately four months post the lawsuit submission, it received encouraging news regarding its removal from the “blacklist.”

It is crucial to note that earlier in December, the U.Sannounced a new round of an “entity list” aimed at further constraining advancements in AI and semiconductor industries in ChinaFollowing this news, the stock prices of numerous publicly listed semiconductor companies plummeted sharplyHowever, the positive news surrounding Zhongwei also contributed to a restoration of trading sentiment within the sectorMany companies within the semiconductor industry experienced upward momentum, particularly Zhongwei, likely due to its relatively smaller market capitalization.

Nonetheless, regardless of the short-term fluctuations, the upcoming U.S

administration is expected to maintain a robust interest and assertive stance towards the semiconductor industryIn the long run, domestic semiconductor and tech sectors are anticipated to push towards achieving “self-sufficiency,” accelerating the trend for “domestic replacements”.

Research conducted by Citic Securities indicates a hopeful outlook for China to cultivate an independent, self-sustaining industrial chain that operates outside of U.SinfluenceSupply chain enterprises in Japan, South Korea, Europe, and Taiwan may simultaneously engage with both the Chinese and American supply chain ecosystems.

As 2024 draws to a close and 2025 looms ahead, various investment opportunities within the semiconductor sector are garnering widespread attention from financial institutions, each offering distinctive insightsCitic Securities highlights that over a six-month period, focus should be on the domestic demand for advanced memory and logic manufacturers’ capacity expansion, breakthroughs in advanced packaging technologies, and the positive impact of integrated circuit policies on investor confidence.

From a one-year perspective, the emphasis shifts towards the localization of “bottleneck” areas in manufacturing, advanced packaging, semiconductor equipment, and high-end chips, alongside an increased scrutiny of mergers and acquisitions within the semiconductor landscape.

The rapid advancement of AI technology has undeniably bolstered demand in the semiconductor market

In line with this, China International Capital Corporation (CICC) forecasts that the anticipated AI upgrade wave in 2025 will accelerate growth in semiconductor design-related downstream demandsThe firm expresses optimism towards the expansion of chip requirements driven by AI for both cloud and edge computing capabilitiesCICC also suggests monitoring how mergers and restructuring could unveil investment opportunities across various segments.

Ping An Securities recently noted that the semiconductor industry, characterized by a blend of cyclical nature and innovation, has been thriving amid the resurgence of consumer electronics and the innovations driven by AI, particularly benefiting memory and processor segmentsBy 2025, AI is projected to remain a central theme while the memory market enters a more stable growth phase, signaling the potential recovery of other sectorsThis suggests that the industry may evolve beyond a simplified duality of AI and memory, allowing opportunities to arise in areas such as analog, optoelectronics, and power devices.