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Source: China Securities

The cycle has bottomed out, performance has exploded, stock prices have skyrocketed... Recently, the semiconductor sector has become a beautiful landscape in the stock market.

According to statistics from Securities China reporters, as of now, 24 semiconductor listed companies in the market have released their 2024 semi-annual performance forecasts, among which 6 companies' net profit increased by more than 500% year-on-year. Changchuan Technology's net profit in the first half of the year is expected to increase by more than 10 times year-on-year, driving the entire semiconductor sector to continue to rise strongly.

Wind data shows that as of July 19, the CSI Semiconductor Industry Index has rebounded 9.82% since July. Many stocks such as Changchuan Technology, Xinyuan Micro, and Zhongjing Technology have risen by more than 20%, and the share prices of North Huachuang, Cambrian, and Lexin Technology have hit a stage high.

According to the recently disclosed second quarter fund reports, many well-known fund managers, such as Jin Zicai of Caitong Fund and Xie Zhiyu of Xingzheng Global Fund, overweighted the semiconductor sector in the second quarter, and nine semiconductor stocks, such as Lanqi Technology, Changdian Technology, and GigaDevice, were increased by more than 10 million shares. Many fund managers believe that the semiconductor industry is at the bottom of the inventory cycle and are optimistic about the computing power semiconductor driven by artificial intelligence and the consumer electronics semiconductor driven by the macro economy.

Many well-known fund managers are overweight semiconductors

Since the beginning of this year, whether it is the demand stimulation brought by artificial intelligence, the economic recovery of consumer electronics, or the pressure exerted on the chip supply chain by international relations, they are all attracting the attention of various fund managers to the semiconductor industry chain.

For example, the Caitong Integrated Circuit Industry Fund managed by Jin Zicai increased its stock holdings in the second quarter and made a large-scale adjustment, significantly increasing its holdings of two semiconductor stocks, Jacques Technology and GigaDevice, making them the sixth and seventh largest holdings of the fund respectively. In addition, it also held a large position in Shanghai Electric Co., Ltd. as its third largest holding.

Jin Zicai said in the second quarter report that the semiconductor sector was overweight in the second quarter, mainly because he believed that the semiconductor cycle was getting closer to bottoming out and reversing. At present, advanced manufacturing and advanced packaging have taken the lead in rising sharply, but related companies are not listed in the A-share market. If the AI ​​industry develops towards the end and application side, he believes that it is very likely to drive the semiconductor industry to reverse upward, and he will pay close attention to investment opportunities in related industries in the future.

For another example, the Xingquan Social Value Fund managed by Xie Zhiyu has 6 semiconductor stocks among the top 10 holdings, including memory interface chip leader Lanqi Technology, camera module supplier Gowin Electronics, and audio and video chip company Jingchen Holdings. In addition, San'an Optoelectronics, Crystal Optech, and Hua Hong Semiconductor are also heavily held. Among them, Crystal Optech and Hua Hong Semiconductor were both newly added to the fund's top 10 holdings in the second quarter.

In the second quarter report, Xie Zhiyu stated that Nvidia's AI server business continued to develop rapidly in the second quarter, and domestic related server, optical module and other sector indexes continued to improve. The expected implementation of Apple's AI will drive the domestic electronics industry chain. The fund maintained a relatively high position during the reporting period, exploring related industry chains such as pan-AI applications, semiconductors, new energy vehicles, and home appliances, and conducting long-term tracking and layout of companies with core competitiveness. In the future, it will continue to look for excellent companies with good investment cost-effectiveness.

In addition, Galaxy Innovation Growth, managed by Zheng Weishan, has 9 semiconductor stocks among its top 10 holdings, among which the top three are Changdian Technology, Shengbang Electronics, and North Huachuang; GF Advanced Manufacturing, managed by Sun Di, has heavy holdings in Shanghai Electric Co., Ltd., Tongfu Microelectronics, and Changdian Technology; Wanjia Technology Innovation, managed by Huang Xingliang, has heavy holdings in China Micro Semiconductor, Zhanrui Micro, GalaxyCore, and Cambrian.

Zheng Weishan stated in the second quarter report of Galaxy Innovation Growth that the inventory cycle of this round of the semiconductor industry has basically been fully interpreted. Except for mobile phones and PCs, which may have quarterly replenishment opportunities, other smart Internet of Things (AIoT), home appliances, and cars may be in a state of slow digestion and slow transition. Overall, the industry has bottomed out and may be in the initial stage of an upward cycle.

9 semiconductor stocks received large-scale fund increases

Overall, in the second quarter of this year, the entire semiconductor sector received a trend of increased holdings from public funds.

Wind data shows that as of the end of the second quarter of 2024, public funds have held a total of 121 semiconductor stocks, of which 70 stocks have been increased by funds in the second quarter. Nine semiconductor stocks including Lanqi Technology, Changdian Technology, GigaDevice, Cambrian, and Yak Technology have been increased by funds by more than 10 million shares.

Among them, Lanqi Technology is the semiconductor stock with the largest number of increased holdings by funds in the second quarter. More than 150 funds, including Xingquan Trend Investment managed by Dong Li, GF Multi-Factor managed by Tang Xiaobin and Yang Dong, and Xingquan Heyi managed by Xie Zhiyu, increased their holdings in the stock in the second quarter, with a net increase of 66.455 million shares in total.

It is worth mentioning that the latest semi-annual report disclosed by Lanqi Technology in 2024 predicts a significant increase in performance, with net profit attributable to the parent company's owners of 583 million to 623 million yuan in the first half of the year, an increase of 612.73% to 661.59% over the same period last year. The company believes that this is due to the recovery of demand for the company's memory interface and module supporting chips, and on the other hand, it is due to the large-scale shipment of some of the company's new AI "capacity" chip products, which have contributed new growth points to the company's performance. In the secondary market, the company's stock price has bottomed out and rebounded since April 10, and has risen by more than 40% so far.

Similar to Lanqi Technology, most of the semiconductor stocks that were pre-empted by funds have shown encouraging performance in the recently disclosed 2024 semi-annual report performance forecasts.

Storage chip company GigaDevice received an increase of 44.1 million shares from funds in the second quarter. Galaxy Innovation Growth, managed by Zheng Weishan, and Soochow Mobile Internet, managed by Liu Yuanhai, both increased their holdings in the stock. GigaDevice's performance forecast shows that after experiencing sluggish market demand and gradual inventory reduction in 2023, demand in the consumer and network communication markets will pick up in the first half of 2024, driving the company's storage chip product sales and revenue growth. The company expects to achieve a net profit of approximately 518 million yuan in the first half of the year, a year-on-year increase of 54.18%.

The semiconductor materials company Yak Technology's performance forecast shows that the company is expected to achieve a net profit of about 512 million to 580 million yuan in the first half of 2024, a record high since 2019, an increase of 50% to 70% over the same period last year. In the second quarter, the stock was increased by products under the management of many star fund managers, including E Fund Emerging Growth, Invesco Great Wall Industrial Trend, and Caitong Value Momentum, with a total increase of about 14.85 million shares.

Overall, as of the end of the second quarter, among the 121 semiconductor stocks heavily held by public funds, North Huachuang had the largest number of heavily held funds, with 527 funds holding them; the stock with the largest total market value was SMIC, with funds holding a total of 24.075 billion yuan.

According to Huafu Securities' research report, as of the end of the second quarter of 2024, the total market value of public funds' electronic industry holdings accounted for 14.1%, ranking first among all Shenwan first-level industries, with a month-on-month growth rate of 24.4%, also ranking first. Among them, semiconductor sector holdings accounted for 46% of the total electronic sector holdings, accounting for half of the market.

Computing power semiconductors and consumer electronics semiconductors are the most promising

Looking ahead to the future market, many fund managers have elaborated in detail their views on investment opportunities in the semiconductor industry in their second quarter reports. Among the many semiconductor sub-industries, artificial intelligence-driven computing power semiconductors and macroeconomic-driven consumer electronics semiconductors are the most favored by fund managers.

For example, Zeng Peng and Xiao Ruijin, fund managers of Bosera Semiconductor Theme Mix, divide the A-share semiconductor industry into four major sub-industries based on downstream driving forces: computing power semiconductors driven by artificial intelligence, semiconductor equipment materials driven by independent innovation, consumer electronics cyclical semiconductors driven by macroeconomics, and power and special semiconductors driven by new energy and military demand. Among them, in the third quarter of 2024, they continue to be optimistic about the two major categories of computing power semiconductors driven by artificial intelligence and cyclical semiconductors driven by global economic recovery.

First, they expect AI to drive the consumer electronics industry into an update cycle. Subsequently, we will see the release of a series of new products equipped with AI functions, which will increase consumers' willingness to buy. This will drive the replenishment of electronic components and chip inventories, and the prices of chips with cyclical attributes such as storage, display driver, and radio frequency will continue to rise, and the performance of upstream chip companies will continue to improve.

Secondly, the successful establishment of the third phase of the National Integrated Circuit Industry Investment Fund will help to steadily advance independent innovation in semiconductors. Advanced processes and high-performance storage will become the focus of market attention. This is also an investment direction with certain performance in the semiconductor industry.

Finally, they remain optimistic about domestic artificial intelligence chips in 2024. After the U.S. Department of Commerce implemented new export control regulations on advanced computing chips in October 2023, Chinese artificial intelligence computing chip manufacturers began to accelerate domestic substitution. As the bottleneck of advanced processes is broken through, the problem of domestic chip supply will also be solved.

"In summary, we believe that the global semiconductor industry has entered a new upward cycle. In the third quarter, we will continue to overweight consumer electronics chip design manufacturers, overweight core leading domestic semiconductor equipment manufacturers, overweight domestic artificial intelligence computing chip companies, and continue to underweight power and specialty semiconductors driven by new energy and military industry." Zeng Peng and Xiao Ruijin said.

Lei Tao, fund manager of Debang Semiconductor, also expressed a similar view. He continued to place the portfolio's largest position on consumer chips and storage related to the semiconductor recovery. In addition, computing chips are an important long-term position, and he said that he still maintains optimistic expectations for these two areas.

"Recently, the market has finally begun to trade on opportunities for semiconductor recovery. This is also a response to our patience after the industry changes observed at the beginning of the year. We are still relatively optimistic about the recovery of the entire semiconductor industry. In the future, more consumer electronic products with AI functions will gradually increase the recovery slope of overall demand. I believe that the market will become more and more confident in this industry trend." Lei Tao said.

Editor: Chen Lixiang

Proofreading: Liu Rongzhi