- The CSI All Share Semiconductor Products and Equipment Index (H30184) rose by 3.6% at one point during Monday's early trading, reaching a three-month high, with a year-to-date increase expanding to 19%, significantly outperforming the CSI 300 Index (399300), which rose by 3.3% in the same period.
- The State Council of China recently held an executive meeting, clearly proposing a comprehensive deepening of reforms in the science and technology system and mechanism, emphasizing the focus on global technological frontiers and strengthening original and leading scientific and technological breakthroughs.
- DeepSeek formally released the V4 series of large language models after a 15-month interval, reshaping market expectations regarding the pricing of the Sino-American technology gap in artificial intelligence and the localization process of computing infrastructure.
Market Data and Relative Performance
During today's Asia-Pacific early trading session, China's A-share semiconductor sector displayed significant features of excess returns. The CSI All Share Semiconductor Products and Equipment Index exhibited a gap upward movement in resonance with multiple news fronts, with an intraday increase of 3.6% reflecting the concentrated allocation demand on the funding side for this vertical field. Compared to broad-based indices, the semiconductor index's year-to-date return of 19% is in stark contrast to the CSI 300 Index's 3.3% increase. This structural divergence indicates that market liquidity is accelerating towards hard technology targets with policy certainty and a predictable turning point in the industrial cycle during a cycle where the macroeconomic fundamentals are in stable repair.
Policy Tone and Industry Support Path
The recent statement from the State Council executive meeting provides top-level design credit endorsement for semiconductor and frontier technology tracks. The meeting focuses on high-level technological self-reliance and self-improvement, with its core focus on meeting national strategic needs and industrial development requirements. This top-down policy orientation implies that the future inclination of resources towards semiconductor equipment, core components, and key materials may further increase. If substantial fiscal and tax subsidies or industrial funds are implemented, relevant enterprises' R&D investment and capacity expansion cycles may shorten accordingly, thus improving long-term expected capital returns.
Technological Events Driving and Marginal Pricing
The release of the V4 series large language model by DeepSeek served as the direct catalyst for the current market trend. After a 15-month hiatus, the launch of this start-up's new product not only affirmed the domestic capability of AI algorithm iteration but also transmitted a clear signal of computing power demand expansion upstream in the industry chain. Dependencies in large model training and inference stages on high-performance computing chips, advanced packaging technologies, and high-bandwidth memory are driving the semiconductor industry's fundamental logic from cyclical bottom recovery to AI technology innovation-driven structural growth. If competition in this field between China and the US continues to complexify, the demand for a self-controlled domestically-produced computing power supply chain will grant related targets higher valuation premiums.
The Chinese semiconductor industry is currently in a dual resonance period of policy efforts and industrial innovation. The record high in the CSI All Share Semiconductor Products and Equipment Index for the past three months reflects not only the emotional feedback on short-term news fronts but also the process of re-evaluating the entire artificial intelligence and underlying computing power industry chain. The emergence of DeepSeek's V4 large model as a landmark event is triggering demand reassessment between downstream applications and upstream manufacturing.
Competitive Landscape
In the global competition of large AI models, the release of DeepSeek V4 marks the resilience shown by domestic algorithm enterprises in facing computing power bottlenecks and technology blockades. This strategic resilience, unfearing of disparagement, is reshaping the competitive landscape of the domestic large model ecosystem. From an industrial perspective, the availability and cost efficiency of underlying computing power will become core variables determining the market share of AI companies. As domestic large model performance gradually approaches or even aligns with international leading levels in certain verticals, the logic of localizing computing power infrastructure will become more solid, thus providing domestic semiconductor design companies and foundry enterprises with a certain market space.
Industry Chain Transmission and Order Expectations
The exponential increase in computing power consumption driven by the surge in large model parameter magnitudes and the expansion of multi-modal capabilities will initially manifest in the substantial demand for AI training and inference chips in the upstream semiconductor industry chain. Simultaneously, the construction of computing power clusters will also drive the release of orders for optical modules, server power management chips, and high-speed interconnect interface chips. If the commercialization path of downstream AI applications becomes gradually clearer, the inventory reduction speed in the semiconductor design segment is expected to accelerate, further driving the capacity utilization rate of packaging and testing and wafer foundry segments to recover, forming a healthy positive cycle across the upstream and downstream of the industry chain.
Long-term Prosperity of Equipment and Materials
The State Council executive meeting clearly emphasized strengthening original and leading scientific and technological breakthroughs, directly addressing the weakest links of equipment and materials in the semiconductor industry chain. Against the macro backdrop of continued external geopolitical uncertainties, self-control over semiconductor equipment and core components is not only a commercial demand but also the bottom line for industrial security. The capacity expansion cycle of domestic wafer fabs will be highly tied to the progress of domestic equipment integration. If domestic semiconductor equipment manufacturers can achieve substantial breakthroughs in mid-to-high-end front-end processes, their profit distribution weight in the entire industry chain will significantly increase, thereby supporting the long-term prosperity and upward shift of the valuation center of this niche sector.
