The

company's main products are etching and thin film deposition equipment, which is an important market for semiconductor equipment (WFE's total capital expenditure accounts for 43%). Since its establishment, the company has successively broken through CCP etching, MOCVD, ICP etching, LPCVD and other semiconductor equipment products. Among them, the company's CCP etching products have entered the 2D and 3D memory production lines, and 270+ reaction tables have entered the production lines of 5nm and below; ICP-etched twin products have entered the production line, bringing significant market share growth to the company; Deep silicon etching products have become mainstream equipment in TSV/MEMS in China; LPCVD is a new product, which has been verified in 3D memory and has begun to contribute revenue.

Rapid expansion of wafer production capacity in mainland China with the support of

localization According to SEMI data, in 2000, the United States and Japan dominated half of the world's semiconductor production capacity, and Chinese mainland's production capacity accounted for only 2%. By 2010, semiconductor production capacity began to shift to Asia, with South Korea and Taiwan together accounting for 35% of global production capacity, while Chinese mainland's production capacity increased to 9%. In 2020, with the construction of production lines in Chinese mainland and the expansion of existing production lines, the proportion of production capacity in Chinese mainland increased to 17%. Looking forward to 2026, Chinese mainland's 12-inch wafer production capacity will account for 25%, jumping to the world's first 12-inch wafer production capacity, mainly driven by production line localization and mature node investment.

With the continuous progress of process nodes, transistor structures become more complex, etching becomes more and more important, and with the further reduction of linewidth in chip manufacturing and the widespread adoption of advanced processes, higher requirements are put forward for the accuracy and control of deposition and etch technology. In addition, as the number of 3D NAND layers increases, etching requires ultra-high aspect ratio control, which drives the demand for etching equipment to grow significantly, and ICP and CCP equipment have become the core tools for 3D NAND manufacturing due to their precise deep hole machining capabilities. As the number of layers continues to increase, etch technology will continue to play a key role in high-density manufacturing.

Under the continuous high R&D investment, the company continues to make product breakthroughs The

company maintains high R&D investment all year round, and the R&D expense rate is stable at more than 10%. Compared with overseas equipment manufacturers Applied Materials and Lam Research Semiconductor, the company's R&D rate has been higher than overseas since 2020. The company continues to break through performance and product efficiency, broaden the product line, in recent years, has launched dual reactor etching, LPCVD and other equipment. In May 2024, the company released the Preforma UniflexHW and AW equipment, which focuses on the deposition of high aspect ratio metal tungsten, using an autonomous growth gradient suppression process and an optimized thermal field system to achieve precise filling and high production efficiency of complex structures.

Investment Advice

We expect that the company's net profit attributable to the parent company from 2024 to 2026 will be 16, 25, and 3.4 billion yuan respectively, and the corresponding EPS will be 2.6, 4.0, and 5.5 yuan respectively, and the corresponding closing price PE on April 10, 2025 will be 72x, 47x, and 34x respectively. The first coverage gives a "buy" rating.

Risk Warning: The

expansion of production is less than expected, the progress of R&D is less than expected, industrial competition is intensifying, and trade frictions are intensifying.