Weir Group Forecasts Sevenfold Profit Surge

In recent industry developments, Weir shares released a significant performance forecast on July 5, anticipating a net profit attributable to shareholders of approximately 13.08 to 14.08 billion Yuan for the first half of 2024. This marked an unprecedented increase of around 754.11% to 819.42% compared to the previous year, indicating not just a recovery, but a strong resurgence in demand.

The surging performance can be attributed to a steady recovery in market demand, particularly in high-end smartphone markets and automotive applications, where the adoption of advanced driver-assistance systems is growingThis is reflective of a broader trend within the semiconductor industry, which has seen various companies benefit from increased demand as they introduce new products, thereby significantly boosting revenue.

By July 8, the semiconductor sector was witnessing a notable uptickVarious stocks such as Jinwei Hikai and Fumanwei hit the trading limit after announcing impressive gainsCompanies like Weir, Lanqi Technology, and ChipOrigin also saw their stock prices soarIn the backdrop, TSMC's customers have agreed to price increases in return for a reliable supply of chips, indicating a tightening of the semiconductor supply chain and an increasing trend of price hikes across the boardThis phenomenon signals a critical shift for an industry that has been struggling with oversupply and decreased demand for over a year.

Price increases are often the most straightforward indicator of a market reversalThis year, power semiconductors led the way, with major players announcing price hikes ranging from 10% to 20%. As we approached June, several power semiconductor manufacturers like Huadong and Yangjie also initiated price adjustments in their offerings, further solidifying the trend.

Such price barriers are now cascading through the semiconductor supply chain

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Reports suggest that TSMC plans to raise its pricing by more than 5% for its advanced 3nm process, with packaging costs projected to climb as high as 20% next yearFollowing this news, TSMC's stock opened notably higher on June 18 and subsequently reached record highsAdditionally, Morgan Stanley has reported that Hua Hong Semiconductor's wafer utilization rate has surpassed 100%, with expectations of a wafer pricing increase in the latter half of the year.

Those directly within the industry have the clearest perception of the sector's fluctuationsFor instance, in the wafer manufacturing arena, SMIC reported Q1 2024 revenues of approximately 12.59 billion Yuan, representing a year-on-year increase of 23.36%. Moreover, companies in the packaging and testing sectors, such as Changdian Technology and Tongfu Microelectronics, are also reporting solid revenue growth, evidencing a recovery across the semiconductor supply chain.

The average number of inventory turnover days among leading Chinese chip firms like Zhiyin Innovation and Weiwei shares has shown a marked decrease over the past year, a sign that demand is picking upFrom an average of 351 days in Q1 2023, that number has fallen to around 240 days in Q1 2024. This declining trend strengthens the argument for an industry on the upswing.

Additionally, performance indicators including prices, inventory levels, and capacity utilization rates corroborate the facts indicating an upswing in the semiconductor cycleHistorically, the semiconductor industry has manifested clear cycles of growth and decline that typically span several quartersTaking the previous decade as a model, the industry transitions from booming growth periods to gradual downturns, a pattern that has filtered down through the years.

In further analysis, the ongoing demand for computational and storage power, particularly stemming from AI advancements, is contributing to this resurgence

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The computational requirements for AI models are skyrocketing; estimates suggest a staggering 750-fold increase in computing power demands every two yearsThe global AI chip market alone was valued at approximately $44.2 billion in 2022, and projections predict a growth to nearly double by 2027.

Moreover, the semiconductor market size is also on an upward trajectoryThe World Semiconductor Trade Statistics organization has adjusted its predictions, now estimating the global semiconductor market will reach approximately $611.23 billion in 2024, an impressive 16% growth from the previous fiscal year.

If one were to pinpoint a segment of particular interest as the new semiconductor cycle begins, the equipment sector certainly stands outThe demand for cutting-edge equipment used in the manufacturing of advanced semiconductors is expected to increaseAdvanced process nodes necessitate more sophisticated tools for etching, thin film deposition, and monitoring, thus driving demand across various equipment sectors.

The Chinese semiconductor landscape, bustling with potential yet grappling with low self-sufficiency, beckons for more robust local manufacturing capabilities to keep pace with global trendsCurrent data reveal that China’s chip self-sufficiency rate hovers around 12%, with high-end chips being heavily reliant on imports from companies like Nvidia, which has captured a sizable share of China's AI chip market.

Consequently, the push for domestic semiconductor manufacturing is mountingThe first quarter of 2024 saw North Huachuang report revenue growth of 51.36%, while industry players in the equipment segment are anticipating a rapid expansion in capacity and sales in the coming years, driven by domestic developments.

Against this backdrop, Chinese firms that specialize in semiconductor equipment are poised for significant growth

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