Analysis of Investment Opportunities in Localization of Semiconductor Materials and Equipment

Based on the above in-depth research data and market analysis, I now provide you with a systematic and comprehensive analysis report on investment opportunities and competitive landscape against the backdrop of localization of semiconductor materials and equipment.

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The “Several Policies of Guangzhou on Promoting High-Quality Development of the Integrated Circuit Industry Across the Entire Chain During the 15th Five-Year Plan Period (Draft for Comments)” issued by the Guangzhou Municipal Bureau of Industry and Information Technology marks a new stage in local governments’ systematic support for the semiconductor industry [1]. This policy clearly proposes two core goals:

• Production lines for manufacturing materials such as photomasks, photoresists, electronic specialty gases, high-purity sputtering targets, and large-size silicon wafers
• Focus on breaking through bottleneck links in domestic substitution of semiconductor materials

• Leading enterprises in manufacturing equipment such as lithography, etching, ion implantation, deposition, cleaning, and testing
• Build independent supply capacity for equipment covering front-end processes

This policy framework echoes the national-level “50% domestic equipment procurement red line” policy. According to an internal notice from the Ministry of Industry and Information Technology, chip manufacturers must use at least 50% domestic equipment when adding new production capacity. This mandatory requirement has been implemented since early 2025, and is strictly enforced for mature process production lines (≥28nm), while appropriately relaxed for advanced process production lines (<14nm) [2].

The localization rate of China’s semiconductor equipment has increased significantly from 25% in 2024 to 35% by the end of 2025, exceeding the 30% target set at the beginning of the year [3]. The adoption rate of domestic equipment in key sectors such as etching and thin film deposition has exceeded 40% [4]. This progress is attributed to:

• Technological Breakthroughs
  : AMEC’s 5nm-level etching equipment has entered validation at TSMC’s advanced process lines; the utilization rate of NAURA’s oxidation furnaces and diffusion furnaces in SMIC’s 28nm production lines exceeds 60%
• Policy Support
  : The third phase of the National Integrated Circuit Industry Investment Fund (with a scale of over RMB 300 billion) focuses on supporting R&D of domestic equipment, and the Ministry of Industry and Information Technology provides a 15% procurement subsidy
• Market Demand
  : China’s semiconductor market reached RMB 1.8 trillion in 2025, accounting for 31% of the global share

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According to industry data, the localization rates of various equipment segments show significant structural differentiation:

Equipment Type	Localization Rate	Global Market Size	Domestic Substitution Space	Key Domestic Manufacturers
Photoresist Strippers	80%	US$1.5B	Low	Etang Semiconductor
Thermal Processing Equipment	35%	US$2.5B	Medium-Low	NAURA, Huazhuo Precision Technology
Cleaning Equipment	28%	US$4.0B	Medium	ACM Research (Shanghai), ToPure Technology
CMP Equipment	25%	US$2.8B	Medium	Haina Qingke
Etching Equipment	18%	US$12.0B	High	AMEC, NAURA
Thin Film Deposition Equipment	18%	US$11.7B	High	Tuojing Technology, AMEC
Ion Implantation Equipment	8%	US$3.6B	Very High	Suke Zhongkexin, KAST
Coating & Developing Equipment	5%	US$3.7B	Very High	Xinyuan Micro, ACM Research (Shanghai)
Metrology & Testing Equipment	5%	US$12.0B	Very High	C-Fly Tech, Wuhan Jingce Electronics
Lithography Equipment	<1%	US$18.0B	Extremely High	SMEE

: The global etching equipment market is monopolized by three US and Japanese manufacturers: LAM Research, Tokyo Electron (TEL), and Applied Materials (AMAT), with a combined market share of over 90%. AMEC, NAURA, and Etang Semiconductor have achieved a localization rate of 10-20% and are accelerating market penetration [5].

:

• AMEC’s CCP etching equipment fully covers most applications for processes above 28nm, has entered the 5nm cycle verification stage, with critical dimension uniformity of less than 1nm [6]
• NAURA dominates silicon etching and dielectric etching in 8-inch production lines, and has successfully applied its products in key steps such as hard mask etching and aluminum pad etching in 12-inch production lines

: Etching equipment is one of the three core equipment in semiconductor manufacturing (accounting for 22% of total value), with broad domestic substitution space. Focus on and .

: The global thin film deposition equipment market is approximately US$11.7 billion, with localization rates of 10-30% in sub-sectors such as PECVD, ALD, and CVD. Enterprises including Tuojing Technology, AMEC, MicroGuide Nano, and ACM Research (Shanghai) are making rapid breakthroughs [7].

:

• Tuojing Technology’s PECVD, ALD, and SACVD products cover logic chip and memory chip manufacturing, with customers including SMIC and Huahong Group
• NAURA has deployed in LPCVD, APCVD, and ALD fields, and is the domestic leader in the PVD sector
• MicroGuide Nano is the first domestic equipment company to successfully apply mass-produced High-k ALD to front-end production lines at the 28nm node

: The value share of thin film deposition equipment in 3D NAND and HBM manufacturing has increased from 18% to 26%, with growing demand. Focus on .

: The global lithography equipment market is dominated by three companies: ASML (Netherlands), Nikon, and Canon, with ASML monopolizing high-end EUV lithography machines. SMEE’s 28nm DUV lithography machine has completed process verification, but there is still a significant gap in overlay accuracy and uptime compared to ASML [8].

:

• Accelerated localization of DUV lithography machines for mature processes (28nm and above)
• Advanced processes rely on multiple patterning technology to compensate
• Coating & developing equipment is supporting lithography machines, with a localization rate of <5%; Xinyuan Micro has covered i-line, KrF, and ArF segments

: The localization rate of lithography equipment is less than 1%, but policy support is the strongest. SMEE’s IPO on the STAR Market is approaching; pay attention to related concept stocks.

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Material Type	Localization Rate	Global Market Size	Key Enterprises
Silicon Wafers	20%	US$14.0B	Simgui Technology, Lion Micro
Electronic Specialty Gases	30%	US$6.5B	Nanda Optoelectronics, Huate Gas, Jinhong Gas
Photoresist	15%	US$5.5B	Tongcheng New Materials, Nanda Optoelectronics, Jingrui Electronic Materials
CMP Slurries & Pads	15%	US$3.5B	Anji Technology, Haina Qingke
Wet Chemicals	25%	US$5.5B	Jingrui Electronic Materials, Shanghai Xinyang
Sputtering Targets	20%	US$2.2B	Jiangfeng Electronics, Grikin Advanced Materials
Photomasks	15%	US$6.0B	Lovi Optical Technology, Qingyi Photomask
Coating & Developing Materials	25%	US$2.8B	Xinyuan Micro, ACM Research (Shanghai)

: The global photoresist market is monopolized by Japanese giants such as JSR, Tokyo Ohka Kogyo, and Shin-Etsu Chemical. The localization rate of high-end ArF/KrF photoresist is still in single digits. The scale of China’s domestic photoresist market is expected to reach RMB 18-22 billion in 2025, accounting for 25-30% of total demand [9].

:

Enterprise	Core Technology	Market Position	Capacity Plan
Tongcheng New Materials	KrF/ArF Photoresist	KrF market share over 40%, ArF qualified	10,000-ton annual photoresist production project
Nanda Optoelectronics	ArF Photoresist	The only domestic enterprise with mass-produced ArF, qualified for 28nm	50-ton annual ArF production line
Jingrui Electronic Materials	KrF/ArF Photoresist	Monthly KrF production capacity exceeds 1 ton, ArF in small-batch production	30,000-ton annual semiconductor photoresist production project
Shanghai Xinyang	KrF/ArF Photoresist	Mass supply of I-line/KrF, received ArF orders	Large-scale production line under construction

: Photoresist is the semiconductor material category with the highest technical barriers. The risk of potential supply cuts from Japan accelerates domestic substitution. Focus on , , and .

: Electronic specialty gases are the second largest material category in semiconductor manufacturing (accounting for 13% of total value), with a localization rate of about 30%. Nanda Optoelectronics, Huate Gas, and Guanggang Gas have achieved breakthroughs.

:

• Nanda Optoelectronics ranks first in global market share of Mo sources; capacity utilization rates of electronic specialty gases and precursor materials are 102% and 93% respectively, with tight supply
• Huate Gas and Jinhong Gas have comprehensive layouts in high-purity gas sectors

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:

• Market Capitalization: RMB 217.6 billion
• Current Stock Price: RMB 348.76
• 2025 Increase: 94.88%
• P/E (TTM): 113.72x
• ROE: 9.31%

:

1. Etching Equipment Leader
   : CCP etching equipment covers most applications above 28nm, 5nm-level equipment enters cycle verification
2. Thin Film Deposition Breakthrough
   : Thin film equipment such as LPCVD and ALD have successfully entered the market; Q3 2025 financial report shows strong new equipment orders
3. Platform Layout
   : Formed a four-front-end process equipment matrix of “etching + thin film + metrology + wet process” through the acquisition of Hangzhou Zhonggui, covering 80% of key processes in chip manufacturing

:

• H1-Q3 2025 revenue increased by 37.3% YoY, net profit attributable to shareholders increased by 23.9% YoY
• Gross profit margin remains stable, R&D investment continues to increase
• Healthy free cash flow, low debt risk [10]

:

• Stock price continues to rise along the 50-day moving average, MACD in long position
• KDJ indicator is at a high level of 79.8, RSI is in the overbought zone
• Short-term support level: RMB 296.65, resistance level: RMB 356.29

: . As the absolute leader in etching equipment, it benefits from memory capacity expansion and advanced process breakthroughs, with high certainty of medium- to long-term growth.

:

• Market Capitalization: RMB 44.7 billion
• Current Stock Price: RMB 265.42
• 2025 Increase: 153.17%
• P/E (TTM): 59.72x
• ROE: 25.06% (industry-leading)

:

1. CMP Slurry Leader
   : Leading localization rate of CMP slurries, products cover logic chips and memory chips
2. Wet Chemicals Leader
   : Advanced technology for electronic-grade wet chemicals, high capacity utilization
3. Outstanding Profitability
   : Net profit margin of 32.10%, far exceeding the industry average

:

• Q3 2025 EPS: RMB 1.38, exceeding expectations by 14.05%
• Earnings have exceeded expectations for multiple consecutive quarters, with strong growth momentum
• Abundant operating cash flow, healthy financial structure

:

• Stock price rises strongly along the 20-day moving average, cumulative increase in 2025 exceeds 150%
• MACD golden cross upward, KDJ indicator runs in the overbought zone
• Short-term support level: RMB 228.28, resistance level: RMB 272.60

: . A platform-type enterprise in semiconductor materials, it benefits from accelerated domestic substitution with high earnings elasticity.

:

• Market Capitalization: RMB 32.0 billion
• 2025 Increase: 85.2%
• Localization Rate of CMP Equipment: 20-30%

:

• Leading localization rate of CMP equipment; single-wafer cleaning equipment received repeat orders from Huahong Shanghai’s 12-inch 28nm production line
• Equipment uptime exceeds 90%, product reliability verified
• Net profit growth for 4 consecutive years, high growth certainty

:

• Market Capitalization: RMB 38.0 billion
• 2025 Increase: 95.8%
• Photoresist Business Revenue: RMB 442 million (H1 2025)

:

• Controlling stake in Beijing Kehua gives it over 40% market share of KrF photoresist
• ArF/ArFi photoresist products have passed verification by domestic chip manufacturers and are in mass production
• The only A-share enterprise cooperating with ASML in EUV photoresist development
• Independently develops electronic-grade phenolic resin, with a full industrial chain layout

:

• Market Capitalization: RMB 15.0 billion
• 2025 Increase: 186.5% (industry’s top gainer)
• Photoresist Revenue: Exceeded RMB 106 million (H1 2025)

:

• Full product matrix covering G-line, I-line, KrF, and ArF
• Monthly KrF photoresist production capacity exceeds 1 ton
• ArF products have entered verification in Yangtze Memory Technologies’ advanced process production lines
• H1-Q3 2025 net profit growth rate exceeds 19200% YoY

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Sub-sector	Investment Targets	Rationale
Etching Equipment	AMEC, NAURA	Technological breakthrough + market share gain + full order book
Thin Film Deposition	Tuojing Technology, MicroGuide Nano	Driven by memory/HBM demand + domestic substitution
CMP Equipment	Haina Qingke	Penetration into mature processes + demand for advanced packaging
Metrology & Testing	C-Fly Tech, Wuhan Jingce Electronics	Lowest localization rate + policy support

Sub-sector	Investment Targets	Rationale
Photoresist	Tongcheng New Materials, Nanda Optoelectronics, Jingrui Electronic Materials	Risk of supply cuts from Japan + technological breakthrough + capacity release
Electronic Specialty Gases	Nanda Optoelectronics, Huate Gas	Mature category + high capacity utilization
CMP Slurries & Pads	Anji Technology, Haina Qingke	Platform layout + outstanding profitability

                    High Domestic Substitution Space
                         │
    ┌────────────────────┼────────────────────┐
    │                    │                    │
    │   Photoresist (Strong Buy) │   Etching Equipment (Strong Buy) │
    │   Metrology & Testing (Watch)     │   Thin Film Deposition (Strong Buy) │
Low◄─┼────────────────────┼────────────────────┼►High
Mar   │                    │                    │ Mar
ket   │   Silicon Wafers (Watch)       │   Cleaning Equipment (Buy)    │ ket
Spa   │   Sputtering Targets (Watch)       │   CMP Equipment (Buy)     │ Si
ce   │   Wet Chemicals (Buy)   │   Testing Equipment (Buy)    │ ze
    │   Electronic Specialty Gases (Buy)    │   Ion Implantation (Watch)    │
    │                    │                    │
    └────────────────────┼────────────────────┘
                         │
                    Low Domestic Substitution Space

• R&D progress of advanced process equipment may fall short of expectations
• International giants continue to increase R&D investment to maintain technological leadership

• The implementation intensity of the 50% domestic equipment policy may be adjusted
• Advanced process production lines may be granted more exceptions

• Risk of a global semiconductor cycle downturn
• Memory capacity expansion progress may be affected by price fluctuations

• Price competition among domestic manufacturers may intensify
• International manufacturers may cut prices to maintain market share

• Supply chain security incidents may cause short-term disruptions
• Technology export controls may continue to escalate

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1. Accelerated Localization Process
   : The localization rate of semiconductor equipment has exceeded 35%, entering the core climbing phase of the acceleration period on the S-shaped growth curve, and the growth rate will accelerate significantly in the future [11].

2. Structural Opportunities Highlighted
   : Segments with localization rates below 10% such as lithography, metrology & testing, and coating & developing have the largest growth space; segments that have broken through the 10-20% range such as etching and thin film deposition are in a rapid penetration period.

3. Clear Policy Support
   : The “50% domestic equipment procurement red line” policy is enforced, with the third phase of the National Integrated Circuit Industry Investment Fund providing over RMB 300 billion in support, combined with supporting policies from local governments, forming a policy synergy.

4. Technological Breakthroughs Expected
   : AMEC’s 5nm etching machine has entered verification, the yield of the 7nm pilot line exceeds expectations, and 14nm domestic equipment is expected to be put into mass production as early as Q2 2026.

: Focus on the photoresist sector, as the urgency of domestic substitution has increased due to the catalysis of Japanese supply chain security incidents. Key targets include .

: Focus on order fulfillment of leading equipment enterprises and interim report performance. Key targets include .

: Focus on breakthrough opportunities in low-penetration, high-value segments such as metrology & testing and coating & developing, as well as verification progress of advanced process equipment.

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[1] Securities Times - “Guangzhou’s Plan to Accelerate the Construction of a Strong Advanced Manufacturing City (2024–2035)” (https://www.stcn.com/article/detail/3579703.html)

[2] New Third Board Information - “Overview of China’s Semiconductor Supply Chain Independence Progress” (https://www.xinsanbanbao.com/20251231/news/n98415.html)

[3] ICwise - “China’s Semiconductor Equipment Enters Core Acceleration Period” (https://www.esmchina.com/marketnews/56588.html)

[4] Yahoo News - “China’s Semiconductor Equipment Localization Rate Exceeds 35%, Far Exceeding Expectations” (https://tw.news.yahoo.com/)

[5] Guojin Securities - In-Depth Report on Semiconductor Equipment Industry: “Resonance of Memory Capacity Expansion and Independent Controllability, Broad Domestic Substitution Space”

[6] Futu News - “Semiconductor Equipment Industry: 2026 Outlook Amid Domestic Substitution” (https://news.futunn.com/post/