Japan's $10 Trillion Semiconductor Investment

 

 

Last week, the Japanese government announced that it will provide at least 10 trillion yen (approximately 468.8 billion yuan) in support by the fiscal year 2030 to promote the development of semiconductors and AI in the country.

Not only Japan, but also China, the United States, India, South Korea, the European Union, Southeast Asia, and other regions around the world are heavily investing in the semiconductor industry, hoping to strengthen control over the chip supply chain and seek a more advantageous position in the global semiconductor market.

A recent overview of global semiconductor support policies

 

 

I. Why increase investment in semiconductors?

As the technological foundation of the modern technology industry, the status of semiconductors in the global technology game is becoming increasingly prominent. Governments around the world are continuously increasing their investment in semiconductors, mainly due to the following reasons:

Autonomy and security

Semiconductors are the core of modern information technology, widely used in military, communication, transportation, medical, and other fields. Although the semiconductor industry relies on global division of labor, in some key areas, especially products related to national defense or critical infrastructure, it is still necessary to obtain them as much as possible from domestic sources, otherwise, there may be a risk of supply chain disruption, affecting national security.

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Occupying a favorable position in the industry chain

Countries hope to strengthen control over the chip supply chain and occupy a more advantageous position in the global semiconductor market to avoid the recurrence of supply chain issues during the pandemic and threats brought about by geopolitical tensions.

Industrial upgrading

Semiconductors are an important part of the high-tech industry and are of great significance to economic growth and industrial upgrading. At the same time, since the AI wave has swept the world, the close connection between AI and semiconductors has also been valued. AI smart application innovation drives the continuous growth of the semiconductor industry, and the computing power provided by GPUs makes AI smart applications possible. The two complement each other and jointly promote industrial upgrading.

 

II. Current logic of semiconductor investment

1

Fundamental recovery

Since the growth bottomed out in 2022, the performance of semiconductor companies has continued to improve. In the third quarter of this year, the revenue of the semiconductor (Shenwan) index increased by 20.3% year-on-year, and the net profit attributable to the parent company increased by 50.3% year-on-year. Behind the performance improvement, it reflects the industry's fundamental recovery.

2

Global semiconductor cycle upward

According to SIA (Semiconductor Industry Association) data, the global semiconductor sales in the third quarter of this year reached 166 billion US dollars, a year-on-year increase of 23.2%, marking four consecutive quarters of year-on-year growth and setting a new record for quarterly revenue. Among them, China's semiconductor sales were 48.1 billion US dollars, accounting for 30.0% of the global total, with a year-on-year increase of 22.9%.

Benefiting from the strong demand brought by AI, looking at the global semiconductor cycle, the semiconductor industry may have started a new upward cycle. Since May 2023, the global monthly semiconductor sales have continued to rebound, driving the industry's prosperity upward.

 

 

III. How to seize semiconductor opportunities?

"Hardcore Li Gong" Li Xin is a fund manager who noticed the reversal of semiconductor prosperity earlier. As early as in the third quarter report of 2023, Li Xin expressed his views on AI driving the development of semiconductors:

"From the hardware perspective of AI, the goal is to achieve high-performance parallel computing that can support large models. High-end digital chip manufacturing and its upstream advanced semiconductor equipment, as well as AI chip design with accumulation in hardware, underlying software, and algorithm optimization, are the segments we are optimistic about benefiting first from new industrial development opportunities. For the semiconductor equipment industry, as the industry deepens, there have emerged a number of excellent or highly potential companies in the development of upstream key components and high-difficulty "bottleneck" equipment."

Since late September, driven by policy benefits, A-shares have started a rebound, with the technology sector represented by semiconductors once again acting as the "vanguard" of the rebound. However, technology investment is not something that can be achieved overnight, and the fluctuation of the technology sector is relatively large, requiring investors to have enough patience and determination. They need to not only seize the current opportunities but also look to the future, which requires some judgment on the long-term development of technology and the industry, which is more difficult for ordinary investors.

Professional investors represented by Li Xin are relatively more professional in technical judgment, research on related industries and companies, and may be a suitable choice for investors.