Under the complex international situation, domestic semiconductor companies have increased R&D investment in order to accelerate the breaking of the monopoly of foreign companies in the domestic market

Text: "Caijing" reporter Zhang Jianfeng

Editor Yang Xiuhong's tariff disruption continues, and a number of A-share semiconductor companies release their annual report cards. In the context of the improvement of the industry's prosperity and the acceleration of domestic substitution, it is the general state of semiconductor companies in 2024 to increase revenue and increase R&D expenses in order to make up for the shortcomings of domestic high-end semiconductor equipment. On the evening of April 17, the market value of more than 100 billion yuan of micro companies (688012. SH) released its 2024 annual report, and the company's operating income increased by 44.73% year-on-year to 9.1 billion yuan. In the current period, the company's core product etching equipment revenue increased by more than 50% year-on-year, which is the main contributor to the company's revenue growth. Wind data shows that as of April 17, 2025, about 134 A-share semiconductor companies have released 2024 financial data, and nearly eighty percent of the company's operating income has increased year-on-year. Shengong Co., Ltd. (688233. SH), Stewey-W(688213.SH), Pioneer Precision (688605. SH) temporarily ranked among the top three in the industry, with year-on-year growth rates of 124%, 109% and 104% respectively. "In 2024, smartphone and PC shipments will begin to recover, laying the foundation for the semiconductor upcycle driven by the consumer market." Shengong Co., Ltd. said in the annual report that the company is rooted in the international semiconductor supply chain with a strict division of labor, and the silicon material subdivision industry is located in the upstream of the entire semiconductor industry chain, and the operating performance is still highly correlated with the prosperity of the semiconductor industry shown by the above data. At a time when revenue is growing, domestic semiconductor companies have increased R&D investment, and some companies' net profits have declined. As of April 17, among the 69 A-share semiconductor companies that have announced R&D expenses in 2024, more than eighty percent of the companies have increased their R&D expenses year-on-year, with a total R&D expenditure of about 35 billion yuan, a year-on-year increase of nearly two percent. From the perspective of the amount of R&D expenses, among the above-mentioned semiconductor companies, there are about 52 companies with R&D expenses exceeding 100 million yuan in 2024. Among them, SMIC (688981. SH), Haiguang Information (688041. SH), Weir shares (603501. SH) temporarily ranks among the top three, with R&D expenses of 5.4 billion yuan, 2.9 billion yuan, and 2.6 billion yuan in 2024, respectively. In terms of the proportion of R&D expenses, among the above-mentioned companies, there are about 28 companies whose R&D expenses will account for more than 20% of operating income in 2024. Among them, Zhenlei Technology (688270. SH), Kai Wit (688693. SH), Xinhai Technology (688595. SH) temporarily ranked in the top three, accounting for 51%, 45% and 41% of R&D expenses respectively.

Making up for the shortcomings of domestic high-end semiconductor equipment and accelerating the breaking of the monopoly of foreign companies in the domestic market are the main purposes of many semiconductor companies to increase R&D investment. As the tariff war escalates, U.S. sanctions on China's semiconductor industry are increasing. Since the beginning of April this year, the United States has repeatedly raised the additional tariff rate on China, from 34% to 125% at the beginning, and after the tariffs that have already taken effect, the tariff rate on Chinese goods exported to the United States has reached 145%. Since then, the U.S. government has announced that it will exempt electronic products such as smartphones, computers, and chips from "reciprocal tariffs", but U.S. Secretary of Commerce Lutnik said on April 13 that the exemption is only a temporary measure and will only be maintained until the U.S. government formulates a new tariff plan for the semiconductor industry, and the United States is expected to introduce a special "semiconductor tariff" within "one or two months". "In recent years, with the accelerated development of digital technology-related industries such as artificial intelligence and big data, semiconductor micro-manufacturing equipment, as the cornerstone of the digital industry, has developed rapidly." Yin Zhiyao, chairman and general manager of AMEC, said in the company's 2024 that the complex international situation highlights the truth that "if the digital is strong, the country will be strong, and if the digital is weak, the country will be weak" and "if the equipment is strong, the digital will be strong, and if the equipment is weak, the digital will be weak", and the importance of independent and controllable semiconductor equipment. A relevant person in the semiconductor industry told Caijing that under the trend of localization substitution, R&D investment in the semiconductor industry is expected to continue to increase. For the outlook for the industry, the market is still relatively optimistic. At the investor conference in March 2025, the management of Pioneer Precision said that according to the order situation and customer feedback, China's semiconductor equipment market as a whole will still be in an upward cycle in 2025.

Some institutions pointed out that in the context of tariff countermeasures, the semiconductor equipment and materials of companies such as Applied Materials, the core semiconductor equipment and material manufacturers in the United States, will be affected, resulting in an increase in the import cost of upstream semiconductor equipment and materials, and will also increase the willingness of domestic wafer factories to purchase domestic equipment and materials, and the process of domestic substitution will be further accelerated.

Revenue increased

As of April 17, 134 of the 162 A-share semiconductor companies have released 2024 financial data. In terms of revenue, among the above-mentioned companies, 106 companies increased their operating income year-on-year, accounting for nearly eighty percent. Among them, the revenue of 19 companies increased by more than 50% year-on-year, and the revenue growth rate of 3 companies exceeded 100%.

In the same period, among the above-mentioned companies, 67 companies reported a year-on-year increase in net profit attributable to the parent company, accounting for half of the total. Among them, the net profit attributable to the parent company of 28 companies increased by more than 100% year-on-year.

Among the above-mentioned semiconductor companies with operating income of more than 10 billion yuan in 2024, Weir shares (603501. SH), Tongfu Microelectronics (002156. SZ) and other four companies doubled their net profit attributable to the parent company, of which Weir shares temporarily ranked first with a year-on-year increase in net profit of 498%.

Weir is mainly engaged in chip design business. According to consulting firm TrendForce, the company is one of the top 10 fabless semiconductor companies in the world in 2024.

In 2024, Weir's operating income increased by 22.41% year-on-year to 25.7 billion yuan, and the net profit attributable to the parent company increased by 498.11% year-on-year to 3.323 billion yuan. The company's semiconductor design business is mainly composed of three business systems: image sensor solutions, display solutions and analog solutions.

"In 2024, the global semiconductor industry will usher in a recovery, AI (artificial intelligence) will promote the recovery of consumer electronics demand, accelerate the intelligence of automobiles, and the industry as a whole will enter an upward cycle." In the 2024 annual report, Weir said that the company seized the market opportunity, driven by factors such as the continuous introduction of products in the high-end smartphone market and the acceleration of the penetration of automotive intelligence, the company's operating performance has achieved significant growth, and the scale of operating income has reached a record high.

Weir further said that the company has achieved the improvement of gross profit margin and the increase of net profit through product structural optimization and supply chain combing and efficiency.

As a provider of integrated circuit packaging and testing services, Tongfu Microelectronics' operating income in 2024 increased by 7.24% year-on-year to 23.9 billion yuan, and the net profit attributable to the parent company increased by 299.9% year-on-year to 678 million yuan.

"The company's market development has been fruitful, the product structure has been further optimized, the capacity utilization rate has been improved, and the operating income has increased, especially the operating income of medium and high-end products has increased significantly." Tongfu Microelectronics said in its 2024 annual report that the semiconductor industry will gradually enter the upward stage of the cycle in 2024, and the market demand will gradually pick up under the combined effect of the gradual destocking of the industry, the demand of data centers, automotive electronics and other industries, and the favorable policies for consumer electronics.

The growth of semiconductor companies is closely related to the recovery of the industry.

According to data from the World Semiconductor Trade Statistics Organization (WSTS), global semiconductor sales will increase by 19.1% year-on-year to US$627.6 billion in 2024, and annual sales will exceed the US$600 billion mark for the first time.

During the same period, China's semiconductor industry continued to develop under the dual role of technological innovation and policy game, showing strong growth resilience and industrial vitality. According to the annual report of Tongfu Microelectronics, China's semiconductor sales will reach 1.3 trillion yuan in 2024, accounting for 30.1% of the global market, a year-on-year increase of 20.1%. Among them, the annual export value of integrated circuits increased by 17.4% year-on-year to 159.5 billion US dollars, surpassing mobile phones for the first time to become the single commodity with the highest export value.

For the prospects of the semiconductor industry in 2025, the market is still positively optimistic.

The

World Integrated Circuit Association (WICA) predicts that the global semiconductor market will continue to grow in 2025 and is expected to further increase to $718.9 billion, a year-on-year increase of 13.2%.

Wei Shaojun, chairman of the design branch of the China Semiconductor Industry Association, predicts that the size of the semiconductor chip market in Chinese mainland will reach 223 billion US dollars by 2025, a year-on-year increase of about 20%.

Increase R&D investment

At a time when revenue is growing, many semiconductor companies have increased R&D investment in order to accelerate the breaking of the monopoly of foreign companies in the domestic market. In terms of short-term profits and long-term R&D investment, many companies pay more attention to the latter.

Wind data shows that as of April 17, 69 semiconductor companies have announced annual R&D expenses, and 59 companies will increase their R&D expenses year-on-year in 2024, accounting for more than eighty percent. Among them, 43 companies have a year-on-year growth rate of more than 10%, and 5 companies have a year-on-year growth rate of more than 50%.

Among the above-mentioned companies, Zhongke Flying Test (688361. SH), China Micro Corporation (688012. SH), Kai Wit (688693. SH) will temporarily rank among the top three in the semiconductor industry in 2024 with a growth rate of 118%, 74% and 63% respectively.

As a leading enterprise in the domestic high-end semiconductor quality control equipment industry, Zhongke Flying Measurement's operating income in 2024 increased by 54.94% year-on-year to 1.38 billion yuan, and the net profit attributable to the parent company decreased by 108.21% year-on-year to a loss of 11.5251 million yuan. The significant increase in R&D expenses is one of the main reasons for the company's current loss.

In 2024, Zhongke Flying Measurement will invest 498 million yuan in R&D, a year-on-year increase of 118%. The company said in the annual report that in order to accelerate the breaking of the monopoly of foreign companies in the domestic market, the company further increased R&D investment in new products and iterative upgrading of existing products to more cutting-edge processes.

"With the rapid development of semiconductor process technology, quality control equipment is developing to smaller process nodes, and the difficulty of research and development is gradually increasing." In the 2023 prospectus, Zhongke Flying Test admitted frankly that although the company's products have been able to cover 2Xnm (node unit, generally refers to the "size of transistor gate width" in the integrated circuit manufacturing process) and above processes, the quality control equipment applied to the process below 2Xnm is still under development or verification, and there is still a big gap with international giants such as Kelei Semiconductor, Applied Materials, and Innovative Technology in terms of process advancement.

The increase in R&D investment is still continuing. In April 2025, the company issued a fixed increase announcement, planning to raise 2.5 billion yuan, of which 446 million yuan will be used for the Shanghai high-end semiconductor quality control equipment R&D and testing center project, and 620 million yuan will be used for the ABP and R&D center upgrade and construction project.

With the intensification of global trade frictions, China's semiconductor industry is facing severe challenges in supply chain security and technological breakthroughs. It is increasingly urgent to accelerate import substitution and promote the localization of China's high-end semiconductor quality control equipment.

According to the statistics of VLSI, a research and consulting company, the semiconductor testing and measurement equipment market in Chinese mainland will present a monopoly pattern of foreign equipment companies in 2023, with the top five companies accounting for 84.52% of the total market share, all of which are foreign manufacturers.

As the head company of domestic semiconductor equipment, AMEC will have a year-on-year decline in net profit attributable to the parent company in 2024 with a revenue increase of more than 40%, one of the reasons behind which is the substantial increase in the company's R&D investment.

In 2024, AMEC's R&D expenses will be 1.418 billion yuan, a year-on-year increase of more than 70%. During the same period, the company's R&D investment was about 2.452 billion yuan, a year-on-year increase of more than 90%, and the current R&D investment accounted for about 27.05% of the company's operating income, much higher than the average value of the Science and Technology Innovation Board.

AMEC said that due to the sharp increase in market demand for AMEC to develop a variety of new equipment, the company will significantly increase its R&D efforts in 2024 to make up for the shortcomings of domestic high-end semiconductor equipment as soon as possible, achieve catch-up, and lay a good foundation for sustainable growth.

Semiconductor equipment is the cornerstone of the integrated circuit and pan-semiconductor micro-device industry, and the ability of micro-processing of semiconductor equipment is the key to the development of the digital industry. AMEC's main products are etching equipment and MOCVD (Organometallic Compound Chemical Vapor Deposition, which is the key equipment in the production process of light-emitting diode epitaxial wafers).

Market analysts generally believe that under the trend of domestic substitution, the R&D investment of the semiconductor industry is expected to continue to increase.