CITIC Securities: AMD releases Ryzen AI 300 series processors, emphasizing the trend of AI landing on terminals and self-controllability

According to the financial news app Zhitong Finance, Guotai Junan Securities released a research report stating that AMD has launched a new AMD Ryzen AI300 series mobile processor and introduced multiple new AI PCs and gaming laptops powered by the AMD Ryzen AI300 series processors. With the AI investment boom, major technology giants are actively applying AI large models to smartphones, PCs, wearable devices, and other terminals. The penetration of AI PCs, AI smartphones, smart glasses, and edge AI is expected to accelerate. In addition, the importance of semiconductor self-controllability continues to be highlighted, with wafer and memory factories maintaining orderly expansion this year and next year. The progress of localization in the semiconductor industry is still accelerating. Over the next three years, localization will remain one of the strongest trends in the industry. The counter-cyclical expansion of domestic wafer factories combined with the continuous increase in domestic market share will drive sustained prosperity in the semiconductor equipment industry.

On July 27th, AMD launched a new AMD Ryzen AI300 series mobile processor and introduced multiple new AI PCs and gaming laptops powered by the AMD Ryzen AI300 series processors. With the AI investment boom, major technology giants are actively applying AI large models to smartphones, PCs, wearable devices, and other terminals. The penetration of AI PCs, AI smartphones, smart glasses, and edge AI is expected to accelerate. Recommended companies include PCB leader Pengding Holdings, battery leader Zhuhai Guanyu, Luxshare Precision, which closely cooperates with major North American customers, and Hikvision, which focuses on the intelligent IoT field. The AI wave is driving a surge in computing power demand, and the value of segments such as servers, AI chips, optical chips, storage, PCBs, etc., will significantly increase. It is recommended to pay attention to global server ODM leader Inventec, AI chip designer Cambricon-U, domestic processor leader Haiguang Information (Guotai Junan Securities market-making company), high-speed PCB leader Shanghai Electric, packaging substrate manufacturers Xingsen Technology and Shennan Circuit, memory interface chip leader Lanqi Technology (Guotai Junan Securities market-making company), Juchen shares, etc.

The Ministry of Economy, Trade and Industry of Japan has revised the "Cabinet Order for Export Trade Control and Foreign Exchange Order Related to Goods and Technology Listed in Appendix 1" to add 5 items related to semiconductors to the list of controlled export items and technology. This revision will be implemented on September 8, 2024. The importance of semiconductor self-controllability continues to be highlighted, with wafer and memory factories maintaining orderly expansion this year and next year. Guotai Junan Securities believes that over the next three years, localization will remain one of the strongest trends in the industry. The counter-cyclical expansion of domestic wafer factories combined with the continuous increase in domestic market share will drive sustained prosperity in the semiconductor equipment industry. The prosperity of equipment components and semiconductor materials is also expected to bottom out and rebound. It is recommended to pay attention to companies such as North Huachuang, Tuojing Technology, Huahai Qingke, Xinyuan Micro, Xinlaiyingcai, Yingjie Electric, Anji Technology, Guanggang Gas, Dinglong shares, etc. Advanced packaging technologies represented by CoWoS, seizing the trend of the AI industry, have broad growth prospects. Core equipment and material manufacturers in the industry chain are also worth noting. It is recommended to pay attention to Xingsen Technology, Tiancheng Technology, Huahai Chengke, Dinglong shares, Qiangli New Materials, Xinqi Microassembly, Shengmei Shanghai (Guotai Junan Securities market-making company), Changchuan Technology, etc.

SK Hynix released its financial report for the second quarter of the 2024 fiscal year, with consolidated revenue of 16.42 trillion Korean won, operating profit of 5.47 trillion Korean won, and net profit of 4.12 trillion Korean won. **In the second quarter of the 2024 fiscal year, the operating profit margin was 33%, and the net profit margin was 25%. SK Hynix predicts that in the second half of the year, with the continuous growth in demand for storage for AI servers, new products supporting edge AI for PC and mobile terminals will be launched. The sales volume of high-performance storage required for these products will also increase, and the demand for general storage will show a significant upward trend. After a two-year downward cycle, the destocking in the upstream areas represented by passive components, digital SoCs, RF, storage, packaging and testing, and panels has been basically completed or is nearing completion. With the replenishment of mobile phones and PCs and the demand for AI driving, prices and utilization rates of some categories have already started to rise, gradually entering the bottoming out and rebound phase, and the performance of related companies is gradually reaching a turning point. Key focuses include passive components such as Sunlord Electronics, Three Circles Group, and Jiemai Technology, with recommendations to pay attention to Tai Crystal Technology; for RF chips, ZTE Micro is recommended, with suggestions to focus on Weijie Chuangxin; as storage prices bottom out and rebound, it is recommended to pay attention to the domestic storage chip leader Zhaoyi Innovation and Beijing Junzheng; in the field of digital SoC chips, it is recommended to focus on Zhongke Lantian, Beijing Jingchen, and Hengxuan Technology, which are also expected to benefit from the outbreak of AI entry; as the utilization rate in the packaging and testing process gradually rises, it is recommended to pay attention to Tongfu Microelectronics, Changdian Technology, and Yongsi Electronics, which will also benefit from the surge in demand for advanced packaging driven by AI chips.

The global demand for smartphones and laptops is gradually recovering, with AI accelerating landing on the edge, AI smartphones and AI PC products successively coming to market, and Apple's Vision Pro already on sale in multiple countries or regions globally. Recommendations focus on the following directions: 1) Targets that are expected to benefit from downstream customer innovation in the future performance, including micro-innovations in AI, XR, and smartphones, 2) High-quality targets with greater performance elasticity benefiting from the recovery in demand for phones and computers. Investors are advised to focus on leading consumer electronics companies that benefit from the recovery in demand and entering a new cycle of innovation, such as Luxshare Precision, Pengding Holdings, Changying Precision, Zhuhai Guanyu, Huaqin Technology, OBIGO-UW, Transsion Holdings (Xingye Securities Market Maker), Lante Optics, and Yongxin Optics.

Risk Warning: Industry prosperity declining, industry manufacturing management costs rising