Tracking China’s Semi Localization Dependency on import lit...-110481691

M UpdateTracking China’s Semi Localization | Asia PacificDependency on import lithography tools remains We summarize local news and our industry checks to provide key evidence of China’s progression in semi localization.Morgan Stanley Taiwan Limited+Charlie ChanEquity Analyst Charlie.Chan@morganstanley.com +886 2 2730-1725 Daniel Yen, CFAEquity Analyst Daniel.Yen@morganstanley.com +886 2 2730-2863 Ray Wu, CFAEquity Analyst Ray.Wu@morganstanley.com +886 2 2730-2871 Morgan Stanley Asia Limited+Daisy Dai, CFAEquity Analyst Daisy.Dai@morganstanley.com +852 2848-7310 Morgan Stanley Taiwan Limited+Tiffany YehResearch Associate Tiffany.Yeh@morganstanley.com +886 2 7712-3032 Morgan Stanley Asia Limited+Ethan JiaResearch Associate Ethan.Jia@morganstanley.com +852 3963-2287 Morgan Stanley Taiwan Limited+Lucas WangResearch Associate Lucas.Wang@morganstanley.com +886 2 2730-2875 Greater China Technology SemiconductorsAsia PacificIndustry ViewIn-LineBreakthrough in China’s Domestic DUV Equipment to 8nm? Recent reports of breakthroughs in China’s chip manufacturing equipment have gained attention, with rumors suggesting that China’s domestically made DUV equipment can produce chips at 8nm and below. Some companies have also applied for EUV equipment patents. However, according to a report by the Central News Agency, experts believe these claims are questionable, emphasizing that production yield is the real key. Also, the Netherlands remains an important equipment import source, as suggested by Exhibit 2 (Trendforce, Sept 18, 2024).Huawei’s Tri-Fold Phone Revealed with Pre-Orders Reportedly Exceeding 5 mn units: Huawei's tri-fold phone surpassed 5mn units in pre-orders during its launch week, The phone’s thickness is only 0.36 cm, and the battery, at 0.19 cm, is considered the thinnest in the world. Meanwhile, the new model is said to support multiple AI applications, and it offers satellite communication. Huawei revealed that the price of the Mate XT ranges from Rmb19,999 to Rmb23,999, in line with market expectations. (Financial Times, Sept 11, 2024)ACM Research Launches Panel-Level Etching Tool, Expanding Its FOPLP Porfolio: ACM Research (ACMR), a provider of wafer processing solutions for semiconductor and advanced wafer-level packaging applications in China, announced on September 3 the release of its Ultra C bev-p panel bevel etching tool for fan-out panel-level packaging (FOPLP) applications. We expect ACMR to gain market share from Chinese customers and capture international opportunities. (Company press release, Sept 3, 2024)Stock implications: China smartphone sell-through is turning weaker in 3Q24, which could prove negative for its supply chain companies, such as Goodix and Will Semi. Huawei's Mate XT may not move the needle, due to its high ASP and small volume. China equipment made lots of progress in recent years, we like NAURA (002371.SZ), AMEC (688012.SS) and ACM Research (ACMR.O), and we believe these players wil