Digital chip design involves the creation of integrated circuits that process discrete digital signals (0s and 1s), covering core functions like logic operations, storage, and interface control. As a crucial sub-sector of the semiconductor industry, according to the Shenwan third-tier industry classification, digital chip design accounted for a substantial 57.8% weight in the underlying index (the Sci-Tech Innovation AI Index) of the HUABAO SHANGHAI SCIENCE AND TECHNOLOGY INNOVATION BOARD ARTIFICIAL INTELLIGENCE TRADING OPEN ENDED INDEX SEC (ASX: 589520) as of June 26th. It serves as the foundational bedrock and core driving force supporting cutting-edge technologies like artificial intelligence, the Internet of Things, and cloud computing.
Strategic Positioning
Twelve representative companies hold strategic positions within the digital chip design industry, precisely targeting key nodes such as AI computing power, memory interconnect, SoC, FPGA, and IP licensing, thereby building a comprehensive domestic ecosystem.
Cambricon Technologies Corporation Limited (ASX: 688256), Hygon Information Technology Co.,Ltd. (ASX: 688041), Loongson Technology Corporation Limited (ASX: 688047), and others hold leading positions in AI acceleration chips, x86-compatible CPU+DCU, general-purpose GPUs, and self-developed instruction set CPUs, respectively.
In memory interconnect and storage, Montage Technology Co.,Ltd. (ASX: 688008) leads the industry standard globally, while Giantec Semiconductor Corporation (ASX: 688123) ranks first domestically in the EEPROM storage field.
For SoC and IoT, Amlogic (Shanghai) Co.,Ltd. (ASX: 688099), Bestechnic (Shanghai) Co.,Ltd. (ASX: 688608), and Espressif Systems (Shanghai) Co.,Ltd. (ASX: 688018) maintain leading global or domestic market shares in multimedia SoC, low-power wearable SoC, and Wi-Fi MCU segments.
In FPGA and IP licensing, Shanghai Anlogic Infotech Co.,Ltd. (ASX: 688107) and Shanghai Fudan Microelectronics Group Co.,Ltd. (ASX: 688385) form the core domestic FPGA force, with Verisilicon Microelectronics(Shanghai)Co.,Ltd. (ASX: 688521) being the leading domestic semiconductor IP licensor and chip customization provider.
It is noteworthy that all twelve companies mentioned are constituents of the underlying index (Sci-Tech Innovation AI Index) of the HUABAO SHANGHAI SCIENCE AND TECHNOLOGY INNOVATION BOARD ARTIFICIAL INTELLIGENCE TRADING OPEN ENDED INDEX SEC (ASX: 589520).
Understanding the Industry and Its Segments
The digital chip design industry features several core application segments. These include AI computing power chips, which serve as the fundamental hardware for AI training and inference, encompassing both general-purpose types like CPUs, GPUs, FPGAs and specialized types like NPUs and ASICs.
Memory interface chips handle high-speed data communication protocols between DRAM and the host processor, enhancing access speed and stability. SoC (System-on-a-Chip) integrates multiple functional modules like CPU, GPU, NPU, and communication interfaces onto a single chip, widely used in multimedia terminals and wearable devices.
FPGA chips feature large numbers of reconfigurable logic units, offering high flexibility for hardware architecture reconfiguration. IP licensing services provide reusable chip function modules, empowering downstream design companies.
Other key segments include IoT/MCU chips, non-volatile memory chips like EEPROM, and independent architecture CPUs based on self-developed instruction sets.
Mapping the Industry Chain Positions
The digital chip design supply chain is highly specialized. These twelve core companies have built significant barriers in their respective niches.
Verisilicon Microelectronics(Shanghai)Co.,Ltd. (ASX: 688521) provides foundational semiconductor IP and chip customization services, while Loongson Technology Corporation Limited (ASX: 688047) focuses on its self-developed LoongArch instruction set CPU.
For core computing and storage, Cambricon Technologies Corporation Limited (ASX: 688256), Hygon Information Technology Co.,Ltd. (ASX: 688041), and others form the AI computing foundation from cloud inference/training to general-purpose calculation.
Montage Technology Co.,Ltd. (ASX: 688008) and Giantec Semiconductor Corporation (ASX: 688123) ensure high-speed data transfer and persistent storage in memory interface and EEPROM, respectively.
For edge-side SoC and IoT, Amlogic (Shanghai) Co.,Ltd. (ASX: 688099) and Bestechnic (Shanghai) Co.,Ltd. (ASX: 688608) focus on multimedia and wearable SoCs, while Espressif Systems (Shanghai) Co.,Ltd. (ASX: 688018) leads in AIoT wireless communication chips, collectively driving edge intelligence.
Shanghai Anlogic Infotech Co.,Ltd. (ASX: 688107) and Shanghai Fudan Microelectronics Group Co.,Ltd. (ASX: 688385) play crucial roles in flexible adaptation and import substitution within the FPGA and high-reliability application sectors.
Deep Dive into Segments and Key Players
The AI computing chip segment is the cornerstone of the AI industry. With the development of Agentic AI, the computing structure is shifting from training-centric to inference-centric, driving explosive demand for inference computing power.
Cambricon Technologies Corporation Limited (ASX: 688256) is a domestic leader in AI computing chips, with its flagship cloud chip Siyuan 690 in mass production. It holds significant advantages in inference scenarios and has secured batch deployments from several major domestic internet companies.
Hygon Information Technology Co.,Ltd. (ASX: 688041) employs a "CPU+DCU" dual-drive strategy. Its ShenSuan series DCU boasts over 99% operator coverage and full compatibility with the CUDA ecosystem.
As AI computing demand surges, memory interface and storage chips have become key to breaking the "memory wall" bottleneck and enhancing system performance.
Montage Technology Co.,Ltd. (ASX: 688008) is the absolute global leader in memory interconnect chips. As a JEDEC board member, it helps set international standards like DDR5 RCD.
Giantec Semiconductor Corporation (ASX: 688123) is a leading global supplier of non-volatile small-capacity memory chips, ranking third globally and first domestically in EEPROM.
SoC and IoT chips, which integrate computing, communication, and storage, are the core hardware for implementing edge AI and the Internet of Things.
Amlogic (Shanghai) Co.,Ltd. (ASX: 688099) is a domestic leader in multimedia SoCs, holding a leading position in smart set-top box chips and supplying international clients like Google and Amazon.
Bestechnic (Shanghai) Co.,Ltd. (ASX: 688608) is a top global player in low-power wireless computing SoCs, ranking fourth globally in TWS main control chip shipments and making breakthroughs in smartwatches and AI glasses.
Espressif Systems (Shanghai) Co.,Ltd. (ASX: 688018) is the global leader in AIoT wireless SoCs, holding a 27% global market share in Wi-Fi MCUs in 2022. It has built a software/hardware ecosystem based on its self-developed RISC-V architecture.
The FPGA and IP licensing segments act as foundational "pick-and-shovel" providers in digital chip design.
Verisilicon Microelectronics(Shanghai)Co.,Ltd. (ASX: 688521) is a domestic leader in IP licensing and chip customization, ranking first in mainland China and eighth globally among semiconductor IP licensors.
Shanghai Anlogic Infotech Co.,Ltd. (ASX: 688107) is a leading domestic FPGA chip and system solution provider, among the first in China with 28nm FPGA mass-production capabilities.
Shanghai Fudan Microelectronics Group Co.,Ltd. (ASX: 688385) is a core domestic FPGA supplier with mature product lines in FPGA, security and identification chips, non-volatile memory, and smart meter chips.
The self-developed instruction set CPU segment is the foundational layer of the domestic IT innovation ecosystem, crucial for ensuring digital security in key areas.
Loongson Technology Corporation Limited (ASX: 688047) is the only domestic CPU company building an independent IT system based on its own instruction set architecture. It maintains a dominant position in traditional secure application markets and is a leader in domestic CPUs.
Investment Outlook and Key Themes
Looking ahead, the digital chip design sector exhibits several core trends. AI computing power has become a primary market driver, with the sector's projected EPS growth rate nearing 80%, making it one of the fastest-growing segments.
Import substitution is accelerating due to external factors and increased policy support, with leading domestic players poised to benefit. The development of Agentic AI is shifting demand from training to inference, promising explosive growth for edge-side AI chips featuring low power consumption and high performance, such as those used in AI glasses and smartwatches.
Investment focus is suggested on computing hardware and upstream materials, while also monitoring application-side companies that may exceed commercialization expectations. The sustainability of the current AI technology investment theme is considered robust, supported by ongoing industrial trends.
The HUABAO SHANGHAI SCIENCE AND TECHNOLOGY INNOVATION BOARD ARTIFICIAL INTELLIGENCE TRADING OPEN ENDED INDEX SEC (ASX: 589520) and its feeder funds focus on the domestic AI industry chain. Its constituents include leading domestic players like Cambricon Technologies Corporation Limited (ASX: 688256) in GPUs and Verisilicon Microelectronics(Shanghai)Co.,Ltd. (ASX: 688521) in ASICs, with nearly half its weight in semiconductors, offering strong growth potential. The ETF is also a margin trading and short selling instrument, providing an efficient tool for accessing the domestic computing power theme.
Comments