Every March and April, the A-share market enters its annual reporting season, a period when companies with high earnings uncertainty often experience volatile stock prices. However, one sector has consistently delivered strong performance during this earnings period for three consecutive years: semiconductor equipment.
From 2023 to 2025, the CSI Semiconductor Materials and Equipment Index, tracked by E Fund Semiconductor Equipment ETF (159558), achieved excess returns of 2.8%, 3.1%, and 2.0%, respectively, relative to the STAR 50 Index during earnings disclosure periods. As another earnings window approaches, the question arises: will this trend continue?
First, it is essential to understand what this index represents. The CSI Semiconductor Materials and Equipment Index selects 40 companies from the A-share market whose businesses are involved in semiconductor materials and equipment. Equipment companies account for the majority, approximately 63%, while materials companies make up 24%. The top ten constituents collectively represent over 60% of the index, highlighting its concentration in leading players.
A similar index is the STAR Semiconductor Materials and Equipment Index, which differs by selecting stocks exclusively from the STAR Market. In simple terms, the CSI index has broader coverage, including non-STAR Market equipment leaders such as Naura Technology and Changchuan Technology, giving it stronger industry representation. In terms of performance, as of March 19, the CSI Semiconductor Materials and Equipment Index has gained 8.8% year-to-date, while the other index has risen by 6.6%.
Why has semiconductor equipment consistently outperformed during earnings season? There are two core reasons.
First, earnings visibility is high. Semiconductor equipment companies are the "shovel sellers" in chip production expansion, with clear order cycles. When chip manufacturers plan to expand production, they first place orders with equipment suppliers and pay deposits. Equipment companies then proceed with production, delivery, and acceptance before revenue can be recognized. This entire process ensures a predictable rhythm from orders to earnings, minimizing the risk of sudden surges or shortfalls and reducing the likelihood of significant earnings disappointments.
Second, growth stability is strong. The prosperity of the semiconductor equipment sector is not driven by short-term speculation but is supported by solid industrial demand. On one hand, the explosion in AI computing power is driving memory chip production expansion, which in turn requires equipment purchases. On the other hand, the long-term logic of domestic substitution remains intact. Regardless of external conditions, the expansion of domestic wafer fabs continues unabated. Leading manufacturers like ChangXin and Yangtze Memory Technologies are building production lines, providing sustained demand for equipment companies.
Therefore, when the market enters the earnings disclosure period and investors seek assets with "confirmed orders, solid earnings, and stable growth," the semiconductor equipment sector stands out as a rare high-performer. Investors bullish on this sector can gain exposure to leading companies through the E Fund Semiconductor Equipment ETF (159558, with feeder fund A/C: 021893/021894). This approach addresses the challenge of selecting individual stocks while capturing the dual opportunities of industrial expansion and domestic substitution.
Comments