CITIC SEC released a research report stating that the semiconductor wafer industry is entering an upward cycle driven by AI demand. Volume growth is expected to materialize in 2025, with price increases likely to follow by the second quarter of 2026. Coupled with the accelerated pace of import substitution for 12-inch wafers in China, CITIC SEC is optimistic about the long-term growth prospects of Chinese wafer companies. The report recommends focusing on wafer companies with a relatively high proportion of heavily doped wafer products and suggests monitoring other wafer firms leading in shipments of 12-inch lightly doped wafers.
The main viewpoints of CITIC SEC are as follows: Semiconductor wafers are a core material in the semiconductor industry, characterized by high technological barriers. As the foundation of chip manufacturing, over 90% of chips and sensors are manufactured using silicon material, according to Shangpu Research Institute and SEMI data. Global semiconductor wafer shipments are projected to reach 13 billion square inches in 2025. Wafer production involves complex processes and stringent performance requirements, with larger diameters presenting higher technical challenges. The primary downstream applications for 12-inch wafers are memory and logic chips. SEMI data indicates that 12-inch wafers will account for 78.8% of total wafer shipment area by 2025, while wafers smaller than 8 inches still hold advantages in More-than-Moore applications.
Demand is driven by memory and logic chips, while power and analog chips add growth elasticity. Global equipment spending for 12-inch wafer fabs continues to rise, with SEMI forecasting global 12-inch wafer capacity to reach a record 11.1 million wafers per month by 2028, laying the foundation for 12-inch wafer demand. SUMCO estimates that AI-related demand for advanced process semiconductor wafers could reach 1 million wafers per month by 2026, accounting for over 10% of global 12-inch wafer demand. AI-related logic chips and memory chips have become core growth drivers for 12-inch wafers. Meanwhile, the accelerated transition of power and analog chips to 12-inch manufacturing platforms provides potential elasticity to the 12-inch wafer growth trajectory. The global and Chinese 12-inch wafer markets are projected to reach $10.1 billion and $2.5 billion by 2027, respectively, with CAGRs of approximately 11.4% and 25.2% from 2024 to 2027.
The 12-inch wafer market is currently dominated by overseas manufacturers, but domestic substitution is accelerating. While 6-inch and 8-inch wafers have achieved relatively high localization rates in China, the 12-inch wafer segment remains led by five major overseas players, with a CR5 estimated at 76% in 2025. SEMI expects 12-inch wafer capacity in Mainland China to grow to 3.21 million wafers per month by 2026, representing about one-third of global 12-inch fab capacity. Capacity from domestic 12-inch fabs, represented by SMIC, Hua Hong Semiconductor, and CXMT, is projected to increase to approximately 2.5 million wafers per month. Concurrently, Chinese wafer manufacturers have planned a combined 12-inch wafer capacity exceeding 7 million wafers per month. As these planned capacities gradually commence production and ramp up, the process of import substitution for 12-inch wafers is expected to accelerate.
Global wafer shipments are anticipated to bottom out and rebound in 2025, with the industry expected to enter a price hike cycle in 2026. The semiconductor wafer sector is emerging from a downturn in 2025, with global shipments rebounding from the bottom while prices remain low. Leading overseas manufacturers are facing profit pressure, providing motivation for price increases. CITIC SEC believes a market foundation exists for 12-inch wafer price hikes, with heavily doped products exhibiting greater price elasticity. Referencing the previous "bottoming-recovery-price increase" cycle from 2019 to 2022, the report judges that this cycle will likely see overseas manufacturers leading a broad-based price increase, followed by domestic producers, with the timing potentially occurring in the second quarter of 2026.
Risk factors include significant fluctuations in raw material prices; risks associated with technology R&D; intensifying industry competition; cyclical fluctuations in the semiconductor industry; and wafer price increases falling short of expectations.
Investment strategy: Focus is recommended on wafer companies with a relatively high proportion of heavily doped wafer products. It is also advised to monitor other wafer firms that are leaders in shipments of 12-inch lightly doped wafers.
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