A recent research report from Guotai Haitong Securities Co., Ltd. indicates that China's semiconductor equipment industry is expected to remain in an upcycle over the next 2-3 years. The primary growth drivers are identified as structural capacity expansion in advanced process nodes, advanced memory, and advanced packaging, coupled with the continued rise in domestic equipment market share.

For investors seeking certainty, the report recommends focusing on manufacturers in etching, thin-film deposition, cleaning, and CMP segments. Meanwhile, for those looking for higher upside potential, the firm highlights inspection/metrology, advanced packaging equipment, and high-end testing tools as the most compelling areas.

Where to find the most reliable opportunities

According to the latest management guidance cited by Guotai Haitong Securities Co., Ltd., the combined capital expenditure of the four major cloud service providers and Oracle is projected to reach approximately $790 billion in 2026. This significant surge in overseas spending, anticipated to accelerate further into 2027, strongly signals the semiconductor industry is entering a new phase of robust demand.

Memory presents the strongest downstream growth certainty, with advanced process nodes expanding in tandem. AI is simultaneously boosting GPU shipments and per-chip memory capacity, which directly drives HBM demand. This, in turn, stimulates overall DRAM requirements and market momentum through server memory expansion and the capacity displacement effect of HBM production.

SEMI forecasts confirm this trajectory, predicting the global semiconductor equipment market will enter a new upcycle driven by AI computing power, advanced logic, and memory expansion. Worldwide equipment sales are projected to increase from $134.7 billion in 2025 to $165.9 billion in 2026, a year-on-year growth of 23.2%. This upward trend is expected to continue, with sales reaching $201.2 billion in 2027 and $229.5 billion in 2028, representing a compound annual growth rate of approximately 19.5% from 2025 to 2028.

Potential risks to monitor

Investors should remain aware of certain risks, including potential shortfalls in downstream capital expenditure, cyclical fluctuations in the semiconductor industry, delays in technology R&D and iteration, slower-than-expected customer validation progress, and setbacks in domestic substitution efforts. Other concerns include intensifying market competition, export controls and international trade frictions, supply chain disruptions for core components, high customer concentration, mismatches between order booking and revenue recognition, loss of key R&D personnel, profitability pressures, accounts receivable and cash flow challenges, valuation volatility, and potential discrepancies between forecasts and actual market performance.