Semiconductor Equipment Sector Strong Surge: AI-Driven and Domestic Substitution Dual Resonance, Industry Boom Cycle Accelerates
Introduction
On July 24, 2026, the A-share market's semiconductor equipment sector saw a notable movement, with the Semiconductor Equipment ETF Guotai (159516) rising over 4% during trading and turnover volume continuing to expand, drawing widespread market attention. This positive performance is not an isolated phenomenon but a microcosm of the profound transformation in the global semiconductor industry. Recently, SEMI released its latest report, predicting that global semiconductor manufacturing equipment (OEM) total sales will hit a record high of $165.9 billion in 2026, a year-on-year increase of 23.2%, with the growth trend continuing until 2028, when total equipment sales are expected to exceed $229.5 billion, achieving five consecutive years of growth. This forecast not only outlines the long-cycle prosperity of the industry but also reveals that AI-driven demand is fundamentally reshaping the investment landscape of semiconductor manufacturing.
Against the backdrop of AI sweeping the globe and the deepening of the domestic substitution strategy, the semiconductor equipment sector, as the "cornerstone" of the industrial chain, is facing unprecedented development opportunities. This article will conduct an in-depth analysis from multiple dimensions such as industry macro trends, demand drivers, and the domestic substitution process, presenting readers with a comprehensive and in-depth panorama of the semiconductor equipment industry.
1. Global Semiconductor Equipment Market Entering a "Golden Five Years": AI as the Core Engine
According to the SEMI report, global semiconductor equipment (OEM) sales are expected to reach $165.9 billion in 2026, nearly 23% higher than the $135 billion in 2023. What is even more encouraging is that this growth trend is not a short-term impulse but a sustained structural upturn. According to forecasts, by 2028, total global equipment sales will climb to $229.5 billion, with a compound annual growth rate exceeding 12%. This means that 2024 to 2028 will become the most definitive "Golden Five Years" in the history of the semiconductor equipment industry.
The core engine driving this round of growth is undoubtedly the explosive demand generated by Generative AI (GenAI) and its underlying infrastructure. AI applications represented by large language models require massive computing power, driving unprecedented demand for high-performance computing chips, high-bandwidth memory (HBM), and advanced packaging technology. To meet these demands, major global chip manufacturers are increasing capital expenditure, building new fabs or upgrading existing production lines. For example, the competition among giants like TSMC, Samsung, and Intel in the 3nm and below advanced process nodes directly drives the procurement of high-value equipment such as EUV lithography machines, etching equipment, and thin film deposition equipment. Meanwhile, the expansion of HBM production also drives strong demand for advanced packaging equipment like TSV (through-silicon via) and hybrid bonding.
Moreover, the "long-tail effect" of AI is quietly penetrating traditional semiconductor sectors. From edge AI chips to smart IoT devices, from autonomous driving sensors to data center power management, the generalized application of AI technology is reshaping the manufacturing demand of the entire semiconductor ecosystem. It is foreseeable that AI is not just a "catalyst" but a "structural force" that will run through the next five years.
2. Domestic Substitution Enters Deep Water: Huge Capital Expenditure Space in the Memory Industry Chain
Resonating with the global prosperity cycle is the domestic substitution process of China's semiconductor equipment industry itself. A recent research report by Industrial Securities pointed out that overall, whether from the explosive demand brought by AI or from the perspective of domestic substitution or technology catch-up, the domestic memory industry chain led by Yangtze Memory Technologies (YMTC) and ChangXin Memory Technologies (CXMT) still has immense development and capital expenditure space, which will also bring significant development opportunities and growth room for upstream semiconductor equipment and materials.
Memory chips are one of the most heavily "bottlenecked" areas in China's semiconductor industry chain. For a long time, the NAND Flash and DRAM markets have been monopolized by overseas giants such as Samsung, SK Hynix, and Micron. However, with technological breakthroughs and capacity expansion by YMTC (3D NAND) and CXMT (DRAM), China's memory industry has entered a high-speed development stage from "0 to 1" to "1 to N". Taking YMTC as an example, its proprietary Xtacking architecture has undergone multiple generations of iteration, gradually increasing market share. However, compared with international giants, there is still a huge gap in production capacity. According to industry estimates, YMTC's current capacity accounts for less than 5% of global NAND Flash total capacity, and CXMT's DRAM capacity share is similarly low. To achieve the long-term goal of "domestic substitution," both companies must continue to make large-scale capital expenditures to build more advanced process fabs.
This expansion in capital expenditure will directly translate into demand for semiconductor equipment. Etching machines, thin film deposition equipment, cleaning equipment, ion implanters, inspection equipment, etc., are all core procurement items for domestic memory production lines. And due to the ever-tightening export controls on overseas equipment, local equipment manufacturers have gained a precious "verification window" and "substitution opportunity." For example, domestic equipment leaders such as NAURA Technology Group, Advanced Micro-Fabrication Equipment Inc. (AMEC), and ACM Research (Shanghai) have achieved a leap from "substitutable" to "gradually leading" in multiple segments such as etching, thin film, and cleaning. For the next few years, as long as the memory industry's expansion plan continues, equipment demand will not diminish.
3. Dual Drive of Equipment and Materials: Coordinated Industrial Chain Upgrades
The prosperity of semiconductor equipment often goes hand in hand with the growth of materials. From silicon wafers to photoresists, from electronic specialty gases to sputtering targets, the materials segment is also a battleground for domestic substitution. As domestic equipment enters the mass production verification stage, supporting domestic materials are also experiencing a volume release opportunity. For example, in advanced processes, high-end materials such as ArF immersion photoresist and high-purity metal sputtering targets, which were heavily dependent on imports in the past, have now achieved key breakthroughs by domestic leading companies and have started to enter the supply chains of mainstream fabs.
The "dual-drive" model of equipment and materials is forming a unique competitive advantage for China's semiconductor industry. On one hand, local equipment companies can optimize process adaptation based on the characteristics of domestic materials; on the other hand, material companies can adjust formulations according to equipment parameters, forming a close collaborative innovation ecosystem. Once this ecosystem matures, it will effectively reduce the entire industrial chain's dependence on foreign sources and enhance overall risk resilience.
4. Risks and Challenges: Beware of Short-term Overheating and Long-term Uncertainty
Although the semiconductor equipment sector has a bright outlook, investors still need to maintain a clear understanding of potential risks. First, the global semiconductor cycle is not a linear upward trend; there have been multiple instances of periodic oversupply due to "capital expenditure bubbles" in history. While AI demand is indeed strong, traditional sectors such as consumer electronics and automobiles still face demand fluctuation risks. If the global economy experiences an unexpected downturn, it could drag down the overall equipment procurement pace.
Second, geopolitical factors remain the biggest variable. US technology controls on China continue to escalate, and countries such as the Netherlands and Japan have also joined the restriction camp. While this accelerates domestic substitution in the short term, it may limit the advanced process breakthrough space of Chinese equipment manufacturers in the medium to long term. For example, access to cutting-edge equipment like EUV lithography machines remains uncertain, posing challenges to the localization of logic chips below 14nm.
Third, valuation issues cannot be ignored. After the recent rise, the price-to-earnings ratios of some semiconductor equipment stocks are at historically high percentiles, with market expectations for their growth already fully priced in. If earnings fall short of expectations, there may be valuation correction pressure. As the fund legal documents remind, short-term fluctuations of indices are for reference only and do not represent their future performance, nor do they constitute a commitment or guarantee of fund performance.
Finally, for ordinary investors, participating in industry investment through thematic funds (such as a semiconductor equipment ETF) is an effective way to diversify stock risk. However, it is necessary to fully understand the risk-return characteristics of fund products and make prudent decisions based on one's own risk tolerance. Market views may change with the environment and do not constitute specific investment advice or promises.
Conclusion
The strong surge in the semiconductor equipment sector is both a positive market response to the explosion of AI-era computing demand and an inevitable result of the deepening of the domestic substitution strategy. From SEMI's forecast of five consecutive years of growth, to the capital expenditure space of domestic memory industry chains like YMTC and CXMT, and to the industrial logic of coordinated equipment and material upgrades, we see a major investment theme full of certainty and challenges.
Looking ahead to the next three years, the global semiconductor equipment market will enter an unprecedented high prosperity period. The "hard-core" drive of AI demand, coupled with the "resilience" support of domestic substitution, is expected to enable Chinese semiconductor equipment companies to achieve a dual breakthrough of "volume and price increase" and "technology leap" in this wave. However, investors should also remain rational, grasping trends while guarding against cyclical fluctuations and external risks. Only by deeply understanding the essence of the industry can one navigate steadily in volatile markets.
Risk Disclaimer: The stocks mentioned are only used for industry event analysis and do not constitute any stock recommendation or investment advice. Short-term fluctuations of indices, etc., are for reference only and do not represent their future performance, nor do they constitute a commitment or guarantee of fund performance. Views may adjust with market environment changes and do not constitute investment advice or promises. The risk-return characteristics of the funds mentioned vary; investors are advised to carefully read the fund legal documents, fully understand product features, risk levels, and income distribution principles, choose products that match their own risk tolerance, and invest prudently.
