The US-Iran "Rashomon" shocks the market, the domestic substitution mainline counterattacks! Semiconductor equipment ETF (561980) rises over 1.2%, domestic equipment benefits from expansion dividends.

After Black Monday, Tuesday’s domestic substitution theme led the market rebound, with the Semiconductor Equipment ETF (561980) rising by 1.25% intraday. The constituent stocks performed strongly, with Fuchuang Precision up over 3%, Changchuan Technology, Shengmei Shanghai, Tuojing Technology, and Jiangfeng Electronics up over 2%, and North Huachuang, Lian Dong Technology, Zhongke Feice, and Zhongwei Company also following the gains.

Fund flow data shows that the ETF received a net subscription of 6.08 million yuan on the previous trading day, indicating that funds may be channeling into the domestic substitution theme.

On the news front, last night’s US-Iran conflict played out as a “Rashomon.” Guotai Haitong believes that the micro trading impact will not last long, and the current position is not suitable for blindly selling off. The Chinese stock market is expected to find an important bottom and support zone. Our supportive monetary stance and diversified reserves/growth help to break risk narratives more quickly.

Currently, within the tech main theme, the narrative logic of domestic substitution in the chip and semiconductor industry remains solid, with strong medium- to long-term certainty. On one hand, semiconductor prices are rising and penetrating end markets, driven by AI demand causing a surge in storage chip prices. Storage chips, packaging and testing, wafer fabs, smartphones, computers, home appliances, and automobiles are all adjusting prices or product configurations.

SEMI initially projected that global semiconductor industry revenue would surpass $1 trillion by 2030. However, driven by AI development boosting chip and memory prices, this milestone may be reached earlier this year, and by 2035, it could exceed $2 trillion. Overseas industry leaders are planning to invest $25 billion in chip manufacturing plants, integrating chip design, lithography, manufacturing, memory chips, advanced packaging, and testing, with an expected annual capacity of 1 terawatt. If built, it will become the largest semiconductor wafer factory in the world.

On the domestic front, global semiconductor sales in January increased by 36.1% year-over-year, continuing a 7-month growth streak. Semiconductor sales in China grew by 47% YoY, showing strong growth. Recently, Huawei Ascend 950PR, along with the Atlas 350 standard card, was launched as scheduled, with a single-card computing power 2.87 times that of H20. It is currently the only domestically supported FP4 low-precision inference product, indicating that domestic substitution continues to accelerate.

Guojin Securities pointed out that semiconductor equipment is the cornerstone of the industry chain, with storage capacity expansion and independent controllability resonating, leaving broad room for domestic substitution. Semiconductor equipment is positioned upstream in the industry chain and is critical for chip manufacturing and packaging/testing. Leading domestic equipment companies performed well, with the top eight companies’ combined revenue increasing by 37.3% and net profit attributable to shareholders increasing by 23.9% in the first three quarters of 2025. As AI large models drive storage technology toward 3D, combined with domestic storage giants’ expansion projects, the domestic semiconductor equipment industry chain is expected to usher in a new round of rapid growth opportunities.

CICC Securities also noted that the demand for AI computing power continues to expand, supporting a bullish trend in semiconductor demand. The explosive growth of the AI industry sustains the upward trend in memory demand, and supply constraints have led to rising memory prices amid supply-demand imbalance. As of March 20, the prices of 8Gb DDR4 and 16Gb DDR5 increased by 8.81% and 4.73% month-over-month, respectively; 16Gb DDR4 prices remain high and volatile. The domestic chip industry chain continues to accelerate development, with related companies increasing capital investment and steadily improving chip performance. Industry demand remains strong, and the combined growth in volume and price is expected to sustain high growth in the first-quarter earnings of the semiconductor sector.

The Semiconductor Equipment ETF (561980) tracks the CSI Semiconductor Index, with the top ten holdings including Zhongwei Company, North Huachuang, SMIC, Haiguang Information, Cambrian, and Hushi Silicon Industry, all leading companies in semiconductor equipment, materials, and integrated circuit design and manufacturing. The ETF is 100% focused on the core chip industry chain; the top ten holdings have a concentration ratio of over 75%.

Data shows that as of March 20, the CSI Semiconductor Index’s cumulative gains since 2020 and 2025 are 241% and 67%, respectively, significantly outperforming mainstream comparable semiconductor thematic indices such as the STAR Market chip and semiconductor materials and equipment indices.