Caitong Securities: Order transfers and domestic substitution enter the accelerated cashout period, focusing on flexible varieties of semiconductor upward cycles

The Zhitong Finance App learned that CaiTong Securities released a research report saying that domestic semiconductor components are shifting from “alternatives” to “required options” in the supply chain, and that order transfers and domestic substitution are entering a period of accelerated fulfillment. Looking ahead, downstream equipment companies will continue to strengthen the prosperity of the parts sector as orders are full, and the boom is being transmitted upward along the industrial chain. It is recommended to focus on local parts companies that have core technical barriers, are deeply bound to leading downstream customers, and whose products have already entered the release stage.

The main views of Caitong Securities are as follows:

The supply of parts at home and abroad continues to be tight, and order spillover and accelerated domestic substitution ushered in a golden window

The global semiconductor equipment boom continues to improve. According to SEMI forecasts, global semiconductor equipment sales are expected to reach 165.9 billion US dollars in 2026, an increase of 23.2% over the previous year, a record high, and the boom is being fully transmitted to the upstream component sector. Currently, supply-side constraints of leading overseas parts companies are becoming more and more prominent. Kyocera is taking large-scale orders from equipment manufacturers and is expanding production in stages. The new plant is expected to be put into operation in September 2026 to ease delivery pressure; VAT Group, a leading global vacuum valve company, added more than 700 employees in the first half of the year to accelerate the decline in production capacity. The growth rate of overseas supply capacity falls short of the rapid increase in downstream demand, thus driving the gradual overflow of parts orders from equipment manufacturers, creating a valuable customer import and product verification window for domestic manufacturers. Domestic parts are shifting from “alternative options” to “required options” in the supply chain, and order transfers and domestic substitution are entering a period of accelerated fulfillment.

The procurement and demand for parts has a long whip effect, and sector performance flexibility is expected to be the first to be unleashed

Parts are located in the upper reaches of the equipment industry chain, and demand for parts has increased layer by layer through early orders from equipment vendors. Currently, parts are fully entering an upward boom cycle, and overall orders from sector companies are growing very brightly. Take VAT Group as an example. Orders in the second quarter surged 102% year over year, and revenue increased 3% during the same period. Looking ahead, downstream equipment companies will continue to strengthen the prosperity of the parts sector as orders are full, and the boom is being transmitted upward along the industrial chain.

Capacity utilization continues to rise, and profitability has improved significantly

The semiconductor parts industry has typical asset-heavy characteristics. Fixed costs account for a high proportion of fixed costs, and the marginal improvement in profit due to rising capacity utilization rates is extremely remarkable. As downstream demand continues to rise, the scale effect of some enterprises continues to show. For example, production capacity at various production sites of Fuchuang Precision is gradually being released, large-scale production is driving unit cost optimization, and the company's 2026Q1 gross margin increased to 27.1%, a sharp increase of 13.9% over the previous month; the tracking rating report disclosed by Kema Technology in July 2026 shows that its structural component capacity utilization rate exceeds 90%, forming a positive cycle with strong demand and efficient operation of production capacity. Currently, the industry has entered a channel of sharp rise in volume and price, and the continuous increase in capacity utilization is driving the rapid dilution of fixed costs. Under the volume-price transmission logic of “demand expansion - tightening supply and demand - profit expansion”, the parts sector is expected to usher in an accelerated release of profit elasticity.

Risk warning: Downstream demand fluctuation risk, industry competition exacerbates risk, supply chain and localization risk.