China’s STAR Market Semiconductor Equipment Boom: AI Demand Fuels Q1 Growth & R&D Spikes

Fueled by relentless AI demand and strategic investments, the STAR Market semiconductor equipment sector in China is showing fascinating dynamics, with most players reporting strong revenue growth in early 2024, even as R&D spending ramps up significantly.

Let’s dive into the latest financial reports from Q1 2024 and the full year 2023 for these key tech companies.

Most STAR Market Semi Equipment Firms See Revenue Climb in Q1 2024

The numbers paint a picture of widespread growth, though performance isn’t uniform across the board.

Based on Cailian Press StarMine Data and the Shenwan industry classification, there are 12 semiconductor equipment companies listed on Shanghai’s tech-focused STAR Market.

These companies operate across crucial sub-sectors like:

• Etching equipment
• Thin film deposition
• Testing equipment
• Cleaning equipment

Here’s the big news: 11 out of these 12 companies posted positive revenue growth in the first quarter of 2024.

Here’s the ranking by Q1 2024 revenue growth rate:

1. Jingyi Equipment (Jingyi Zhuangbei 京仪装备) (688652)
2. Piotech Inc. (Tuojing Keji 拓荆科技) (688072)
3. AccoTEST (Huafeng Cekong 华峰测控)
4. ACM Research (Shanghai), Inc. (Shengmei Shanghai 盛美上海) (688082)
5. Pioneer Precision Co., Ltd. (Xianfeng Jingke 先锋精科) (688605)
6. AMEC (Zhongwei Gongsi 中微公司) (688012)
7. Hwatsing Technology Co., Ltd. (Huahai Qingke 华海清科) (688120)
8. Anhui Naike Equipment Technology Co., Ltd. (Naike Zhuangbei 耐科装备) (688419)
9. Skyverse Technology Co., Ltd. (Zhongke Feice 中科飞测) (688361)
10. Kingsemi (Xinyuan Wei 芯源微) (688037)
11. Fuchuang Precision Component Co., Ltd. (Fuchuang Jingmi 富创精密) (688409)

Only Zhejiang Jingsheng Mechanical & Electrical Co., Ltd. (Jingsheng Gufen 晶升股份) (688478) saw negative revenue growth during this period.

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Spotlight: Jingyi Equipment Leads the Pack

Jingyi Equipment (Jingyi Zhuangbei 京仪装备) (688652) topped the charts with Q1 2024 revenue hitting ¥338 million RMB ($46.6 million USD).

That’s a jump of ¥119 million RMB ($16.4 million USD) year-over-year, marking three straight years of growth with a hefty 54.23% YoY increase.

The company credits strong performance across its business lines, robust demand in the semiconductor equipment market, and the competitive edge of its products.

Interestingly, alongside this revenue surge, Jingyi significantly boosted its R&D investment in 2023, spending ¥94.15 million RMB ($12.99 million USD) – a 53.06% increase YoY. This brought R&D spending to 9.17% of its operating revenue.

Heavy Hitter: AMEC’s Continued Dominance

AMEC (Zhongwei Gongsi 中微公司) (688012), a major player with a market cap over 100 billion RMB, also posted strong results.

Q1 2024 revenue reached ¥2.173 billion RMB ($299.7 million USD), up 35.4% YoY.

Net profit attributable to shareholders climbed to ¥313 million RMB ($43.2 million USD), a 25.7% YoY increase.

AMEC is gaining ground, particularly in etching equipment for sub-5nm logic and memory chips.

Their 2023 annual revenue hit ¥9.065 billion RMB ($1.25 billion USD), inching closer to international giant Applied Materials (Yingyong Cailiao 应用材料) – reaching nearly 15% of Applied Materials’ comparable product line revenue. This signals a speeding up of the localization process in China’s semiconductor industry.

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Sub-Sector Performance: A Mixed Bag

Looking closer at specific areas like thin film deposition and measurement/inspection equipment reveals more divergence.

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Piotech: High Growth, High Investment

Piotech Inc. (Tuojing Keji 拓荆科技) (688072), despite reporting a net loss of ¥147 million RMB ($20.3 million USD) in Q1, saw impressive revenue growth.

Its revenue hit ¥709 million RMB ($97.8 million USD), a 50.22% YoY increase, second only to Jingyi Equipment.

This reflects continued high demand in the thin film deposition equipment sector.

Chen Xinyi, General Manager of Piotech’s ALD Business Unit, noted at SEMICON China 2024 that the company leads in China for ALD equipment installations and process coverage.

Nearly 70% of Q1 equipment sales came from new products and processes.

The reported loss? Piotech attributes it mainly to increased R&D investment targeting equipment for advanced processes below 12nm.

Skyverse Technology: Revenue Up, Profit Down (For Now)

In the measurement and inspection space, Skyverse Technology Co., Ltd. (Zhongke Feice 中科飞测) (688361) reported Q1 2024 revenue of ¥294 million RMB ($40.6 million USD), a solid 24.9% YoY increase.

However, its net loss widened to ¥15 million RMB ($2.07 million USD).

Why? The company points to the extended validation cycles required for its equipment in memory wafer fabs.

Industry insiders suggest this “revenue growth without profit growth” pattern reflects the high-investment nature of high-end equipment R&D. The expectation is a potential performance turnaround once customer certifications are secured.

Challenges and Full-Year Perspectives

Not every company shared in the Q1 growth story.

Zhejiang Jingsheng Mechanical & Electrical Co., Ltd. (Jingsheng Gufen 晶升股份) (688478) faced pressure on both top and bottom lines.

Q1 operating revenue was ¥70.81 million RMB ($9.77 million USD), down 12.69% YoY.

Net profit attributable to shareholders was negative ¥2.53 million RMB (-$0.35 million USD), a drop of 117.10% YoY.

Analysis from Huatai Securities (华泰证券) (601688) suggests this decline was impacted by price cuts in the downstream electric vehicle market and inventory adjustments in the photovoltaic sector.

Furthermore, depreciation from new production lines coming online and higher R&D spending also squeezed profits.

Looking Back at 2023 Growth

Reviewing the full-year 2023 revenue figures provides context:

• Pioneer Precision Co., Ltd. (Xianfeng Jingke 先锋精科) (688605)
• Skyverse Technology Co., Ltd. (Zhongke Feice 中科飞测) (688361)
• Piotech Inc. (Tuojing Keji 拓荆科技) (688072)
• Fuchuang Precision Component Co., Ltd. (Fuchuang Jingmi 富创精密) (688409)
• AMEC (Zhongwei Gongsi 中微公司) (688012)

These companies led the pack in 2023 revenue growth.

Notably, Pioneer Precision saw over 100% YoY revenue growth in 2023, while Skyverse Technology and Piotech exceeded 50% YoY growth.

The fact that most companies continued their growth trajectory into Q1 2024 suggests improving market demand and significant potential moving forward.

The Big Picture: Profitability vs. R&D Investment

While overall revenue trended upwards, net profit performance in Q1 2024 was more varied across the STAR Market semiconductor equipment cohort.

This contrasts with 2023, when 9 companies saw positive YoY net profit growth and only 1 reported a loss.

In Q1 2024:

• 6 companies reported YoY net profit growth.
• 4 companies reported net losses.

Profit Powerhouses: ACM Research and AMEC

ACM Research (Shanghai), Inc. (Shengmei Shanghai 盛美上海) (688082) stood out dramatically.

Its Q1 2024 net profit attributable to shareholders was ¥246 million RMB ($33.9 million USD), a massive 207.21% YoY surge.

This ranked it first in the industry for both profit growth rate and absolute scale.

ACM cites the ongoing recovery in the global semiconductor industry, especially strong demand in mainland China, and a healthy order backlog.

ACM Research Chairman David Wang (Wang Hui 王晖) mentioned on a recent earnings call that the company’s wet process equipment market share in China’s logic chip market has now surpassed 25%.

AMEC (Zhongwei Gongsi 中微公司), the largest by market cap and revenue, also delivered significant profit growth.

Its Q1 net profit hit ¥313 million RMB ($43.2 million USD), up 25.67% YoY.

AMEC boosted shipments of high-end products for critical etching processes in Q1.

Its tech for advanced logic and memory devices achieved mass production status.

Six types of its thin film equipment successfully entered the market, and its EPI equipment moved into client mass production verification stages.

The R&D Spending Factor

The top three players – AMEC (Zhongwei Gongsi 中微公司), ACM Research (Shengmei Shanghai 盛美上海), and Hwatsing Technology Co., Ltd. (Huahai Qingke 华海清科) (688120) – collectively accounted for *more than 100%* of the net profit for the entire STAR Market semiconductor equipment sector.

Meanwhile, companies like Skyverse Technology (Zhongke Feice 中科飞测) and Fuchuang Precision Component Co., Ltd. (Fuchuang Jingmi 富创精密) (688409) slipped into losses.

Why the losses despite often growing revenue? Key factors include:

• Significant upfront capacity investments.
• Building up talent reserves.
• Heavy R&D spending.

Take Fuchuang Precision: It reported a Q1 loss of ¥22.16 million RMB ($3.06 million USD), but its R&D expenses for the same period were ¥54.7 million RMB ($7.54 million USD), up 16.26% YoY.

Even Zhejiang Jingsheng Mechanical & Electrical Co., Ltd. (Jingsheng Gufen 晶升股份) (688478), despite weak revenue growth (4.78%) and declining net profit (-28.7%) in 2023, increased its R&D investment by 16.39% YoY.

Its 2023 R&D spending reached ¥44.25 million RMB ($6.1 million USD), representing 10.41% of its annual operating revenue.

Wang Zhe, an analyst at CITIC Securities (Zhongxin Zhengquan 中信证券) (600030), highlights a crucial point: “The R&D cycle for semiconductor equipment is typically 3 to 5 years and requires continuous investment to maintain technological leadership, placing higher demands on companies’ cash flow management capabilities.”

Market Drivers: AI Demand and Policy Fueling Growth

The broader market context is positive, driven significantly by AI demand.

According to semiconductor industry association SEMI:

• Global semiconductor equipment sales hit $117.1 billion USD in 2024 (likely referencing projected or recent trailing data, correcting from a slight dip in 2023’s $106.3B). This represents a 10.16% increase and a new historical high.
• SEMI predicts the global market will reach $121 billion USD in 2025.
• Mainland China is the leading market, with its equipment market size expected to reach $45 billion USD in 2024. Planned investments over the next three years exceed $100 billion USD.

Ajit Manocha, SEMI President and CEO, confirmed the rebound and record sales figure for 2024.

New Growth Engines

Key growth drivers for the semiconductor equipment market include:

• Advanced packaging technology
• Applications like Artificial Intelligence (AI)
• 5G technology
• The Internet of Things (IoT)

Sun Qiang, Chairman of AccoTEST (Huafeng Cekong 华峰测控), expressed optimism: “This year, the growth potential in the domestic semiconductor packaging and testing equipment field is good… New growth drivers… continue to boost demand for testing equipment. The company currently has a relatively sufficient order backlog… revenue from semiconductor packaging equipment will maintain a continuous growth trend in 2024.”

Huatai Securities (华泰证券) (601688) agrees, noting that market sentiment is accelerating upwards. Globally, spending on 300mm (12-inch) wafer fab equipment is driven by regional fab build-outs and soaring demand for AI chips for data centers and edge devices.

Policy Power: The “Big Fund III” Effect

Government support is a major factor.

The National Integrated Circuit Industry Investment Fund Phase III (aka the “Big Fund III”), launched in 2024, allocates 30% of its funds to support R&D for semicondutor equipment and components.

This is already translating into real support, with companies like AMEC (Zhongwei Gongsi 中微公司) and Piotech Inc. (Tuojing Keji 拓荆科技) securing initial project funding.

This policy support is turning into orders:

• Piotech reported in January an order backlog exceeding ¥8 billion RMB ($1.1 billion USD), enough to cover its production capacity for the next two years.
• Soochow Securities (Dongwu Zhengquan 东吴证券) (601555) pointed out that major wafer fabs like Yangtze Memory Technologies Corp (YMTC) and ChangXin Memory Technologies (CXMT) have increased their procurement ratio of domestic equipment from 45% to 60%.
• This shift drove a threefold year-on-year increase in orders for ACM Research’s (Shengmei Shanghai 盛美上海) slot-type cleaning equipment.

HUA CHUANG SECURITIES (华创证券) analysis suggests the Big Fund III will bolster core technologies and key components.

Combined with cyclical recovery, domestic substitution efforts (localization), and policy tailwinds, China’s domestic semiconductor equipment and components industry looks set for accelerated development.

The interplay between surging AI demand, heavy R&D investment, and strong policy support is shaping a dynamic and rapidly evolving STAR Market semiconductor equipment landscape.

FAQs

What’s the main takeaway from the Q1 2024 STAR Market semiconductor equipment results?

Most (11 out of 12) companies saw positive revenue growt›h, indicating strong market demand, particularly driven by AI and domestic needs. However, profitability varied significantly, often due to heavy R&D investments.

Why are some companies like Piotech and Skyverse reporting losses despite strong revenue growth?

This is largely attributed to aggressive R&D spending on next-generation technologies (like sub-12nm processes for Piotech) and factors like extended customer validation cycles for new equipment (Skyverse). It reflects a strategy of investing heavily now for future market share and technological leadership.

How is AI impacting the semiconductor equipment market in China?

AI is a major demand driver. The need for powerful AI chips for data centers and edge computing is boosting investment in wafer fabs, which in turn increases demand for the equipment made by these STAR Market companies (etching, deposition, testing, etc.).

What is the “Big Fund III” and how is it helping these companies?

The National Integrated Circuit Industry Investment Fund Phase III (“Big Fund III”) is a significant Chinese government investment fund aimed at boosting the domestic semiconductor industry. A substantial portion (30%) is dedicated to equipment and components R&D. This translates into direct funding for companies like AMEC and Piotech and encourages domestic wafer fabs (like YMTC, CXMT) to buy more locally-made equipment, increasing orders for STAR Market firms.

What is the outlook for the Chinese semiconductor equipment market?

The outlook appears positive, driven by global trends like AI, 5G, and IoT, strong domestic demand fueled by localization efforts (reducing reliance on foreign suppliers), and significant government policy support via the Big Fund III. While R&D costs can impact short-term profits, the long-term trend points towards accelerated growth for the domestic industry chain.

References

• Original Source: STAR Market Daily (科创板日报) via Cailian Press (财联社)
• *(Note: The specific article link on cls.cn related to the EastMoney publication date might vary, but the content originates from STAR Market Daily / Cailian Press.)*
• China’s Push for Semiconductor Self-Sufficiency Fuels Equipment Market Growth – Semiconductor Digest
• China launches third, biggest-ever chip fund to boost semiconductor sector – Reuters
• SEMI: Global Semiconductor Equipment Sales Slip 2% in 2023 After Three Straight Years of Record Highs (Data referenced in article for 2023/2024 figures)