Weekly Highlights

Hua Hong Grace-Led RMB 46.8bn Phase III Wuxi Expansion Accelerates 12-Inch Specialty-Process Capacity

In early September, Hua Hong Grace, Chinas second-largest wafer foundry, announced a major external investment. Together with several institutions, it will inject capital into Wuxi Hua Hong Grace Phase III Semiconductor Co., Ltd. Key details include:

• ●Investment scale: Total project investment is USD 6.95bn (approx. RMB 46.8bn). Hua Hong-related entities will contribute approx. USD 2.127bn (approx. RMB 14.3bn) and retain absolute control with a 51% stake.
• ●Capacity plan: A 12-inch specialty-process foundry line with monthly capacity of approx. 55,000 wafers, covering power devices, memory, analog chips, MCUs and other specialty processes.
• ●Construction schedule: Located on Xinzhou Road, Xinwu District, Wuxi; line construction and production start are expected by December 2027.
• ●Funding sources: Capital increase jointly funded by Wuxi Xihong Guoxin Phase II, Huaxin Dingxin (backed by the National IC Fund), a new policy-based financial instrument from China Development Bank (CDB), and other investors; RMB 5.6bn of previously raised funds will also be redirected to Wuxi Phase III.
• ●Earnings support: Hua Hong Graces H1 2026 earnings surged 436% YoY, while existing capacity utilization remained high, providing a solid foundation for large-scale expansion.

A core part of Chinas specialty-process wafer manufacturing segment, with clear upstream and downstream linkages:

• ▲Upstream: Semiconductor equipment suppliers (etching, deposition, inspection, etc.) and materials suppliers such as silicon wafers, photoresists and specialty gases.
• ▼Midstream: Specialty-process foundries such as Hua Hong Grace, forming a dual-engine structure with SMIC across advanced nodes and specialty processes.
• ●Downstream: Designers of power devices, analog chips, MCUs, memory, CIS and other chips, serving new energy, automotive electronics, industrial control, consumer electronics and other end markets.

Impact cascades through the supply chain, affecting each segment differently:

• ■Upstream equipment & materials: Wuxi Phase III will directly drive demand for etching, deposition and inspection equipment. Domestic equipment suppliers gain more qualification and adoption opportunities, while demand for silicon wafers and photoresists rises in parallel.
• ■Midstream wafer manufacturing: Chinas 12-inch specialty-process capacity continues to expand. Hua Hongs capacity advantage in power, analog and MCU processes will strengthen further, easing tight mature-node capacity.
• ■Downstream chip design: Domestic substitution in power, analog and MCU chips gains stronger capacity support, improving chip supply for automotive electronics, new energy and other downstream sectors.
• ■China industry perspective: Hua Hong and SMIC are forming a dual-engine structure of advanced nodes + specialty processes. Domestic wafer-manufacturing supply chain autonomy continues to improve, with specialty processes emerging as a key domestic-substitution breakthrough.
• ■Customs perspective: Imports of equipment for 12-inch lines will rise sharply. HS classification, eligibility for duty/tax exemptions and port inspection lead times are becoming key variables in fab construction schedules; demand for staggered deliveries + bonded temporary storage is increasing.

Update 1 | ASML Teams with Three Major Chipmakers on 12-Inch Photomasks, Accelerating High-NA EUV Ecosystem

On September 8, lithography leader ASML issued three major announcements in one day, announcing or deepening cooperation with TSMC, Samsung Electronics and Intel on high numerical aperture (High-NA) extreme ultraviolet (EUV) lithography. Key points:

• ●12-inch photomask initiative: ASML and TSMC jointly launched an industry initiative to transition High-NA EUV photomasks from the 6-inch standard to 12 inches, potentially increasing capacity by up to 40%.
• ●TSMC mass-production plan: Plans to use High-NA EUV for high-volume advanced-node manufacturing from 2030.
• ●Samsung mass-production plan: Plans to introduce High-NA EUV into DRAM high-volume manufacturing for the first time before 2028.
• ●Intel progress: Has processed more than 1mn wafers using High-NA EUV-related technology.

At the core of the lithography-equipment segment in semiconductor manufacturing:

• ▲Upstream: Core materials/components including photomasks, photoresists and optical components.
• ▼Downstream: AI chips, high-end processors, advanced DRAM and other end chips, extending through the AI server and data center value chain.

• ■The shift from 6-inch to 12-inch photomasks will reshape the upstream photomask industry, creating new technology-upgrade opportunities for domestic photomask suppliers.
• ■TSMC, Samsung and Intel are all committing to the High-NA roadmap, moving advanced-node competition into a new stage and accelerating sub-2nm process capacity deployment.
• ■With access to High-NA EUV equipment constrained, China must continue advancing differentiated paths such as advanced packaging, specialty mature-node processes and DUV multiple patterning.

Update 2 | TSMC August Revenue Hits Record TWD 514.8bn, Up 53.3% YoY

On September 10, TSMC released its August 2026 revenue report. Continued strong AI-chip demand drove results well above expectations:

• ●Monthly revenue: August consolidated net revenue was approx. TWD 514.806bn (approx. USD 16.3bn), exceeding TWD 500bn for the first time.
• ●Growth: Up 53.3% YoY and 10.1% MoM, marking a record high for the fourth consecutive month.
• ●Cumulative revenue: Net revenue for January–August 2026 was approx. TWD 3.39tn, up 39.3% YoY.
• ●Capacity status: N3 and CoWoS advanced-packaging capacity remain extremely tight, while AI agents are expected to extend compute demand into CPUs.

TSMC is the global leader in semiconductor foundry services, with clear upstream and downstream linkages:

• ▲Upstream: Semiconductor equipment and material suppliers including silicon wafers and photoresists.
• ▼Downstream: AI-chip and high-end processor designers including Nvidia, AMD, Apple and Qualcomm.

• ■Strong AI-chip demand is set to keep advanced-node and advanced-packaging capacity tight in the near term.
• ■Upstream equipment and materials suppliers continue to benefit from TSMCs record capex (USD 60bn–64bn for full-year 2026).
• ■Domestic foundries face greater competitive pressure and need to accelerate differentiation in mature nodes, specialty processes and advanced packaging.

• 1

  Samsung and SK Hynix Memory Inventories Fall Below 10 Days as AI-Driven Shortage Intensifies

  Event: As of Q3 2026, Samsung Electronics and SK Hynix memory inventories had fallen below 10 days of supply. Demand for HBM, server DRAM and enterprise SSDs is rising sharply, raising concerns that the market could face an extreme "nothing left to sell" scenario next year.

  Position: Memory-chip manufacturing, covering DRAM, NAND Flash and HBM.

  Impact: Memory prices are expected to keep rising. Domestic memory suppliers such as YMTC stand to benefit from the upcycle, while downstream AI servers and consumer electronics face higher memory costs.

  Sources: BusinessKorea; ICsmart
• 2

  JCET Plans RMB 6.5bn Private Placement to Expand Advanced Packaging; Four Projects Total Over RMB 9.5bn

  Event: On September 3, leading domestic OSAT JCET disclosed a private-placement plan to raise no more than RMB 6.5bn. Proceeds will fund four projects: high-performance-computing advanced-packaging platform expansion (RMB 1.5bn), high-end power-module packaging and testing upgrade (RMB 1bn), wafer-level packaging capacity upgrade (RMB 1.1bn), and high-density/high-capacity memory-chip packaging and testing upgrade (RMB 1bn), plus working capital.

  Position: Advanced packaging and testing, serving HPC, AI chips, memory chips, etc.

  Impact: The leading domestic OSAT is accelerating its shift toward an advanced-packaging platform. Revenue from computing electronics has exceeded revenue from communications electronics for the first time, while demand for upstream packaging equipment and materials rises in parallel.

  Sources: JCET private-placement plan; Shanghai Securities News
• 3

  Kaifa Technology Subsidiary Plans RMB 1.85bn Expansion of High-End Memory Packaging and Testing Capacity

  Event: On September 9, Kaifa Technology announced that wholly owned subsidiary Payton Technology (Shenzhen) plans a further expansion of high-end memory-chip packaging and testing capacity, with total planned investment of RMB 1.85bn, to capture opportunities from explosive AI-industry growth.

  Position: Memory-chip packaging and testing, serving DRAM, NAND Flash and other memory products.

  Impact: Chinas high-end memory packaging and testing capacity continues to expand, benefiting from the memory upcycle and AI-server demand while strengthening domestic supply chain autonomy in memory packaging and testing.

  Sources: Kaifa Technology announcement; Changjiang Times
• 4

  ASML Builds New Industrial Campus in the Netherlands to Expand Lithography-System Assembly Capacity

  Event: On September 9, ASML announced a new large-scale industrial site in the northern section of the Brainport industrial park in the Netherlands. Phase I is expected to be completed in 2029 and will include cleanrooms, equipment assembly halls, logistics/warehousing and offices, expanding final assembly capacity for EUV and DUV lithography systems.

  Position: Lithography-equipment manufacturing; upstream inputs include precision optics and mechanical components.

  Impact: Helps ease global lithography-system delivery pressure, shorten lead times and support global fab expansion, underscoring sustained long-term demand for semiconductor equipment.

  Sources: ASML official announcement; Semiconductor Equipment Industry News Flash
• 5

  Nexchip Phase IV Cleanroom Fit-Out Underway as Capacity Utilization Remains High

  Event: On September 10, at a STAR Market group earnings briefing for the semiconductor manufacturing, equipment and materials sector, Nexchip said current capacity utilization remains high, orders remain robust, downstream demand is broadly in line with prior expectations, and cleanroom fit-out for Phase IV is underway.

  Position: Wafer manufacturing, focused on display drivers, power management and CIS.

  Impact: Domestic fab capacity continues to expand amid strong mature-node demand, accelerating domestic substitution in display driver and power-management chips.

  Sources: Nexchip earnings briefing; Securities Times

Chart 1 · Comparison of Major 12-Inch Fab Expansion Projects in China

Chart 2 · Mass-Production Plans of Major Global High-NA EUV Players

Note: Specific figures are subject to official disclosures by the respective sources. In the event of discrepancies involving qualifications or compliance information, announcements by the competent authorities shall prevail.