Chip Shortages Return, Semiconductor Equipment Enters Epic Revival!

Ahead of the Lunar New Year, NVIDIA CEO Jensen Huang toured China, from Shanghai’s dumplings to Beijing’s Yunnan cuisine and Shenzhen’s hotpot. Alongside culinary adventures, he praised Chinese open-source models like DeepSeek and announced that 400,000 H200 chips were approved for import, capturing industry headlines.

Over the past year, although large AI models evolved rapidly, the “magic” shifted from model parameters to hardware and capital markets. Early 2026 saw Chinese semiconductor production surge: SMIC, Huahong, and others returned to 100% fab utilization, driving capital expenditure and boosting semiconductor equipment and materials companies first.

Chip Shortages and the Global Semiconductor Cycle

• 2021: Pandemic disruptions and Southeast Asian port closures triggered a global shortage of automotive power chips. Panic buying spread through consumer electronics, home appliances, and industrial sectors, forming a high-demand loop.
• 2022: Capacity concerns compounded by geopolitics led to a global semiconductor “great leap” with skyrocketing capex.
• 2023: Over-expansion resulted in 50% fab utilization at second-tier foundries; storage industry suffered, capex fell 7%.
• 2024-2025: AI-driven demand surged for storage, GPUs, ASICs, and CPUs, reigniting shortages.

Semiconductor Equipment: The Golden Track

• Growth logic: supply-demand mismatch + cyclical amplification + policy support
• Data: Morgan Stanley forecasts 16% growth in the global semiconductor equipment market in 2026, reaching $136B, with advanced process CapEx up 26%
• Chinese equipment entering acceleration phase: domestic substitution rate rose from 25% to 35% in 2025; government funding of ¥80B boosts the industry further

Investment Strategy
Semiconductor equipment is highly technical and segmented. For ordinary investors, index-based investment is optimal:

• Index: CSI Semiconductor Materials & Equipment Index (931743.CSI)
• Focus: upstream materials + equipment
• ETF: E Fund Semiconductor Equipment ETF (159558), covering leading firms, with institutional holdings exceeding 80%

Since the start of 2026, semiconductor equipment ETFs have returned over 20%. In tech investing, embracing industry trends often matters more than debating niche technologies.