The turning point toward self-reliance and control in China’s semiconductor industry is gradually becoming clear.
On May 25, Huawei unveiled the “Tao (τ) Law”; on May 19, Yangtze Memory Technologies began preparations for its A-share IPO; and on May 17, Changxin Memory Technologies updated its STAR Market IPO prospectus and resumed the listing review process.
When viewed in context, Miaotou has observed that China’s strategic plan for the semiconductor industry has come to light.
The challenge of domestic semiconductor production appears to be a technological gap on the surface, but at its core lies the long-standing monopoly of industry rules and a mature industrial ecosystem.
While Huawei’s “Tao (τ) Law” is still in the transition phase from the laboratory to mass production, Changxin Technology and Yangtze Memory Technologies are already actively rewriting the rules and shaping the ecosystem.
Miaotou believes that the emergence of original equipment manufacturers (OEMs) like Changxin will be a key factor in shifting the landscape of semiconductor localization. The turning point toward a self-reliant and controllable Chinese semiconductor industry is becoming increasingly clear, and the semiconductor supply chain is poised for a revaluation of its value.
1. Rewriting the Rules and the Ecosystem
As is well known, advanced processes at 7nm and below rely on EUV lithography systems, which are exclusively monopolized by the Dutch company ASML. This is also the most difficult bottleneck for China’s semiconductor industry to overcome.
Since a head-on confrontation won’t work, we must find a different path.
It’s not just Huawei’s “Tao (τ) Law” that attempts to circumvent the lithography machine blockade and rewrite the rules of hardware; Changxin Memory Technology’s DRAM and Yangtze Memory Technologies’ NAND also break the deadlock by bypassing the lithography machine and redefining new technological pathways.
For example: Without pursuing the most advanced lithography equipment, Yangtze Memory Technologies Co., Ltd. (YMTC) pioneered the Xtacking architecture and was the first to release 232-layer 3D NAND. Changxin Memory Technologies Ltd. (Xinchip) bypassed the patent barriers erected by Samsung, Micron, and SK Hynix to independently develop a DRAM architecture, achieving mass production of DDR4 and DDR5.
But that is not enough.
For semiconductors to truly achieve domestic production, in addition to independently developing new technological pathways, there must also be an industry chain “leader” capable of rallying the entire sector to reshape the ecosystem.
China has long mastered this ecosystem strategy in the localization of communication networks.
In the 1G and 2G eras, global communication standards were monopolized by Europe and the United States. China was merely a user of these standards, with no say in their development; it simply paid patent fees. As a result, its communications were subject to external control, and it had no choice but to purchase equipment from Ericsson and Nokia. This situation bears a striking resemblance to the current predicament in the semiconductor industry.
Consequently, China established a 3G standard—TD-SCDMA. However, having a standard was not enough; someone had to “nurture” it. Ultimately, this responsibility fell to China Mobile.
As the “chain leader,” China Mobile placed large orders with domestic suppliers, forcing domestic base stations, core networks, and transmission equipment to mature rapidly and bolstering the entire industrial chain. This also laid the foundation for Huawei and ZTE to lead the world in the 5G era.
This time, Changxin Technology is more like the “China Mobile” of years past.
However, the development of the storage industry’s ecosystem does not follow exactly the same logic of localization as the telecommunications industry; there is one key difference.
In telecommunications, the government footed the bill, with central state-owned operators handling centralized procurement; while the storage industry also enjoys government support, it will ultimately face market-driven competition, as smartphone, PC, and server manufacturers are commercial entities that prioritize profitability. Consequently, building an ecosystem in the storage industry will be more challenging than it was for the telecommunications industry back then.
Although Changxin’s DRAM and Yangtze Memory’s NAND have already entered the market and begun competing head-to-head with Samsung, SK Hynix, and Micron, and government agencies, state-owned enterprises, and central SOEs will take the lead in promoting domestic procurement and providing tangible financial support, the storage industry is, after all, a highly market-driven sector with significant price sensitivity. Relying solely on government procurement is insufficient to complete the ecosystem’s closed loop.
Against this backdrop, it is almost inevitable that Changxin Technology and Yangtze Memory Technologies will proceed with their IPOs. Only by leveraging the capital markets to continuously replenish the long-term funds needed for R&D, production expansion, and market competition can they gain a foothold in the fiercely competitive global storage industry.
It is worth noting that China is not the only country relying on state support for its semiconductor industry.
For example, South Korea uses government credit guarantees to enable Samsung to secure loans at extremely low costs, allowing it to expand production against the economic cycle and capture market share; in the United States, military orders provided the semiconductor industry with its “seed money” and the impetus for R&D.
From this perspective, the development of a country’s semiconductor industry ecosystem is ultimately a reflection of national will.
2. Mutual Success Image
Aside from bypassing the most challenging lithography machines, the domestic penetration rate for semiconductor equipment and materials in 2025 remains low, creating an urgent need to “catch up.”
As leaders of the supply chain, Changxin Technology and Yangtze Memory Technologies must cultivate domestic supply chains for semiconductor equipment and materials. Once established, these domestic manufacturers can also be leveraged in the production of logic chips, killing two birds with one stone.
Semiconductor equipment is never a product that can be “manufactured and used immediately.” The equipment must be deeply aligned with the process parameters of the original storage manufacturers to truly establish mass production capabilities.
International giants have long proven the necessity of this approach. Applied Materials, Lam Research, and Tokyo Electron (TEL) have all developed and iterated their equipment parameters in sync with the process roadmaps of major clients such as Samsung and Micron.
The fundamental reason global memory giants can maintain a lead in equipment lies in their sufficient scale of mass production, which allows them to continuously test and iterate in real production environments.
Compared to technology, what domestic equipment manufacturers lack most is the opportunity for mass-production validation.
Together, Yangtze Memory Technologies and Changxin Memory Technologies have a combined monthly production capacity of hundreds of thousands of wafers, providing domestic equipment manufacturers with an irreplaceable real-world testing environment. For example, only by running wafers on actual production equipment can one identify where there are electrical leaks, where etching is uneven, and where film thickness is inconsistent. This kind of data can never be obtained in a laboratory setting.
Furthermore, Yangtze Memory Technologies and Changxin Memory Technologies spend tens of billions of yuan annually on equipment procurement. As long as these two major manufacturers are willing to give domestic equipment a chance, it means equipment manufacturers will have a stable source of revenue and sustainable cash flow.
With orders and cash flow, equipment manufacturers can invest in the R&D of next-generation equipment; with revenue, they can retain engineers, expand their teams, and purchase components. This sets in motion a virtuous cycle for the localization of semiconductor equipment.
This will also drive the development of upstream materials.
When memory manufacturers use domestic equipment, they will simultaneously require domestic materials to support it, such as domestic silicon wafers, domestic polishing slurries, domestic photoresists, domestic tungsten targets, and domestic dielectric films.
When equipment manufacturers, materials manufacturers, and memory manufacturers are deeply integrated as a trinity, the impact of overseas giants “cutting off supplies” will be mitigated.
Miaotou notes that the more far-reaching strategic significance lies in the fact that once the localization rate of storage equipment has been comprehensively improved and the “two-step” verification process is complete, this set of refined equipment and experience can be fully leveraged to empower logic foundries such as SMIC and Huahong.
Storage first, logic second; break through at a single point first, then replicate comprehensively; survive first, then go global. This is the most pragmatic strategic path for the rise of China’s semiconductor industry.
3. The plan has been put into action, and the revaluation of the semiconductor supply chain has only just begun
As the “open strategy” takes shape, the capital markets have quietly begun to reassess the semiconductor supply chain.
The memory industry is characterized by heavy capital investment; companies must continuously invest heavily in technological innovation, product development, and production line construction to remain competitive. Given the extremely high capital expenditure requirements, Yangtze Memory Technologies and Yangtze Memory must leverage economies of scale to reduce costs.
This also means that Yangtze Memory Technologies and Yangtze Memory will continue to increase their capital expenditures on the procurement of equipment, materials, and other components to achieve economies of scale.
In the history of the A-share market, this marks the first time that two super IDM (integrated design and manufacturing) manufacturers, each holding cash reserves in the hundreds of billions, have engaged in centralized procurement of domestically produced equipment.
Capital expenditures and orders will become key factors in the revaluation of domestic semiconductor equipment and materials manufacturers.
In the past, domestic equipment manufacturers often found themselves trapped in a dilemma of “lack of high-end production line validation, inability to secure orders, and inability to iterate technology.” Now that the two giants have clearly prioritized allocating the lion’s share of the benefits from their production expansion to domestic suppliers, this undoubtedly represents a powerful acceleration of domestic substitution.
According to the prospectus, Changxin Technology’s IPO aims to raise 29.5 billion yuan, primarily for upgrading existing wafer production lines (7.5 billion yuan), upgrading DRAM memory technology (13 billion yuan), and R&D for forward-looking technologies such as HBM (9 billion yuan), which will further drive the procurement of related equipment.
In addition, Yangtze Memory Technologies will begin tendering for equipment in the second quarter of 2026. For example, in May 2026, the company launched a tender for the procurement and installation of process equipment for its Plant 2.
On the other hand, as Changxin Technology’s performance has exceeded expectations, expectations for increased semiconductor equipment procurement have also risen.
In the first quarter of 2026, Changxin Technology reported revenue of 50.8 billion yuan, a year-over-year increase of 719.13%; net profit attributable to shareholders reached 24.762 billion yuan, a significant year-over-year increase of over 1,688%.
In addition, Changxin Technology forecasts that net profit attributable to shareholders for January–June 2026 will range from 50 billion to 57 billion yuan, representing a substantial year-over-year increase of 2,244.03% to 2,544.19%.
Furthermore, some institutions predict that its full-year revenue could exceed 150 billion yuan, with at least 50% of cash flow expected to be allocated to capital expenditures.
Looking ahead, Changxin Technology’s target production capacity is 600,000 to 700,000 wafers per month, on par with Samsung and SK Hynix. To achieve domestic self-sufficiency, the company will still need to invest over 300 billion yuan in the future.
For domestic equipment and materials manufacturers, gaining entry into Changxin’s supply chain is tantamount to securing the prestigious title of “first-tier domestic substitute,” which can then be promoted and expanded across the entire industry.
Looking ahead to the coming years, China’s semiconductor industry is poised for an unprecedented expansion in production capacity. Capital expenditures by the “Two Chang” companies and leading wafer fabs are expected to break historical records, helping domestic semiconductor equipment take another leap forward.
Therefore, Miaotou believes that the semiconductor equipment sector offers extremely high growth certainty, with earnings expected to accelerate.
In the past, capital markets were eager to buy into the “grand narrative of domestic substitution,” granting semiconductor equipment manufacturers extremely high premiums. But at this stage, the narrative has begun to materialize, and it is time for performance to speak for itself.
Take Northern HuaChuang, a leading semiconductor equipment manufacturer, as an example: analysts predict that its net profit attributable to shareholders will reach 6.9 billion, 9.05 billion, and 12.01 billion yuan in 2026, 2027, and 2028, respectively. As of now, its market capitalization has approached 500 billion yuan, and based on the 2028 earnings forecast, its price-to-earnings ratio remains around 40 times.
This implies that the recent rise in stock prices has, in fact, already priced in earnings expectations for the coming years. Moving forward, for valuations to rise further, the company must deliver orders and earnings that far exceed expectations. At this juncture, some semiconductor equipment manufacturers have seen excessive short-term gains, making them poor value for money; investors should approach them with caution.
However, taking a long-term view, the semiconductor equipment sector is a classic “the strong get stronger” game. As long as the “chain leaders” remain, as long as the ecosystem persists, and as long as the determination to localize production endures, leading companies are fully capable of justifying current high valuations through increased R&D, strategic acquisitions to expand product lines, and earnings that exceed expectations.
China’s semiconductor strategy is not a 100-meter sprint, but a marathon that cannot be lost—and one we cannot afford to lose.
The cards have been laid on the table, and the show has only just begun.
(Miaoutou)
