Representatives and Committee Members Discuss Integrated Circuits, Critical Materials Breakthrough Needs Urgent Action

Text by Wu Xinzhu

Edited by Li Zhuang

The government work report designates integrated circuits as the leading industry among the six emerging pillar industries, with further strengthening of innovation across the entire industry chain of integrated circuits and related sectors. Among them, breakthroughs in materials are expected to present unprecedented opportunities.

During the two sessions in 2026, multiple national人大 representatives and CPPCC members shared insights on the development of AI (artificial intelligence) and the integrated circuit industry, including strengthening computing infrastructure, establishing comprehensive advantages in the global competition of the integrated circuit industry, and innovative development of semiconductor materials.

Statistics show that the Shenwan Semiconductor Materials Index recently outperformed the semiconductor industry, with key materials such as silicon wafers and target materials gaining favor from capital. It is understood that the accelerated deployment of AI applications is increasing global wafer and chip production, creating opportunities for domestic silicon wafer production and driving growth in ultra-high purity metal sputtering target materials from demand. In the wave of wafer manufacturing industry returning to China, upstream and downstream companies will face dual opportunities from policies and markets.

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Members and Representatives Offer Suggestions on AI

The Status of the Integrated Circuit Industry Becomes Prominent

The 2026 government work report proposes to develop six emerging pillar industries, including integrated circuits, aerospace, biomedicine, and low-altitude economy. Data from the Ministry of Industry and Information Technology shows that in 2025, China’s integrated circuit output reached 484.3 billion units, a year-on-year increase of 10.9%. Customs data indicates that in 2025, China imported 591.7 billion integrated circuit units, up 7.8% from the previous year; the import value was $424.33 billion, a 10.1% increase; exports reached 349.5 billion units, up 17.4%, with export value at $201.9 billion, up 26.8%. Overall, China’s integrated circuit exports grew faster than imports, with significant growth in domestic production.

Hao Yue, a member of the National People’s Congress and academician of the Chinese Academy of Sciences, pointed out that the “14th Five-Year Plan” will be a critical period for China’s integrated circuit industry to shift from following to leading, and an important window to establish a global leading position in some emerging sectors. It is essential to leverage local resources and industrial foundations, focus on industry trends in the post-Moore era, and utilize China’s unique advantages. He emphasized the need to address core “bottleneck” issues, such as technological bottlenecks in semiconductor chips, and to pay attention to fields already at the international forefront or leading locally, by strengthening advantages and seizing global industry opportunities.

From the perspective of A-share computing power industry chain, China’s domestic computing power system has achieved substantive breakthroughs in technological challenges and ecosystem construction. On hardware, advanced domestic processes continue to catch up, with advanced packaging enabling chips to optimize performance, yield, and cost, supporting large-scale deployment of high-end AI chips. In system integration, technologies like “super nodes” have reconstructed hardware, significantly improving computing efficiency and energy utilization, providing support for training large models with hundreds of billions of parameters and high concurrency inference.

During the two sessions, Xia Yong, a member of the National People’s Congress, chairman and general manager of China Mobile Communications Group Chongqing Co., Ltd., stated that during the “14th Five-Year Plan,” high-quality AI development must focus on the three core elements: computing power, data, and algorithms. As an operator, efforts should be coordinated across multiple areas including computing supply, data circulation, technological and application innovation, service operation, and ecosystem building. Zhou Hongyi, a member of the CPPCC and founder of 360 Group, pointed out that large models are just the beginning of AI capabilities. Efforts should be made to promote the development of domestically produced inference chips to enhance the autonomy and controllability of the industry chain, providing infrastructure for large-scale AI applications.

OpenRouter data shows that domestic AI large models surpassed the US in monthly usage for the first time in February. The progress of domestic large models from technology to application has been rapid, with major companies like Tencent, Alibaba, and ByteDance launching new models and series of activities through Yuanbao, Tongyi Qianwen, and Doubao to secure C-end market positions. AI applications are penetrating both B-end and C-end markets, accelerating industry development. Meanwhile, AI is evolving from passive dialogue to active execution. As of March 9, the number of stars on OpenClaw (a “lobster farming” project) on GitHub exceeded 280,000.

Zhang Guohu, general manager of Yanye Silicon, told this publication that AI development will surpass expectations. The core of AI is chips, and chips originate from materials—silicon wafer materials are the foundation of the industry. The materials sector hopes to contribute more to the semiconductor industry. In the future, AI will change the paradigm of material research and accelerate development, showing great potential.

Semiconductor Materials Index Leads Gains

Value of Basic Materials Gains Attention

The Shenwan Semiconductor Index and Shenwan Semiconductor Materials Index reached historical highs on January 28 and February 26, respectively. From January 5 to March 10, their maximum interval gains were 24% and 30.35%, indicating increased investor interest in materials. Shares of Yanye New Materials (600206.SH) and Jiangfeng Electronics (300666.SZ) hit new highs on March 2 and 3, respectively. Sub-sectors such as polished and epitaxial silicon wafers and sputtering target materials saw significant gains, driven by industry upgrades and domestic substitution logic.

Currently, silicon wafers account for over 30% of total semiconductor material costs. Since 12-inch wafers offer about four times the usable area of the mainstream 6-inch wafers, the cost per chip can be reduced by 30%-40%. Manufacturing 12-inch wafers has become an evolution direction in mature processes. As a key raw material, 12-inch silicon wafers are crucial substrates. Yanye Silicon (688432.SH) was among the early companies to deploy 12-inch wafers, with its affiliate Shandong Yanye Aisi Semiconductor Materials Co., Ltd. mainly producing 12-inch wafers, currently in ramp-up phase.

Performance reports show that in 2025, Yanye Silicon achieved total revenue of 1.005 billion yuan, up 0.93% year-on-year; net profit attributable to shareholders was 209 million yuan, down 10.14%. The company explained that early in 2025, it increased its investment in Shandong Yanye Aisi Semiconductor Materials, raising its stake from 19.99% to 28.11%, which led to a significant increase in investment losses recognized this year. Additionally, share-based payment expenses increased from 6.36 million yuan to 18.99 million yuan, affecting overall performance.

Zhang Guohu emphasized that 12-inch wafers are a key focus during the “14th Five-Year Plan,” with ongoing R&D investments. The main target is logic circuit wafers, with substantial funding and talent support to promote domestic storage chips. The company also plans to actively invest in semiconductor components, as this is a golden era for domestic integration of the industry, with clear national policies supporting industry development. Industry players should be confident, seize opportunities, and accelerate growth to achieve a competitive global position.

“Material technology is continuously upgrading. There is still a gap between our advanced process crystal materials and foreign counterparts, and material R&D depends heavily on raw materials and equipment. Equipment collaboration still needs improvement,” said Zhang Guohu. He pointed out that Yanye Silicon has strong R&D capabilities, is a national outstanding engineer enterprise, and relies mainly on自主研发 (independent R&D). In recent years, the company has invested heavily in自主研发, recruiting new talent from universities annually to sustain R&D strength.

He also suggested including Jinan and Dezhou in the national integrated circuit industry layout. Domestic development is stronger in the south than in the north, but Shandong’s economy ranks third nationwide, with a solid industry base and favorable conditions for growth. With abundant human resources, cost advantages, and economic support, Shandong is the most suitable northern region (besides Beijing) for developing the industry.

In target materials, sputtering targets are used in semiconductor integrated circuits, flat-panel displays, solar cells, and other fields. They are raw materials used in physical vapor deposition (PVD) to deposit thin films on substrates. Targets are the bombardment targets for high-energy particles. Rare earth doping is an important way to improve target performance, enhancing film structure, electrical, magnetic, and photocatalytic properties. Geopolitical shifts continue to influence the semiconductor materials market.

Public information shows that in Q1 2026, electronic target companies generally raised prices, with conventional target prices increasing by 20% and special small-metal targets by 60%-70%. From the supply side, the global high-end target market has long been dominated by overseas giants like JX Metals (Japan) and Honeywell. JX Metals, in its performance briefing on November 11, 2025, explicitly stated that due to copper and other material price increases, revenue guidance was revised upward. Dongxing Securities believes that the supply-demand relationship suggests domestic target companies may enter a period of prosperity, benefiting from this price increase wave.

Return of Wafer Foundry Industry Boosts Target Business Performance

From the wafer foundry perspective, overseas chip giants are withdrawing from 8-inch wafer markets due to slim margins, creating new opportunities for Chinese companies. Through large-scale production and localized supply chains, Chinese firms are reducing costs and consolidating market advantages. Demand for mature process chips and automotive-grade devices will sustain the 8-inch market, while demand for 12-inch wafers will continue to grow, especially in AI chips and high-end processors.

Mature process technology refers to semiconductor manufacturing with line widths of 28nm and above. Compared to advanced processes, mature processes have no performance or power advantages but are characterized by low cost, high yield, and relative technological stability, suitable for many cost-sensitive and performance-appropriate applications, widely used in consumer electronics, automotive electronics, industrial control, and IoT. SMIC and Huahong are representative companies in mature processes. SMIC disclosed that in Q4 2025, after adding 16,000 12-inch wafers of capacity, utilization remained at 95.7%. Overall, 8-inch utilization was over capacity, and 12-inch was near full capacity, driven by ongoing industry chain upgrades. By year-end, SMIC’s equivalent monthly capacity for 8-inch logic wafers was 1.059 million units, an increase of 111,000 units from the previous year.

Huahong, in its Q4 2025 earnings call, stated that driven by AI and related product demand, domestic consumer demand rebounded, and capacity remained high, with an average utilization rate of 106.1%. The second phase of its Wuxi 12-inch fab (FAB9) exceeded expectations, and the acquisition of Shanghai’s 12-inch manufacturing base (FAB5) was progressing smoothly, adding about 40,000 wafers of monthly capacity.

Jibang Consulting believes that in 2026, with increasing computing power and power consumption needs of AI servers and edge AI applications, demand for power management chips will grow, supporting higher utilization of 8-inch capacity. It is estimated that global 8-inch capacity utilization will rise to 85%-90% in 2026, significantly higher than 75%-80% in 2025.

Global wafer and chip production will increase and continue to advance toward more mature processes, creating opportunities for domestic silicon wafer production and driving growth in ultra-high purity metal sputtering target materials. Forrester estimates that by 2027, the global semiconductor sputtering target market will reach 25.1 billion yuan, with the display sputtering target market reaching 39.9 billion yuan. TECTCET predicts that global sputtering target revenue will significantly outpace sales volume growth, mainly driven by sharp increases in metal costs, especially copper and tungsten.

The target industry’s fundamentals are positive. Jiangfeng Electronics achieved revenue of 4.605 billion yuan in 2025, up 27.75% year-on-year; net profit attributable to shareholders was 481 million yuan, up 20.15%. The company explained that in 2025, benefiting from sustained growth in downstream demand from AI, 5G, cloud computing, robotics, and transportation, global wafer and chip output increased, promoting revenue growth in ultra-high purity metal sputtering targets. After years of layout, its semiconductor precision parts manufacturing base has come into operation, rapidly expanding its product lines. Additionally, accelerated localization of the supply chain has led to continuous volume growth in semiconductor precision parts. The company’s fair value changes in strategic investments like ChipLink and government subsidies also contributed to increased non-recurring gains.

It is worth noting that although the stock prices of some A-share silicon wafer companies rebounded in late 2024 and reached phased highs in late 2025, some still face significant R&D and depreciation pressures, and have not yet turned losses into profits for 2025.

(This article was published in the March 14 issue of “Securities Market Weekly.” The stocks mentioned are for illustrative analysis only and do not constitute investment advice.)