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Semiconductor Equipment Sector Under Short-Term Pressure: Market Sentiment Fluctuations and Industry Cycle Resilience Prompt Valuation Reassessment
Keywords: Semiconductor Equipment, STAR Market, Inventory Cycle, Market Sentiment, Domestic Substitution, Valuation Restructuring
Introduction
After several months of structural market movements and sector rotation, semiconductor equipment concept stocks recently experienced a notable pullback. On July 16, market data showed that leading semiconductor equipment and material companies such as Jiangfeng Electronics, Anji Technology, and Huahai Qingke saw a collective decline, with Jiangfeng falling over 9%, dragging down sector sentiment. Meanwhile, the semiconductor equipment ETF tracking this field also recorded a drop of about 3%.
This adjustment is not an isolated event; it is both a technical digestion of previous accumulated gains and a reflection of the market reassessing valuations and future growth expectations for this sub-sector under the current macro and industry environment. This article will deeply analyze the multi-dimensional reasons behind the sector's decline and, combined with medium-term industry trends, explore its long-term value and short-term risks in the complex market environment.
I. Short-Term Pullback: Resonance of Sentiment and Capital
The decline in the semiconductor equipment sector can first be attributed to a phased cooling of market sentiment. Over the past few quarters, driven by grand narratives such as "AI computing infrastructure" and "advanced manufacturing self-reliance," the overall valuation center of the semiconductor equipment sector has been shifting upward. Some individual stocks had already priced in optimistic expectations for the next 1-2 years.
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Profit-taking pressure: Taking Jiangfeng Electronics as an example, as a leader in high-purity sputtering targets, its stock had undergone a strong rally within the year. When the market lacks new super-catalysts, accumulated profit-takers choose to cash out at relatively high levels, creating selling pressure. Anji Technology and Huahai Qingke faced similar situations. Large sell orders often trigger chain reactions among retail investors and trend traders, amplifying short-term declines.
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Macro expectation disturbance: Recently, concerns have mounted over the end timing of the global semiconductor inventory adjustment cycle, weak global economic recovery, and heightened escalation of geopolitical restrictions. Although the domestic equipment market benefits from local wafer fab expansion and performs strongly, the degree of "decoupling" from the global cycle is not universally agreed upon. Once macro data or peripheral markets fluctuate, the high-beta equipment sector is often the first to be affected.
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Passive impact of ETF funds: The decline of the semiconductor equipment ETF is not only a result of constituent stock declines but also puts pressure on constituent stocks in return. When the ETF's NAV drops significantly, it may trigger redemptions by some investors. To meet redemptions, ETF managers may sell some constituent stocks in the secondary market, further increasing selling pressure on related individual stocks, forming a negative feedback loop.
II. Medium-Term Logic: Inventory Cycle Turning Point and Resilience of Domestic Substitution
Despite weak short-term market performance, from a medium-term perspective, the fundamental logic of the semiconductor equipment industry remains solid and has not reversed in essence.
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Misalignment of global and domestic cycles: The global semiconductor market is at the tail end of inventory destocking, with recovery signals in demand for consumer electronics, memory chips, etc. Meanwhile, China's semiconductor supply chain, especially the equipment side, is in a high-growth phase of capital expenditure. Expansion plans by leading domestic foundries and memory IDM manufacturers have not paused due to short-term market movements. Data shows that in the first half of 2026, bidding volume for domestic equipment by major domestic wafer fabs still maintained year-on-year positive growth. This "counter-cyclical" expansion provides solid order support for domestic equipment companies.
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Domestic substitution enters deep waters: Companies like Huahai Qingke and Anji Technology have moved from "usable" to "good to use," gradually replacing international players in segments like CMP equipment and polishing slurries. As domestic advanced processes break through, demand for higher-end, more precise equipment and materials will continue to be released. This process is a typical "moat" construction with a long-term nature. The current market decline, on the contrary, offers long-term capital opportunities to allocate these scarce assets at more reasonable prices.
III. Long-Term Perspective: Valuation System Restructuring and Competitive Landscape Evolution
The market's valuation logic for the semiconductor equipment sector is transitioning from a simple "domestic substitution premium" to "earnings delivery capability."
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From "theme-driven" to "earnings-driven": In the early stage of the industry, the market was willing to pay high premiums for growth. As a group of companies enter the volume stage, such as the scaling effect of Jiangfeng Electronics' target business, the market begins to demand higher profitability, stronger cash flow, and clearer growth paths. Companies that cannot consistently deliver earnings growth expectations will face valuation downgrade risks.
The above diagram intuitively shows the synchronicity and differences in stock prices during this decline cycle, reflecting that the market's logic judgment on sub-sector leaders is diverging.
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Endgame thinking in competitive landscape: The semiconductor equipment industry is one with high barriers in technology, capital, and customer validation. In the short term, companies within the industry may all benefit from the wave of domestic substitution. But in the long term, survival of the fittest is inevitable. The advantages of leaders will continue to consolidate, while followers may fall into price wars or fail to pass stringent top customer certifications. This market pullback is also a "touchstone," revealing which companies have stronger risk resistance and more solid fundamentals.
Conclusion
In summary, the collective decline of the semiconductor equipment sector on July 16 is a typical technical adjustment caused by the combined effect of market sentiment and capital flows. It is not a reversal signal of industry fundamentals but a rebalancing of valuations, expectations, and risks after a long-term rise.
For investors, short-term fluctuations should be viewed rationally:
- Short-term dimension: Monitor when market sentiment stabilizes and whether new negative factors emerge. Overvalued individual stocks still have room for further pullback, and caution against chasing highs is needed.
- Medium-term dimension: Focus on the capital expenditure plans of major domestic wafer fabs and actual equipment bidding implementations. A substantive recovery in the inventory cycle (especially memory, CIS) will be an important catalyst.
- Long-term dimension: Focus on industry leaders with core technical barriers, strong customer collaboration effects, and the ability to continuously improve profitability through scale effects.
As the cornerstone of national technological competitiveness, the long-term growth prospects of semiconductor equipment are unquestionable. Every irrational market decline offers an opportunity for investors who deeply study the industry and understand company value to reassess and allocate high-quality assets. When the noise fades, true value becomes clearer.
