Recently, the A-share market has seen an undeniable strong force—the chip semiconductor sector. This sector has not only shown a long-term bottom pattern but also seems to be welcoming an inflection point on the right side. Among the many sectors, the strong trend of chip stocks is particularly eye-catching, becoming a clear stream in the current A-share market.

Significant Improvement in Fundamentals

The fundamentals of the chip semiconductor industry have shown a significant improvement this year. In the first quarter of 2024, global semiconductor revenue reached $137.7 billion, a year-on-year increase of 15.2%, indicating that the market as a whole has initially shown a recovery trend. It is particularly worth noting that the semiconductor sales amount in our country increased by 27.4% year-on-year, leading the growth rate in various regions around the world.

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The price of memory chips began to rebound in the second half of 2023, and major memory manufacturers such as Samsung and Micron plan to increase DRAM prices by 15% to 20% in the first quarter of 2024. Domestic chip companies such as SMIC, Huahong Semiconductor, and Montage Technology have shown clear signs of performance recovery, with 75% of manufacturers having sufficient orders and achieving positive growth in performance.

Strong Support from Industrial Demand

The rapid development of industries such as artificial intelligence, intelligent driving, and robotics, along with the recovery of the consumer electronics industry, has provided strong support for the recovery of the chip industry. The demand for high-performance chips in these industries is growing, which has promoted the rapid development of the chip semiconductor industry.

Strong Support from National Policies

Against the backdrop of the strong recovery of the chip industry, the A-share chip sector naturally has attracted the favor of funds outside the market. In recent years, our country has attached great importance to the development of the chip semiconductor industry and has introduced a series of policies to promote the development of this industry, such as:

In 2020, the "Several Policies on Promoting the High-Quality Development of the Integrated Circuit Industry and Software Industry in the New Era" proposed tax incentives and support policies for domestic and overseas listings for the semiconductor industry.The "Electronic Information Manufacturing Industry Steady Growth Action Plan for 2023-2024" aims to enhance the modernization level of the industrial chain, promote industrial chain innovation, and optimize the industrial layout.

The "14th Five-Year Plan" emphasizes the importance of the semiconductor industry and proposes policies to help achieve leapfrog development.

In the "Made in China 2025" plan, semiconductors are listed as the top priority industry for development.

Seizing Investment Opportunities

Song Weiwei, the fund manager of the China Europe China Chip Industry Index Fund, believes that the investment certainty of the chip semiconductor sector is relatively high: "The first phase of the big fund in 2014 was 98.7 billion yuan, the second phase in 2019 was 204.2 billion yuan, and the third phase in 2024 is expected to be 344 billion yuan. The continuous increase in the fundraising scale can better reflect the national level's determination to solve the bottleneck of semiconductors. From a horizontal comparison, in terms of the continuity of investment and the continuously increasing investment scale, it is rare to see such strong national support in other industries. The autonomy and controllability of chips and semiconductors are one of the most important and certain industrial development trends under the current global situation."

The China Europe China Chip Industry Index Initiator A (020478) he manages has achieved a return of 18.59% this year. The China Europe China Chip Industry Index Initiator C (020483) has achieved a return of 18.48% this year.

Liu Yang, the fund manager of the Chuangjin He Xin Chip Industry Fund, talked about his chip semiconductor sector holding strategy in an interview with the securities: "The current chip industry has reached a historically high level in globalization, specialization, and industrial chain complexity, and a very significant reshaping of the industrial chain will occur, mainly driven by the rise of new energy, the rise of AI, the transformation of industrial automation, and the saturation of consumer electronics. In the future, the overseas investment strategy will be to focus 50% of the position on high-quality leading companies, and 30% of the position on high-elastic varieties with cutting-edge technology characteristics."

The Chuangjin He Xin Global Chip Industry Stock A (017653) he manages has achieved a return of 11.55% this year. The Chuangjin He Xin Global Chip Industry Stock C (017654) has increased by 11.02% in the past year.

Wang Yang, the fund manager of the Jing Shun Great Wall Global Semiconductor Chip Industry Equity Fund, said that the investment opportunities in the chip semiconductor sector have arrived: "Now that the chip has undergone a significant correction, it is in a relatively safe area, and the emergence of this product is timely," Wang Yang pointed out that the global semiconductor chip industry equity fund is one of the few funds in the market that can be used to layout global semiconductor leading enterprises, providing industrial layout opportunities while also to some extent dispersing regional risks.

The Jing Shun Great Wall Global Semiconductor Chip Industry Stock A (501225) he manages has achieved a return of 26.33%. The Jing Shun Great Wall Global Semiconductor Chip Industry Stock C (016668) has achieved a return of 25.74%.The Central European Zhongzheng Chip Industry and Chuangjin He Xin Chip Industry are passive-type products, while Jing Shun Great Wall is an active-type product. Passive-type products aim to track and replicate the index, and they charge relatively low management fees. Since they fully replicate the index's market trend, they build positions passively. Therefore, their investment is not affected by the personal abilities and conditions of the fund manager. Active-type products rely more on the fund manager to actively select stocks and choose the timing. They charge relatively higher management fees. Moreover, it is also very difficult for ordinary investors to select a fund manager with a long-term excellent performance.

In summary, the strong trend of the chip semiconductor sector is not accidental, but the result of the joint action of the industry's fundamental recovery, national policy support, and market demand growth. While seizing this investment opportunity, investors should also fully recognize the risks of the industry, reasonably allocate assets, and choose fund products suitable for their risk-bearing capacity for investment.

With the continuous support of the country for the chip semiconductor industry and the industry's own technological progress, the chip sector will maintain its strong growth momentum for a long time, bringing considerable returns to investors.