CSC maintains its recommendation for the semiconductor equipment sector, highlighting humanoid robots as one of the most effective physical carriers for artificial intelligence. The analysis also covers several other key machinery segments.

Humanoid Robots: Regarded as a premier platform for physical AI, the sector is gaining momentum. The narrative around physical AI represents a tangible industrial trend. The anticipated mass production of Optimus is drawing nearer, with clearer guidance emerging for supply chain volume. The upcoming V3 product release and production ramp-up warrant close attention. Furthermore, the ongoing IPO processes for domestic robotics companies could lead to a revaluation of these entities, providing continuous catalysts for the sector.

AIDC Power Generation Equipment: The trend of domestic gas turbines expanding overseas is becoming evident. Recent orders for companies like Dongfang Electric, China Power, and AECC highlight this movement. Concurrently, price increases are materializing across the产业链. Following price hikes by companies like GE Vernova in March, orders for entities like Jereh have also seen price adjustments, with domestic turbines showing a similar upward trend, potentially boosting profitability. Power shortages remain a key theme for the year, supporting a positive outlook for the gas turbine industry chain. Projections indicate global demand could exceed 150GW by 2028, against a supply of less than 100GW, suggesting a widening gap and reinforcing the positive view on the gas turbine chain and trends like ship-to-shore power conversion.

Engineering Machinery: Both domestic and international demand remain robust, presenting a favorable entry point. The competitive landscape for excavators is improving, with leading manufacturers initiating price increases. Sany Heavy Industry announced a 5% price hike for excavators effective May 15th, citing rising raw material costs. Similarly, XCMG Excavator and LiuGong announced price increases of 3-5% and 5%, effective June 1st and May 20, 2026, respectively. These moves, averaging around 5%, signal a moderation in the price war observed earlier in the year, pointing towards healthier industry development. Following better-than-expected sales in March, April figures also surpassed expectations. Total excavator sales reached 28,745 units, a 29.8% year-on-year increase. Domestic sales grew 34.9% to 16,920 units, while exports rose 23.2% to 11,825 units. Domestic growth accelerated, and exports maintained a strong pace. The peak season for domestic sales appears delayed this year due to the later Lunar New Year, but growth has been positive since March and is expected to continue. Exports remain resilient despite international uncertainties, tariff changes, and interest rate fluctuations, sustaining the strong growth trajectory of China's engineering machinery sector.

Semiconductor Equipment: The IPO progress of major memory chip makers and a clear downstream capacity expansion cycle provide a positive backdrop. ChangXin is scheduled for a hearing on May 27th, while YMTC has begun its IPO辅导. Mass capacity expansion for domestic memory manufacturers is underway. There is potential for outperformance in advanced logic. Following a Reuters report on April 29th about potential U.S. supply restrictions to Hua Hong, observations indicate an increasing number of domestic players in advanced logic, with smooth progress in production line ramp-up and yield improvement. Batch capacity expansion is imminent, with potential for upside in the second half. Advanced packaging is also set to scale, with leading player盛合晶微 listing in April, indicating the start of volume production for domestic advanced packaging. The trend towards self-sufficiency is strengthening. Recent events, including the U.S. MATCH Act and potential supply restrictions, reinforce this trend. Domestic validation of advanced equipment is proceeding smoothly, suggesting a phase of rapid increase in localization rates.

Lithium Battery Equipment: The CIBF exhibition garnered significant industry attention, with upstream equipment manufacturers being a key focus. Held from May 13th to 15th at the Shenzhen World Exhibition & Convention Center, the event spanned over 280,000 square meters, featured 3,029 exhibitors, and attracted over 400,000 professional visitors, setting a new record. Key observations include: Firstly, upstream equipment manufacturers were the dominant exhibitors, accounting for 60.8% of participants, covering the entire process from front to back end and showcasing new technologies like solid-state and sodium-ion batteries, suggesting a potentially stabilizing end-customer landscape. Secondly, Japanese and Korean firms focused on new technologies, while European, American, and Indian participants showed interest in mature production lines, indicating that overseas expansion for lithium battery technology is the next developmental phase. Thirdly, the energy storage market remains hot, with delivery cycles becoming a primary concern. Strong demand for energy storage is key to the current lithium battery cycle recovery. Major battery manufacturers presented new storage solutions, highlighting trends towards larger cells and high integration. Due to factors like overseas tax credit policy windows, customer discussions have shifted from price to delivery timelines, with apparent shortages downstream. Fourthly, cutting-edge technologies are proliferating, with solid-state and sodium-ion batteries showing significant progress, indicating that technological leadership remains substantial. Finally, compared to the relatively consolidated battery sector, the "explosive growth" among equipment and material suppliers was the most notable industry reality at the exhibition.

The analysis also outlines several risk factors: (1) Fluctuations in domestic macroeconomic conditions, as the machinery sector is a typical midstream capital goods industry sensitive to economic cycles. Significant shifts in domestic macro policy could impact overall sector demand. (2) Volatility in overseas markets, as the international expansion of Chinese enterprises may face various frictions, requiring careful assessment of whether these are temporary setbacks or new trends. (3) Risks associated with slower-than-expected downstream capacity expansion, which could reduce equipment demand and adversely affect company orders and performance within the sector.