China Galaxy Securities' latest research note indicates that the semiconductor sector experienced a slight surge in August before oscillating into a flat trend, as the market digested high capital crowding and trading volumes receded. Breaking down the monthly performance by sub-sector, the ranking from top to bottom was analog chip design, semiconductor materials, integrated circuit packaging and testing, integrated circuit manufacturing, semiconductor equipment, and digital chip design. For September, the firm recommends focusing on segments with strong fundamental elasticity and low crowding, specifically highlighting the earnings inflection point for analog and power semiconductors, as well as adjustment opportunities for companies whose deliveries have been disrupted.
In its August market review, China Galaxy notes that the CSI 300 rose 0.46% while the broader electronics sector gained 10.24%, with the semiconductor segment specifically climbing 6.95%. The digital chip design sub-sector posted a 5.72% gain for the month. On the computing power front, Nvidia's FY2027Q2 revenue reached $96.2 billion (up 106% year-over-year), with both results and guidance exceeding expectations. Meanwhile, Tencent's Q2 capital expenditure hit RMB 52.8 billion, with indications of significantly increased computing power procurement in Q3. Alibaba's AI revenue has sustained triple-digit growth for twelve consecutive quarters, underscoring that global investment in computing infrastructure continues to accelerate.
On the memory front, DRAM prices trended upward throughout the month before moderating toward month-end. SanDisk disclosed its long-term financial model, SK Hynix announced a 40 trillion won share buyback and cancellation program, and Samsung rolled out a 90-110 trillion won shareholder return framework, reinforcing the dividend characteristics of the memory sector. Additionally, ChangXin Memory Technologies' interim results significantly surpassed expectations.
Turning to analog chip design and discrete devices, the former saw its sub-sector index surge 21.85% in August, while the latter jumped 26.6%. Over the full month, the analog segment rose approximately 17% and discrete devices about 28%, leading all sub-sectors. In August, Analog Devices, Texas Instruments, and STMicroelectronics all issued price hike notices. Interim reports from companies such as SMIC, Novosense, and 3peak indicated sequential revenue growth in 2026Q2, with profits turning positive or showing marked improvement. The analog and power segments are in the early stages of an earnings inflection, making their upside potential noteworthy.
In integrated circuit manufacturing, the sub-sector gained 8.12% for the month. SMIC and Hua Hong Semiconductor both delivered interim results that beat expectations, with accelerated revenue growth in 2026Q2 and improvements in gross margins both sequentially and year-over-year. Vanguard International Semiconductor and United Microelectronics have confirmed a wafer price hike trend for 2027, while Samsung has raised prices for certain advanced process foundry services by up to 15%. The global pure-play foundry market grew 29% year-over-year in 2026Q2, with TSMC, Samsung, and SMIC holding market shares of 73%, 7%, and 5% respectively. Benefiting from robust AI demand and price increases, domestic wafer fabs are poised for sequential earnings improvements.
The integrated circuit packaging and testing sub-sector advanced 13.55% in August, with advanced packaging identified as the core competitive arena. TSMC's 5.5x reticle CoWoS has entered mass production with yields stable above 98%, and capacity is projected to grow at a compound annual growth rate exceeding 80% from 2022 to 2027. The company also plans to outsource part of the CoW process to major players like ASE Technology. STATS ChipPAC is contemplating price adjustments, while JCET and Huatian Technology reported significant profit improvements in 2026Q2. Additionally, Tongfu Microelectronics intends to establish a joint advanced packaging R&D center with Fujitsu. Advanced packaging has emerged as a critical industry bottleneck, with the global supply-demand gap continuing to widen.
The semiconductor equipment sub-sector rose 7.19% in August. Lam Research and Applied Materials both surpassed expectations with accelerating growth guidance. On August 1st, Japan's third round of semiconductor export controls took effect, targeting high-end advanced packaging equipment, which is accelerating domestic substitution efforts. Naura Technology's interim results came in below expectations, primarily due to component supply restrictions impacting delivery schedules, though order demand remains robust. AMEC and Piotech posted results in line with expectations, with 2026Q2 revenue growing 35.5% and 44.6% year-over-year respectively. With the industry upturn and localization progress, the firm maintains a positive outlook.
In semiconductor materials and electronic chemicals, the sub-sectors posted August gains of 18.12% and 22.3% respectively. The month saw photoresist price increases, indium phosphide substrate shortages, and a growing supply-demand gap for tungsten hexafluoride. Ajinomoto also reduced ABF film shipments to China by 30%. Toward month-end, Taiwanese manufacturers like GlobalWafers signaled silicon wafer price increases, with domestic wafer makers expected to follow suit in Q3. The firm recommends focusing on categories facing global supply tightness.
Risk factors include the potential for AI downstream demand to fall short of expectations and the possibility that semiconductor domestic substitution progress lags projections.