Semiconductors

How the chain fits together

A chip starts as a polished silicon disc and ends as a packaged part ready to solder onto a board. The six stages on this map cover that journey:

• Silicon wafers are the substrate every chip is built on. Global shipments reached 3,275 million square inches in the first quarter of 2026, up 13.1% year on year (SEMI data via NSIG 2026 interim report, p. 11).
• Photoresist is the light-sensitive chemistry that prints circuits onto the wafer, and specialty gases etch, deposit and dope the layers. Both are consumed inside the fab, so they are recurring purchases, not one-off equipment.
• The foundry turns chip designs into finished wafers. The ten largest foundries took US$53.49bn of revenue in the second quarter of 2026, up 11.5% quarter on quarter (TrendForce).
• Power semiconductors are a device branch of the same chain: IGBT and silicon carbide chips that switch current in EV inverters.
• Packaging and testing is the last step: cutting the wafer, packaging each die and testing it before it ships. The ten largest packaging and testing firms took US$41.56bn in 2024, up 3% (TrendForce via Evertiq), and Yole puts the advanced packaging market at about US$62bn in 2026 (Yole via JCET 2026 interim report, p. 9).

Where China is strong

• Packaging and testing. JCET ranks third in the world at US$5.00bn of 2024 revenue, up 19.3%, and Tongfu fourth at US$3.32bn, so China holds two of the world top four. Taiwan ASE still leads and US-based Amkor is second (TrendForce via Evertiq).
• Foundry. SMIC ranks third worldwide at US$3.01bn in the second quarter of 2026, a 5.4% share, and Hua Hong sixth at US$1.27bn, a 2.3% share (TrendForce). SMIC ran at 93.7% utilisation with monthly capacity of 1,096,500 8-inch equivalent wafers (SMIC Q2 2026 results announcement), and Hua Hong had a record quarter at US$717.5m (Hua Hong 2026 interim report).
• Silicon wafers. Shanghai Silicon has 300mm capacity of 1.0 million wafers a month, planned to reach 1.2 million by the end of 2026, and its 300mm sales volume rose more than 90% year on year (2026 interim report, pp. 7, 12). Youyan Silicon reached 300,000 8-inch wafers a month in the second quarter (2026 interim report, p. 10).
• Photoresist. Jingrui is in volume production across mature g-line and i-line resist, in volume delivery of KrF resist and in bulk delivery of ArF resist. Its ArF sales rose nearly 300% year on year from a low 2025 base and KrF volume rose more than 40% (2026 interim report, pp. 16, 19). Nanda Optoelectronic grew ArF sales 48% (2026 interim report, p. 17).
• Specialty gases. Huate Gas has 57 import-substitution products, covers more than 90% of domestic 8-inch and 12-inch fabs, has more than 20 products running on 14nm and 7nm lines and some in 5nm processes, and its semiconductor-field revenue rose 28.22% to ¥342.89m (2026 interim report, pp. 16, 24). Jinhong Gas grew integrated-circuit revenue 29.56% and helium revenue 140.53%, and holds 418 patents (2026 interim report, pp. 23, 25, 26, 28).
• Power semiconductors. Silan grew automotive and solar IGBT and silicon carbide revenue about 11% to ¥1.60bn in the first half of 2026 (2026 interim report, p. 10).

Where the weak points are

• Foundry scale. TSMC holds 72.5% of the top-ten foundry market against SMIC at 5.4%, so China has scale in foundry but no firm close to the leader (TrendForce). SMIC's own filing lists shortages of equipment, parts, raw materials, software and service support, plus geopolitical risk, among the risks that matter most (Q2 2026 results announcement).
• Silicon wafers. Prices are still falling faster than volumes rise: Shanghai Silicon's 300mm sales volume rose more than 90% year on year while revenue rose less than 60%, and its net loss widened to ¥965.15m in the first half of 2026 (2026 interim report, p. 7). Its own filing lists high-end specifications, heavily doped epitaxial products, low-oxygen high-resistivity wafers and SOI wafers as structural gaps in domestic supply.
• Photoresist. Neither listed maker has an EUV product, and Nanda Optoelectronic says the core technology of high-end photoresist has long been held by a small number of foreign makers (2026 interim report, pp. 17, 32). Nanda does not disclose photoresist revenue separately, so its ArF growth cannot be sized.
• Specialty gases. China can make fewer than 30% of the electronic specialty gas varieties its fabs use, so the high end is still imported (Huate Gas 2026 interim report, p. 14).
• Power semiconductors. StarPower saw net profit fall 76.4% on flat revenue in the first half of 2026, and its new energy revenue fell 16.02% (2026 interim report, p. 11). Independent makers also face a customer that makes its own: BYD builds its power semiconductors in-house, as the power semiconductors page sets out.
• Packaging and testing. ASE still leads the global ranking, so even China's strongest stage has a foreign firm on top.

Margins along the chain

The chart below sets the reported gross margins side by side. Specialty chemistry earns the most: Jingrui's photoresist line made 44.71% in the first half of 2026. The two gas makers sit near 30%: Huate Gas about 30.1% and Jinhong Gas about 27.0% on a whole-company basis. SMIC made 25.3% in the second quarter, while packaging and testing sits at the low end, about 15.2% at JCET and 15.12% on Tongfu's packaging and testing segment. The bases differ, a product line, a segment or a whole company, and a quarter against a half year, so this shows where the margin sits rather than a like-for-like ranking. Two stages have no bar: silicon wafers, where Shanghai Silicon is loss-making and discloses no margin, and power semiconductors, where neither maker discloses a segment margin.

What decides who wins

Our view: qualification is the gate that decides how fast the upstream stages close. A gas or a resist is only a product once a fab has certified it, and the filings show that process working: Huate Gas has more than 20 products running on 14nm and 7nm lines, Jingrui is in bulk ArF supply, and Nanda Optoelectronic is building its 70 tonne per year KrF line. The other side of the same gate is time: neither resist maker has an EUV product, and China still makes under 30% of the gas varieties its fabs use. Downstream, the contest is different: JCET and Tongfu already sit in the world top four, so advanced packaging is the stage where China competes on scale today rather than catching up. In the middle, SMIC and Hua Hong are using mature-node volume, SMIC at 93.7% utilisation, to fund the climb, and SMIC guides third-quarter revenue up 2% to 4% at a 26% to 28% margin (Q2 2026 results announcement). What to watch: whether 300mm wafer prices recover enough for Shanghai Silicon to narrow its loss, whether Nanda's KrF line and ArF progress close the resist gap, and whether Hua Hong closes its planned acquisition of a 97.5% stake in Huali Micro.