Semiconductor Silicon Wafers Enter New Upcycle as AI Drives Accelerated Domestic Substitution

Introduction: Silicon Wafer Industry Reaches a New Cyclical Inflection Point

As the most fundamental material in chip manufacturing, semiconductor silicon wafers have long been regarded as the "barometer" of the semiconductor industry cycle. CITIC Securities recently released its latest research report, explicitly stating that driven by robust AI demand, the semiconductor silicon wafer industry is entering a new upcycle. The report concludes that volume growth logic has already emerged in 2025, while price increase logic is expected to materialize in Q2 2026. Combined with the accelerating domestic substitution of 12-inch silicon wafers, the long-term growth potential of Chinese wafer companies deserves close attention.

This assessment has injected a shot of confidence into the silicon wafer market, which had been sluggish for several consecutive quarters, and has once again pushed the far-reaching impact of AI on upstream semiconductor materials to the center of industry discussion.

Core Thesis: AI Demand Reshapes Silicon Wafer Supply-Demand Dynamics

In its report, CITIC Securities systematically outlined the core drivers of the current silicon wafer upcycle. The report argues that AI computing demand — represented by large model training and inference — is being rapidly unleashed, directly driving capacity expansion for advanced-node chips, which in turn transmits to upstream silicon wafer material demand.

Specifically, this cycle exhibits the classic "volume first, price later" pattern:

• Volume growth logic has materialized in 2025. As major global wafer fabs continue to expand capacity — especially with advanced-node production lines targeting AI chips ramping up — 12-inch silicon wafer shipments showed a clear growth trend in 2025.
• Price increase logic is expected to materialize in Q2 2026. Once capacity utilization climbs to elevated levels, a tight supply-demand balance will push wafer prices into an upward channel. CITIC Securities expects this window to most likely occur around Q2 2026.

The report also placed special emphasis on the strategic significance of domestic substitution for 12-inch silicon wafers. Against the backdrop of global semiconductor supply chain restructuring, mainland Chinese wafer fabs are demonstrating significantly increased willingness and speed in adopting domestically produced wafers, opening up enormous incremental market opportunities for domestic wafer companies.

In-Depth Analysis: Why AI Is the "Super Engine" of This Cycle

Looking back at the historical cycles of the semiconductor silicon wafer industry, every upturn has been supported by clear end-market demand — from the PC era to the smartphone era, and now to the AI era. AI is considered the "super engine" of this cycle based on several key dimensions:

First, AI computing chips consume far more advanced silicon wafers than traditional chips. Whether GPUs, TPUs, or various AI-specific accelerator chips, their manufacturing generally employs 7nm and sub-7nm advanced process nodes, corresponding precisely to 12-inch large-diameter wafers. The die area of a single AI chip tends to be larger, meaning each chip consumes more wafer area, fundamentally increasing demand intensity for silicon wafers.

Second, AI infrastructure construction is still in its early explosive stage. Based on capital expenditure plans from global tech giants, 2025 through 2027 will remain the peak period for large-scale AI data center construction. Companies such as Microsoft, Google, Amazon, and Meta continue to set new records for AI infrastructure investment, all of which will ultimately translate into actual demand for upstream chips and silicon wafers.

Third, the continuous expansion of AI application scenarios creates a long-tail effect. Beyond cloud-based training and inference, emerging application scenarios such as edge AI chips, smart automotive chips, and AI smartphone chips are also growing rapidly, providing more diversified support for wafer demand.

From a product structure perspective, CITIC Securities highlighted wafer companies with a relatively high proportion of heavily doped wafer products. Heavily doped wafers are primarily used in the manufacturing of power devices and certain specialty process chips, with broad applications in new energy vehicles and industrial control. Their market demand similarly benefits from the long-term trends of electrification and intelligent automation. The report also recommended paying attention to other wafer companies leading in 12-inch lightly doped wafer shipments, as these enterprises are rapidly improving their competitiveness in the advanced-node wafer segment.

Domestic Substitution: Leaping from "Usable" to "Excellent"

On the domestic substitution front, Chinese wafer companies have made remarkable progress in recent years. The 12-inch silicon wafer market was long monopolized by overseas giants such as Japan's Shin-Etsu Chemical, SUMCO, and South Korea's SK Siltron, with domestic companies holding negligible market share. However, as companies like Zing Semiconductor, National Silicon Industry Group (NSIG), Leon Micro Semiconductor, and Zhonghuan Advanced have continued to increase R&D investment and capacity construction, domestically produced 12-inch wafers have gradually achieved the leap from "usable" to "excellent."

Particularly under the current international landscape, supply chain security has become a core consideration for domestic wafer fabs. An increasing number of Chinese wafer manufacturers are accelerating the adoption of domestic wafers, with some products already entering the mass supply stage on mainstream production lines. This trend not only provides invaluable market opportunities for domestic wafer companies but also objectively accelerates their technological iteration and quality improvement.

Outlook: Long-Term Growth and Cyclical Elasticity in Resonance

Looking ahead, the semiconductor silicon wafer industry is poised to benefit from the dual resonance of long-term growth potential and cyclical elasticity. From a long-term perspective, emerging applications such as AI, new energy vehicles, and the Internet of Things will continue to drive global semiconductor market expansion, with silicon wafers as the most fundamental material standing to benefit fully. From a cyclical perspective, the simultaneous volume and price increases expected from 2025 to 2026 are poised to drive significant improvements in wafer companies' profitability.

For Chinese wafer companies, the current moment represents a golden window where domestic substitution and an industry upcycle converge. Whether they can seize this opportunity and achieve further breakthroughs in technological capability, product quality, and customer coverage will determine their long-term positioning in the global silicon wafer market landscape.

As CITIC Securities emphasized in its report, AI demand is not merely a short-term catalyst but a deeper force reshaping the entire semiconductor materials industry landscape. The new upcycle for semiconductor silicon wafers may have only just begun.