CITIC SEC Electronics Industry 26Q3 Earnings Preview: AI Inflation Chain Delivers Best Performance, Self-Controllable Momentum Continues

CITIC SEC released a research report stating that it expects the overall performance of the electronics industry in 26Q3 to maintain high prosperity under the wave of AI trends. Looking ahead to 2026Q4 and 2027, the bank believes that the investment mainlines of the electronics industry will continue to unfold around the two major directions of "self-controllability and AI computing power." On the one hand, domestic computing power chips, wafer manufacturing, equipment, and advanced packaging are accelerating the formation of an industrial closed loop, and related companies' orders and performance are expected to continue to materialize; on the other hand, demand for supporting components of AI servers is booming, and the performance of related supply chain companies is expected to continue to materialize. It continues to be optimistic about segments with strong fundamentals, high performance realization, and room for domestic substitution. Among them, 1) AI direction; 2) self-controllable direction; 3) price increase direction; 4) others. CITIC SEC's main views are as follows: 26Q3 Earnings Preview: The AI inflation chain has the best performance, domestic equipment and components deliveries are relatively tight, and the prosperity of self-controllability continues It is expected that the 2026Q3 performance of related sub-sectors in the AI inflation chain will remain strong, with the North American AI chain and optical communication-related links highly prosperous, and high certainty of continued earnings growth in PCB/CCL, storage, AI power supplies, etc.; AI demand has led to tight overseas capacity, with some orders continuing to flow back to China, and the prosperity of the manufacturing and packaging/testing end continues; orders in the semiconductor domestic equipment and components links are growing rapidly, and material shortages are expected to cause short-term delivery tightness, without changing the long-term growth trend; in downstream consumer electronics, the terminal is expected to continue the lackluster trend of Q2. 1) AI inflation direction: It is expected that in 2026Q3 AI PCB and storage original manufacturers will see both volume and price increases, niche storage design performance will improve, MLCC price increases have the strongest certainty of landing and will begin to be reflected in Q3 performance, and power and analog performance will gradually realize the earnings elasticity of price increases. 2) Self-controllable chain direction: Affected by AI orders crowding out and overseas order transfers, domestic manufacturing/packaging and testing orders are full, with utilization rates at high levels. In addition, expectations for domestic storage and logic capacity expansion continue to rise, and orders in the equipment/components industrial chain continue to be prosperous; the downstream computing power shortage trend continues, upstream supply chain issues are being resolved, and revenue/orders of domestic computing power-related companies maintain leapfrog growth. 3) Consumer electronics direction: The impact of storage price increases continues, and downstream terminals will continue the Q2 trend, overall lackluster; it is expected that midstream companies with exposure to new businesses such as AI will perform better, and among upstream IC design companies, those with storage packaging businesses and new product volume ramp logic will perform better; in addition, the performance of automotive electronics-related supply chains is relatively stable. 4) Other sectors: It is expected that LCD will be relatively stable, OLED will come under pressure, the LED industry will remain stable, and companies with price increase logic will show stronger performance. Overall, the sub-sectors expected to show relatively outstanding performance in 2026Q3 include PCB/CCL, storage original manufacturers and niche storage design, AI power supplies, the CPU chain, leading FABs, leading equipment makers, IC design companies with packaged storage, and companies with new product volume ramps. AI inflation sector: In 2026Q3 AI PCB/CCL performance is expected to maintain high growth, storage original manufacturers will see both volume and price increases, and MLCC price increases have strong certainty of landing 1) PCB/CCL: In the AI PCB field, with the iterative shipment of new-generation computing power chips, AI PCB orders are growing rapidly, while new industry capacity is gradually being released, and under the resonance of production and demand, performance is expected to maintain high growth; in the traditional PCB field, manufacturers with material procurement capability concentrated price increases in the middle of the year, and the price increase effect is further enhanced, with profitability in 26Q3 expected to improve significantly. 2) Storage: Storage original manufacturers will see both volume and price increases, and performance is expected to continue exceeding expectations; CPU chain pull-in is accelerating, and memory interface and supporting chips are showing strong sequential growth momentum; niche storage design prices continue to rise, capacity is moderately increasing, and gross margins and profits are reaching new levels; the module link is beginning to diverge. 3) Passive components: MLCC price increases have the strongest certainty of landing and a relatively fast pace, and will begin to be reflected in Q3 performance, while inductors, aluminum electrolytic capacitors, films, etc. benefit even more significantly from the AI-driven trend. 4) Power devices: Related companies also show profit elasticity brought by price increases, with some companies reflecting it in Q2, and it is expected that companies such as Xinjieneng will further reflect it in Q3. 5) Analog chips: Price increases are expected to be reflected relatively moderately, and companies with high AI exposure will maintain high revenue growth. Self-controllable sector: In 2026Q3, it will continue to benefit from overseas order transfers under AI crowding out + domestic computing power and capacity expansion demand trends 1) Semiconductor manufacturing/packaging and testing: It is expected that in 2026Q3, affected by AI orders crowding out and overseas order transfers, domestic orders will continue to be fully booked, utilization rates will remain high, and prices will continue to rise sequentially, but continuous investment related to advanced assets will keep depreciation pressure high. 2) Semiconductor equipment/components: It is expected that in 2026Q3, benefiting from continuously rising expectations for domestic storage and logic capacity expansion, the overall order trend of the industrial chain will continue to be prosperous, among which front-end equipment companies will see faster order intake, with an optimistic outlook for order growth in 2027, back-end lithography-related equipment shipments will accelerate, and tester delivery times will be tight; however, constrained by delivery pressure at the upstream components end, some equipment companies' shipment pace will experience periodic fluctuations, without changing the long-term positive trend; in addition, R&D investment in advanced process-related equipment continues, pending the release of scale effects; it is expected that in 2026Q3 upstream components capacity will be tight, delivery times will lengthen, investment pace will begin to accelerate, and medium- to long-term planned capacity may be released ahead of schedule. 3) Domestic computing power: The downstream computing power shortage trend continues, upstream supply chain issues are being resolved, related companies' revenue/orders maintain leapfrog growth, and after supply chain issues are further resolved, revenue growth is expected to accelerate further. Consumer electronics sector: In 2026Q3, the impact of storage prices continues, terminal demand is relatively lackluster, and attention should be paid to AI transformation, new product volume ramps, and opportunities in the automotive electronics supply chain 1) Downstream: On the mobile phone side, the bank expects global mobile phone shipments in 26Q3 to be weak, with shipments declining 10% to 20%, among which Apple phones are relatively resilient, Huawei benefits from new model releases and stands out in the Chinese market, and Android overall shipments decline even more than the broader market. It is expected that due to the continued impact of storage price increases, the pull-in momentum of traditional consumer electronics in Q3 will be relatively insufficient, and combined with negative foreign exchange-related contributions, industrial chain companies will generally perform averagely, among which terminal brand manufacturers will see significant revenue growth but still face strong year-on-year pressure on profit margins. 2) Midstream: It is expected that in 2026Q3 component companies with exposure to new businesses such as AI will perform better. 3) Upstream: It is expected that in 2026Q3 IC design companies with storage packaging businesses, new product volume ramp logic, etc. will perform better; in addition, it is expected that in 2026Q3 the performance of automotive electronics-related supply chains will be relatively more stable. Risk factors: Risk of global macroeconomic downturn; risk of changes in the international political environment and intensified trade frictions; downstream demand falling short of expectations; AI innovation falling short of expectations; AI commercialization progress falling short of expectations; Android industrial chain innovation falling short of expectations; domestic substitution progress falling short of expectations; domestic wafer fab capacity expansion falling short of expectations; advanced process technology development falling short of expectations; intensified competition among downstream manufacturers; risk of raw material price increases caused by inflation; risk of escalated sanctions; large fluctuations in exchange rates, etc.