Power Semiconductors See Price Increases Driven by Supply Constraints, Favor Yangjye Technology
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Power Semiconductors See Price Increases Driven by Supply Constraints, Favor Yangjye Technology
Morgan Stanley expects global sales of power discrete devices to resume growth starting from Q4 2025, limited by constrained capacity expansion over the past two years, predicting further price increases in the second half of 2026.
- Global sales of power discrete devices turned positive year-over-year since Q4 2025, with a 16% increase in April.
- Global industry leaders reduced capital expenditures over the past two years, and future additions to power semiconductor capacity in China will be limited over the next three years.
- Strong industrial demand (automation income up 21% in the first quarter) and improving electric vehicle growth, while solar demand remains weak.
- Raised target prices for Yangjye Technology, CR Microelectronics, and Silan Microelectronics, but maintained an overweight rating only for Yangjye Technology.
- Yangjye Technology benefits from higher automotive business share and Vietnam capacity expansion; Silan Microelectronics and CR Microelectronics maintain underweight ratings due to high valuation.
Report interpretation
Overview
This report analyzes recent trends in the Greater China power semiconductor industry, indicating that the sector is entering an upward cycle driven by supply constraints. Despite sluggish demand in smartphones and PCs, strong industrial demand and gradual recovery in the electric vehicle market have led to renewed growth in global sales of power discrete devices since Q4 2025. With major manufacturers reducing capital expenditure over the past two years, product prices are expected to continue rising through the second half of 2026. The institution favors Yangjye Technology for its advantages in automotive localization and overseas capacity expansion, assigning it an 'overweight' rating and significantly raising its target price. Conversely, it maintains 'underweight' ratings for Silan Microelectronics and CR Microelectronics, citing their current valuations as overly optimistic.
Core views
Improvement in industry supply-demand dynamics has established an upward pricing trend. Global revenue for power discrete devices returned to positive growth territory in Q4 2025, reaching a year-on-year increase of 16% in April 2026. This recovery is primarily driven by robust performance in industrial automation (first-quarter revenue growth of 21% for leading companies) and marginal improvement in China's electric vehicle wholesale sales (a 7% year-on-year increase in the May three-month moving average). In contrast, solar demand remains weak, with installed capacity declining by 51% year-to-date. Supply-side constraints are the core driver of this cycle. Capital expenditures at leading global power semiconductor companies have declined for two consecutive years, with only a modest 11% rebound projected for 2026. In China, future capacity additions for power devices such as IGBTs and MOSFETs are expected to be limited over the next three years, as some firms like Silan Microelectronics and UNT shift focus toward AI power management chips. With high utilization rates and limited new capacity, unless demand deteriorates sharply, the price increase trend is likely to persist into the second half of 2026. Many Chinese vendors issued price increase notices in February 2026, which distributors and other end customers accepted despite lower inventory levels and concerns about further price hikes later in the year. Divergent stock-specific views, favoring Yangjye Technology. The firm raised target prices for Yangjye Technology, Silan Microelectronics, and CR Microelectronics without changing their ratings. Yangjye Technology is favored due to its increasing share of automotive business, enhanced operational efficiency, and the release of Vietnamese packaging and manufacturing capacity, with its target price increased by 50% to 136 yuan. On the other hand, although Silan Microelectronics and CR Microelectronics will also benefit from favorable pricing conditions, the firm believes their current valuations are too high (Silan Microelectronics P/B ratio at 4.8 times, above its historical average of 3.3 times) and that market expectations are overly enthusiastic, thus maintaining 'underweight' ratings. Stardot Semiconductor receives an 'equal weight' rating due to depreciation pressure.
Analysis framework
The firm adopts a top-down approach combined with bottom-up analysis. First, it tracks data on global sales of power discrete devices, trends in capital expenditures, and changes in downstream demand across applications (automotive, industrial, solar, consumer electronics) to assess the overall supply-demand balance and price movements within the industry. Second, it evaluates individual companies based on their capacity plans, product mix (such as the proportion of automotive-grade IGBT/MOSFETs), cost control capabilities, and valuation levels to determine investment value. For valuation methods, the residual income model (RIM) is primarily used to calculate target prices, considered better at capturing a stock's long-term value. Different bull and bear scenarios were set for sensitivity analysis.
Methodology notes
Residual Income Model
A valuation method based on book value and excess earnings, suitable for assessing the long-term value of companies with stable profitability and asset bases. The research report uses this model to calculate target prices for companies such as Yangjye Technology and CR Microelectronics, deriving intrinsic value by assuming equity costs, mid-term growth rates, and terminal growth rates.
Supply-Demand Framework
Analyzing changes in supply (capacity expansion, capital expenditures) and demand (growth in downstream application areas) to gauge industry prosperity and price trends. The report notes that decreased capital expenditures over the past two years have constrained supply, while robust industrial and electric vehicle demand have pushed prices upward.
Operating Leverage
Refers to a situation where fixed costs make up a large portion of total costs, meaning small increases in sales revenue can lead to significant profit increases. The report mentions that Silan Microelectronics's IDM model has high operating leverage, so its performance elasticity is greater in a bull market, but it faces greater risks related to depreciation and interest expenses when demand falls short.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Yangjye Technology (300373.SZ)Beneficiary: Increased automotive business share, Vietnam capacity expansion brings new growth points, and improved operational efficiency.
- Strengths
- High-quality company with breakthroughs in automotive terminals, overseas packaging and contract manufacturing capacity release, and potential margin improvements to 40%.
- Comparison
- Superior to peers, expecting better relative performance.
- Risks
- Economic recession leading to slower growth in discrete device content; slower-than-expected market share gains.
- CR Microelectronics (688396.SH)Beneficiary: Favors advantageous power semiconductor pricing environment and local MOSFETization trend.
- Strengths
- Key beneficiary of China's local MOSFETization trend, with Shenzhen capacity expansion mainly serving YMTC outsourcing orders.
- Weaknesses
- High valuation, with Chongqing project investment losses dragging down profits.
- Comparison
- Insufficient valuation appeal, maintaining an underweight position.
- Risks
- China's self-sufficiency rate in MOSFETs falling short of expectations; R&D investments failing to translate into similar global IDMs' product specifications.
- Silan Microelectronics (600460.SH)Beneficiary: High distribution channel share makes it easier to pass on price increases; IDM model features high operating leverage.
- Strengths
- Key beneficiary of China's domestic power semiconductor trend, with expanded 8-inch and 12-inch production capacities.
- Weaknesses
- Heavy interest and depreciation costs, high valuation (4.8x 2026 BVPS), and limited operating leverage effectiveness.
- Comparison
- Valuation exceeds historical averages, maintaining an underweight stance.
- Risks
- Slower-than-expected market share gains; lagging technology upgrades; economic recessions.
- Stardot Semiconductor (603290.SH)Neutral: More SiC MOS and automotive MCU design wins, but faces depreciation pressures.
- Strengths
- Increasing number of SiC MOS and automotive MCU design wins.
- Weaknesses
- Depreciation concerns, insufficient scale to provide adequate operating leverage, resulting in declining profit margins.
- Comparison
- Assigned equal weight rating.
- Risks
- Reduction in IGBT content per electric vehicle; profit margins decline due to insufficient scale.
Key data
- Global Power Discrete Devices Revenue Growth Rate16% (YoY in April 2026)Turned positive since Q4 2025
- Revenue Growth Rate of Industrial Automation Enterprises21% (YoY in Q1 2026)Indicates strong industrial demand
- Year-on-Year Growth Rate of China's Electric Vehicle Wholesale Sales7% (3MMA YoY in May 2026)Showed improvement compared to zero growth in April
- Solar New Installation Capacity-51% (YoY as of early 2026)Demand remains weak
- Change in Capital Expenditures of Global Industry Leaders+11% (2026)Declined for two consecutive years previously, with moderate growth now
- Target Price for Yangjye Technology136.00 CNYIncreased by 50%, implying an implied EPS multiple of approximately 42x for 2027
- Target Price for CR Microelectronics51.60 CNYIncreased by 20%
- Target Price for Silan Microelectronics26.90 CNYIncreased by 35%
Impact & implications
The research suggests that the power semiconductor industry is experiencing a price hike cycle driven by supply shortages, which will help improve the gross margins of relevant companies. For investors, attention should be focused on those companies capable of effectively leveraging the price increase benefits and possessing strong competitiveness in the automotive and high-end industrial sectors, such as Yangjye Technology. At the same time, caution is advised regarding companies whose valuations have already factored in excessively optimistic growth expectations and face significant depreciation pressures, like Silan Microelectronics and CR Microelectronics. Overall, the industry's recovery is uneven, with industrial and electric vehicles being the primary drivers, while solar and consumer electronics remain drag factors.
Risks
- Economic recession causing a decline in discrete device shipments.
- Slower-than-expected acquisition of market share for China in the discrete device market.
- Limited technological upgrades, falling behind local competitors.
- Impact of China's MOSFET self-sufficiency rate being below or above expectations on CR Microelectronics (differently affected).
- Reduction in IGBT content per electric vehicle.
What to watch
- Price trends and sustainability of power semiconductors in the second half of 2026.
- Subsequent growth in China’s electric vehicle wholesale sales.
- Continuity of industrial automation demand.
- Capacity ramp-up and overseas order acquisition progress at Yangjye Technology’s Vietnam factory.
- Gross margin improvement and valuation digestion progress for Silan Microelectronics and CR Microelectronics.