A recent analysis from CITIC SEC indicates that the global technology sector has experienced a significant correction since the start of July. Within China's A-share market, the electronics sector has seen a sharp decline of 20.5%, ranking 26th out of 30 industry sectors during this period.
Breaking down the sub-sectors, the "other electronic components" category suffered the steepest drop of 30.7%. Components declined by 27.5%, optical and optoelectronics fell by 19.8%, and semiconductors decreased by 19.2%. The consumer electronics sub-sector was the most resilient, with a relatively smaller drop of 15.7%.
Despite the price downturn, the report points out that the fundamental performance of the electronics sector remains strong. Second-quarter earnings are expected to be broadly positive, and the outlook for the second half of the year is promising. The sectors related to domestic self-reliance (自主可控) and Artificial Intelligence (AI) are projected to continue exceeding expectations in terms of industry activity.
Following this period of overselling, the inflection point for an upward trend in the self-reliance direction has become clearer. Driven by global AI demand, the cycle of price increases in certain segments is expected to persist. Component companies are likely to continue delivering on their performance targets, while opportunities within the supply chain are also expanding into consumer electronics.
In the self-reliance area, the report forecasts explosive growth for semiconductor equipment orders between 2026 and 2027. Equipment companies present compelling value, benefiting from short-term recovery from overselling combined with high medium-term fundamental certainty. Packaging and testing (封测) firms are opening up upward potential as advanced packaging capacity expands, and they are also profiting from order transfers from Taiwan. The price increases for wafer foundry services are being implemented continuously, offering promising earnings flexibility. In the domestic computing power sector, Chinese manufacturers are accelerating their efforts to catch up, with improved visibility on orders for the second half of 2026 and beyond.
Regarding AI-related areas, the report notes that in the memory segment, price increases for niche memory products are expected to outpace those of mainstream memory in the second half of 2026. However, for consumer-grade memory, the quarter-on-quarter price increase in the third quarter of 2026 is predicted to narrow significantly. Finally, the supply of electronic yarn is expected to remain tight through the end of 2026.