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The Philadelphia Semiconductor Index fell another 4.49% on July 28, with meltdown deepening across the memory sector. The Roundhill Memory ETF plummeted 8.89% in a single session; Sandisk and Kioxia ADR shed more than 14%. Leading memory stocks have generally retreated over 50% from their year-to-date peaks. The SOX has corrected more than 25% cumulatively from its all-time high on June 22.
SK Hynix posted weaker-than-expected operating profit for Q2. Its ADR tumbled over 5% after hours. The company will officially release earnings today (July 29), marking a critical test of whether the memory supercycle has reached an earnings peak.
Persistent sharp declines in the Philadelphia Semiconductor Index and memory stocks have triggered systematic market reflection on the investment thesis for AI hardware. There are clear signs of capital rotation away from AI hardware toward software and applications. Apple bucked the trend to hit new highs, with its market value approaching USD 5 trillion, validating the "end-user supremacy" narrative.
NXP and Seagate both delivered better-than-expected latest quarterly results. NXP generated Q2 revenue of USD 3.5 billion (consensus: USD 3.46 billion). Seagate recorded Q4 revenue of USD 3.65 billion, up 48% year-on-year. Fundamentals for industrial, automotive and enterprise-grade storage remain sound with no signs of deterioration.
Jiuzhou Yigui enters the silicon photonics sector via cross-industry expansion. Its subsidiary plans to invest RMB 630 million in a wafer laser stealth dicing project focused on 8/12-inch silicon photonic chips, targeting optical module manufacturers as downstream customers.
In-depth Analysis
Optical Communication & Optical Chips：The sector extended its steep slump on July 28. Coherent tumbled over 10%, Lumentum lost more than 8%, while Ciena and Credo fell over 7%. Optical communications has ranked among the worst-performing sub-segments within the semiconductor space since late July.
The only bright spot on the industrial front comes from a new market entrant. Suzhou Jingxi Semiconductor, a wholly-owned subsidiary of Jiuzhou Yigui, plans to invest up to RMB 630 million in an industrial project for advanced semiconductor wafer laser stealth dicing. The facility will process 8/12-inch silicon photonic chips and silicon dummy strips, with production slated to kick off in Q1 2027, serving optical module vendors and chip manufacturers downstream. The project marks progress in filling the domestic supply gap for upstream dicing services of silicon photonic chips. No major fresh updates emerged regarding CPO, 800G or 1.6T optical modules. The sector’s sell-off is currently mainly driven by broad-based risk sentiment.
Advanced Packaging：No significant new developments today. ASE’s July 1 announcement of price hikes of up to 20% for CoWoS and FoCoS, alongside an estimated 10% supply-demand gap, has already been priced into the market. ASE Holdings dropped over 7% on US markets on July 28, and packaging & testing names across the Livermore China Leaders Index came under broad pressure. Domestically, capacity expansion projects of JCET, Ningsia Microelectronics and Tongfu Microelectronics are moving forward, with no new public announcements released.
Memory & Computing Chips：US-listed memory stocks continued their rout on July 28. Sandisk plunged as much as 17% intraday, Western Digital nearly 15%, Seagate over 14%, Kioxia ADR above 13%, Micron over 12%, and SK Hynix close to 10%. The Roundhill DRAM Memory ETF closed 8.89% lower. Leading memory firms have suffered staggering drawdowns from their year-to-date highs: Kioxia leads the decline at 60.5%, followed by Sandisk (-53.6%), SK Hynix (-48.1%), Samsung Electronics (-41.3%) and Micron (-35.4%). Hong Kong-listed memory names also crashed; GigaDevice slumped over 17% and Montage Technology fell more than 13%. The only marginal positive arrived after market hours: Seagate posted Q4 revenue of USD 3.65 billion, surging 48% YoY and beating consensus. Its Q1 revenue guidance stands at USD 4.0–4.2 billion (consensus: USD 3.79 billion), signalling sustained demand for enterprise-grade storage. SK Hynix will release official Q2 earnings today (July 29), and Samsung Electronics will report on July 30. Their results will serve as critical tests to determine whether the memory fundamentals have reached an inflection point.
Semiconductor Equipment & Materials：A-share semiconductor stocks underwent a deep correction on July 28. The underlying index of E-Fund Semiconductor Equipment ETF (159558) dropped 6.2%, yet the ETF attracted a net subscription of 639 million units, with monthly inflows exceeding RMB 8 billion. The E-Fund STAR 50 ETF also recorded monthly inflows above RMB 8 billion, reflecting a “buy-the-dip” pattern among investors. ASML is considering lifting EUV output by roughly 30% in 2027 and another 30% in 2028, supporting the long-term demand thesis for semiconductor equipment. No material new progress has been achieved in China’s push to overcome bottlenecks in lithography equipment.
Policy & Macro Environment：Jensen Huang held meetings with multiple offices in the U.S. Senate to advocate support for open-weight AI models, stating open-source technology is critical to AI safety. The Federal Reserve will announce its interest rate decision on July 29–30 (2 a.m. Beijing time the next day), with markets pricing in approximately a 50% probability of a rate hike. Tensions between the US and Iran persist, and conditions in the Strait of Hormuz remain unresolved, yet the market has partially priced out tangible disruptions to semiconductor supply chains for the time being. For A-shares, institutional investors view the short-term sentiment shock as not altering the positive medium-to-long-term outlook.
Daily Investment Tips
1. Has the memory sector fully priced in downside risks? Leading memory chip stocks have fallen 50%-60% from their year-to-date peaks. However, Seagate delivered better-than-expected Q4 results alongside robust Q1 guidance, indicating enterprise storage demand has not collapsed. The sharp sell-off in the sector is mainly a mean reversion following excessive gains earlier and liquidity-driven panic dumping, rather than a broad deterioration of fundamentals. SK Hynix’s Q2 earnings (released today) and Samsung’s Q2 results (due tomorrow) will serve as core gauges to judge whether the memory cycle has peaked. If earnings remain strong amid continued share price declines, valuation attractiveness will improve markedly.
2. Watch the seesaw effect between the Philadelphia Semiconductor Index and AI software/end-device plays. Apple bucked the trend to hit new highs with its market value approaching USD 5 trillion, while the entire AI hardware chain (GPUs, memory, optical communications) suffered steep losses. This confirms the market is shifting its investment narrative from “the pick-and-shovel providers” to “the gold miners”. Investors should stay alert: a further decline in the Philadelphia Semiconductor Index could trigger forced selling by more passive funds, creating a short-term negative feedback loop.
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