Compare moats

Baidu's search franchise still leads, but it earns less each year and the company has written part of it down. Its 2025 annual report on Form 20-F (https://www.sec.gov/Archives/edgar/data/1329099/000119312526109289/d38065d20f.htm) says revenue from online marketing services "declined in 2024 and 2025, primarily due to our ongoing AI transformation, which impacted the monetization approach, as well as unfavorable macroeconomic conditions", and that "the increasing prevalence of AI-powered search engines and virtual assistants is fundamentally altering user behavior", so that users "may have less need to click on traditional search results or sponsored links". In 2025 it recognised RMB16.2 billion of impairment losses on its Core asset group after a recoverability test it attributes to "fluctuations in the external environment, in particular the rapid iteration of AI technology, and changes in our internal operations", and reported an operating loss of RMB5.8 billion (operating income of RMB10.4 billion excluding the impairment). The decline continued into 2026: the second-quarter results (https://ir.baidu.com/news-releases/news-release-details/baidu-announces-second-quarter-2026-results, 2026-08-18) show what Baidu calls Legacy Business revenue at RMB10.4 billion, down 23% year over year, and the CEO says "our online marketing business remains under pressure". The lead itself is still large by an independent count, with StatCounter putting Baidu at 46.65% of China's search engine market in September 2026. A lead that monetises less each year, and has needed an impairment, is an eroding moat.

source: sec.gov

ASMPT has a real but contested position in thermo-compression bonding (TCB), and its returns were thin until 2026. On the durable side, TrendForce (2025-12-12, citing The Elec) reports that SK hynix 'is using about fifty sets of TC bonders for HBM4 production, with roughly half supplied by ASMPT'. It adds that Hanmi had been SK hynix's exclusive TC bonder supplier for HBM 'until last year, when ASMPT joined the supply chain toward year-end'. ASMPT's FY2025 results announcement reports TCB revenue growth of about 146% and calls the company the 'Process-Of-Record' in chip-to-substrate bonding, which is its own claim. On the limiting side, the market is shared. TrendForce (2026-06-09, citing ET News) reports a 44.2 billion won SK hynix TC bonder order to Hanmi, and Kulicke & Soffa's FY2025 10-K lists ASM Pacific Technology among eight major equipment competitors. Returns were modest: the FY2025 announcement shows a continuing-operations adjusted gross margin of 38.3%, down 172 bps, and an adjusted SEMI segment profit margin of 8.4%. The 2026 interim results show a recovery, with SEMI's adjusted segment margin at 18.1% for 1H 2026. A contested technology lead with cyclical and recently thin returns supports a narrow moat, not a wide one.

source: www1.hkexnews.hk

The moat Baidu is losing is a traffic-driven network. The 20-F says it competes for users and customers "on the basis of user traffic, cyber security, quality (relevance) of search (and other marketing and advertising) results, availability and user experience of products and services, distribution channels and the number of associated third-party websites", and that its content ecosystem depends on attracting creators "by leveraging our user traffic and enhance user engagement through the provision of attractive content, so as to create a virtuous cycle". Advertisers use its P4P platform "to bid for priority placement of paid sponsored links and reach users who search for information related to their products or services", and Baidu Union partners carry its search engine and ads on their own properties. AI answers are weakening that loop: the same filing warns that conversational tools risk "reducing traffic to our platforms and diminishing the inventory and effectiveness of our search-based advertising", and Baidu App's monthly active users were 644 million in June 2026 (second-quarter results) against 679 million in December 2025 (20-F).

source: sec.gov

The advantage sits in bonding process technology rather than in customer lock-in. The FY2025 results announcement credits chip-to-wafer TCB orders to an 'ultrafine pitch TCB solution equipped with proprietary plasma AOR technology', and says its HBM4 12H TCB solutions 'were the first to secure orders from multiple players'. TrendForce (2026-01-28, citing EE Times China) says ASMPT holds TCB and hybrid bonding capability, 'which the industry widely regards as the second most important technologies after lithography'. Kulicke & Soffa's FY2025 10-K says assembly equipment competes on 'price, speed/throughput, production yield, process control, delivery time, innovation, quality and customer support', which rewards technology. Switching costs are the weaker candidate: TrendForce (2025-12-12) shows SK hynix sourcing HBM4 TC bonders from both ASMPT and Hanmi.

source: www1.hkexnews.hk

Baidu leads search by an independent count, but not the AI businesses that now make up half of its core revenue. StatCounter (https://gs.statcounter.com/search-engine-market-share/all/china, September 2026 figures) puts Baidu at 46.65% of China's search engine market across all platforms, against 21.76% for Bing, and at 60.15% on mobile, though on desktop it shows Bing ahead at 41.27% to Baidu's 28.32%. In AI cloud, the 20-F cites IDC's ranking of Baidu AI Cloud as "the No.1 AI cloud provider for the sixth consecutive year" in China's AI public cloud market for 2024, but that figure is relayed by Baidu and covers 2024, and IDC data reported by KrASIA (https://kr-asia.com/how-bytedances-volcano-engine-holds-nearly-half-of-chinas-maas-market, 2026-05-13) put ByteDance's Volcano Engine at 49.5% of China's model-as-a-service market in 2025. In models, Artificial Analysis's leaderboard (https://artificialanalysis.ai/leaderboards/models, read 2026-10-10) gives ERNIE 5.0 Thinking Preview an estimated Intelligence Index of 14, against 45 for Alibaba's Qwen3.8 Max (0902) and Z AI's GLM-5.3 (max). A clear lead in search alongside a contested AI cloud position and a lagging model family makes Baidu a co-leader rather than a clear leader.

source: sec.gov

In HBM TCB, TrendForce (2025-12-12, citing The Elec) reports that roughly half of the about fifty TC bonders SK hynix uses for HBM4 came from ASMPT, and that SK hynix ordered seven more ASMPT systems at about 4 billion won each. Hanmi remains a major supplier: TrendForce (2026-06-09, citing ET News and Hankyung) reports a new SK hynix order to Hanmi worth 44.2 billion won, believed to cover around 15 units. In logic, ASMPT calls itself the 'Process-Of-Record' for chip-to-substrate TCB, which is its own claim. In wire and die bonders, Kulicke & Soffa's FY2025 10-K names ASM Pacific Technology among its major equipment competitors. The only third-party supplier split found covers one customer, SK hynix, and no third-party share figure for TCB, wire bonders or SMT was found, so the band is co_leader rather than clear_leader.

source: www1.hkexnews.hk

Costs are rising faster than revenue, and Baidu has been cutting model prices. In 2025, per the 20-F, Baidu General Business revenue fell 2% to RMB102.5 billion while its cost of revenues rose 15% from RMB44.8 billion to RMB51.5 billion, "mainly related to development of cloud services", and the filing warns of "downward pressure on our operating margin". Online marketing revenue fell in both 2024 and 2025, and Legacy Business revenue was down 23% year over year in the second quarter of 2026. Baidu says it released ERNIE 4.5 Turbo and ERNIE X1 Turbo "delivering improved performance at significantly lower pricing, making them among the most cost-effective options on the market", and IDC data reported by KrASIA says the model-as-a-service leader Volcano Engine's "per-token price was below the industry average". The one premium claim, that AI-native marketing customers are "willing to pay a premium", is Baidu's own, and that line's revenue was "approximately flat year over year" in the second quarter of 2026.

source: sec.gov

Margins are healthy for equipment but not exceptional, and they move with volume. The FY2025 results announcement reports SEMI's adjusted gross margin at 43.3% (down 240 bps) and SMT's gross margin at 32.4% (down 218 bps), with a group adjusted gross margin of 38.3%. The 2026 interim results report Q2 2026 adjusted gross margins of 46.5% for SEMI and 36.8% for SMT, and attribute both year-on-year increases largely to higher volume. TrendForce (2026-01-28, citing EE Times China) says SMT 'mainly serves traditional PCB assembly', while semiconductor packaging equipment, 'especially advanced packaging tools for AI chips', offers 'significantly higher pricing power and margins'.

source: www1.hkexnews.hk

Baidu spans several layers of China's AI stack. Its 20-F describes "a full AI stack of four layers, including cloud infrastructure, deep learning framework developed in-house, foundation models, and applications", with AI infrastructure "powered by a diverse mix of domestic and international high-performance computing resources, including our own self-developed AI computing architecture" and its own Baidu AI Chip. It sells GPU Cloud capacity and Qianfan model services to enterprises and the public sector, with a Qianfan model library that includes "leading third-party and open-sourced models" as well as ERNIE, and it funds this largely from online marketing sold to advertisers through search and feed.

Back-end equipment supplier to IDMs, OSATs, memory makers and electronics assemblers. China was 41% of 2025 revenue and the top five customers about 16%, per the FY2025 results announcement.

• Apollo Go robotaxi Top 3 · Moderate source: ir.baidu.com
• Baidu AI Cloud Infra (GPU Cloud and Qianfan) Top 3 · Moderate source: sec.gov
• Baidu Search and Baidu App (online marketing) Leader · Moderate source: gs.statcounter.com
• ERNIE foundation models Unknown · Low source: artificialanalysis.ai

• Die and wire bonders (SEMI mainstream) Unknown · Moderate source: sec.gov
• SMT solutions Unknown · Moderate source: trendforce.com
• Thermo-compression bonding (TCB) for logic and HBM Top 3 · Moderate source: trendforce.com

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