AMEC order growth is expected to reaccelerate in 2H26, with supply-chain resilience and equipment platformization supporting long-term expansion

Overview

This report reviews AMEC's 2Q26 results and management conference call, focusing on orders, the supply chain, product technology roadmaps, and platform-based expansion. Bernstein believes that despite remaining shortfalls in revenue and core profit margins, strong demand, renewed order acceleration, on-time delivery capabilities, and expansion in advanced packaging and thin-film equipment support its positive view. It therefore reiterates its Outperform rating and maintains its RMB 660 target price.

Core views

AMEC released its 2Q26 results on August 19, 2026, and held a conference call on August 20. Because the company had previously released preliminary data, Bernstein believes the results themselves should already have been largely priced in by the market. The main new information from the call was management's continued positive signaling, emphasizing strong demand and expecting order growth to accelerate further in 2H26. Quarterly revenue fell short of expectations, while net profit substantially exceeded expectations, but the upside surprise came mainly from investment income. Excluding this factor, the net margin remained below market consensus. Expensed R&D accounted for 69% of total R&D spending in 2Q26, while the R&D expense ratio remained as high as 30%, indicating that the company continues to invest substantial resources in product expansion. Orders are the report's most important near-term growth indicator. Demand from domestic customers is very strong, and 1H26 order growth was broadly in line with revenue growth, while management expects order growth to reaccelerate in 2H26 and exceed that of 1H26. Overseas, in addition to one leading global foundry customer that continues to purchase, an increasing number of overseas customers are engaging with the company and advancing validation of AMEC's equipment. Management believes the company's equipment offers differentiated advantages in dimensions, capacity efficiency, and cost, making it increasingly attractive to customers. The company is also actively expanding manufacturing capacity, with current cleanroom capacity able to support revenue of up to RMB 70bn, leaving room for revenue growth over the coming years. Tightening global component supplies pose an execution challenge in 2H26, but as of 1H26, AMEC had maintained 100% on-time delivery and had yet to experience any shipment delays. To address accelerating orders, the company has adopted three measures: holding weekly meetings with overseas suppliers and increasing strategic inventories; accelerating validation of the domestic supply chain; and speeding up equipment move-ins, shortening cycles previously measured in months to several weeks or even several days. Management acknowledges that supply assurance will be more challenging in 2H26 but remains confident in maintaining delivery schedules. Therefore, converting demand into results depends not only on order intake but also on whether the supply chain and capacity can ramp up simultaneously. The company is transitioning from an etching equipment supplier into a platform-based wafer fabrication equipment manufacturer, with products now covering dry etching, thin-film deposition, MOCVD, advanced packaging, process control, display panel equipment, CMP, and other areas. Advanced packaging is becoming a more visible source of incremental growth: the detailed main text states that new orders exceeded RMB 1bn in 1H26 and expects constructive trends to continue in 2H26 and beyond, while the front-page summary records more than RMB 10bn, resulting in two different figures in the original report. Management reiterated that over the next five years, it plans to cover more than 60% to 70% of wafer fabrication and advanced packaging equipment through in-house R&D and acquisitions. For advanced packaging alone, the company aims to cover more than 70% of the relevant equipment within three to five years. Industry technology evolution provides a transmission mechanism for equipment demand. Chinese chip design and manufacturing companies have made progress across several sub-7nm logic nodes, with multiple patterning compensating to some extent for lithography equipment constraints. Memory is evolving from 2D to 3D, while NAND Flash is progressing faster than management had previously expected. More process steps and the transition to three-dimensional chip structures will increase demand for etching, thin-film deposition, inspection, and certain wet-process equipment, thereby supporting AMEC's continued product-line expansion. In high-aspect-ratio etching, current global mass production mainly uses a 60:1 aspect ratio. AMEC has more than 300 reaction chambers operating stably in mass production on memory production lines, with final yields exceeding 90%. For ultra-high aspect ratios of 90:1 and above, the company's beta equipment has undergone validation at customer sites for some time, and management hopes to secure volume orders in 2027. The ICP 140:1 equipment itself already exists, and the current development is for a new application. The 700:1 SiGe/Si high-selectivity etching equipment is expected to require approximately another year to mature and move into production lines. If these projects are validated on schedule, they will extend the company's etching capabilities into more advanced logic, DRAM, and NAND processes. Thin-film equipment is another rapidly growing business line. The company has developed more than 20 core products for advanced processes, including CVD tungsten, high-aspect-ratio tungsten deposition, ALD tungsten, metal gate, PVD, PECVD, PEALD, and epitaxy equipment. Several types of tungsten deposition equipment have achieved volume sales and rapid growth at advanced memory fabs, and the company has recently also made breakthroughs in tungsten deposition applications at advanced logic customers. PEALD is undergoing customer validation. The company also developed Generation 8.6 PECVD large-panel equipment within 18 months, which is currently undergoing customer validation. Thin-film equipment revenue grew approximately 224.23% YoY in 2025, and management expects revenue and orders in advanced processes and advanced packaging to continue growing rapidly. The MOCVD and wide-bandgap semiconductor businesses have approximately 15 years of accumulated technical expertise. The report states that the company's MOCVD equipment for GaN lighting, displays, and Mini LED accounts for nearly 90% of the international market and holds a leading position. Equipment for GaN power devices is expected to enter production lines soon, while equipment related to red and yellow LEDs has received volume orders. The InP MOCVD R&D laboratory is progressing well, and management expects the equipment to enter production lines in 2H27 and aims to complete validation relatively quickly. Its long-term goal is to cover at least 70% to 80% of equipment related to wide-bandgap semiconductors. Advanced packaging and inspection equipment further broaden the platform's boundaries. The company's through-silicon via etching can achieve aspect ratios of up to 140:1, while its existing thin-film equipment can be transferred relatively quickly to advanced packaging. Through in-house R&D, investments, and acquisitions, the company is building capabilities in copper barrier and seed layers, CMP, copper electroplating, bonding, and metrology and inspection. CD-SEM was previously almost entirely monopolized by overseas equipment suppliers. AMEC completed its development in just over a year, with good laboratory test results, and expects it to enter production-line validation in less than a year. Over the next five years, the company also plans to develop most types of e-beam metrology and inspection equipment. Model adjustments mainly incorporate actual 1H26 data into the forecasts, with no changes to revenue or gross profit assumptions. Differences in operating profit and net profit arise from aligning the previous 1H26 forecasts with actual results, while EPS changes are also affected by adjustments to the number of shares outstanding. Bernstein lowered its 2028E EPS but raised the target valuation multiple from 39x to 41x. Applying this multiple to 2028E EPS of RMB 16.06 produces a CNY 660 target price, leaving the target unchanged. The model forecasts revenue of RMB 16.818bn, RMB 30.707bn, and RMB 60.755bn for 2026E, 2027E, and 2028E, respectively, and net profit of RMB 5.086bn, RMB 6.855bn, and RMB 15.229bn, respectively. The report's 2026E and 2027E PE multiples are 69.0x and 50.3x, respectively. Based on the above assessment of orders, delivery, and product platformization, Bernstein reiterates its Outperform rating.

Analysis framework

Bernstein first compares 2Q26 results with market expectations, distinguishing among revenue, reported net profit, and core profitability excluding investment income. It then assesses near-term growth execution based on management's conference call commentary regarding order growth, overseas customer validation, delivery records, and component supply assurance measures. The report subsequently traces product progress and commercialization timelines for etching, thin-film, MOCVD, advanced packaging, and inspection equipment based on changes in process demand. Finally, it incorporates actual 1H26 data into the earnings model and derives the target price using 2028E EPS and a forward PE multiple.

Methodology notes

• Valuation methodologyPE/PEG valuation

  Forward PE target valuation

  The report multiplies 2028E EPS of RMB 16.06 by a target PE multiple of 41x to derive a CNY 660 target price. Although 2028E EPS was lowered, the valuation multiple was raised from 39x to 41x, leaving the target price unchanged.

• Corporate fundamentals and financial frameworkEarnings quality analysis

  Assessing core profit margins excluding investment income

  The report notes that the substantial upside surprise in 2Q26 net profit was mainly driven by investment income and compares the net margin excluding this factor with consensus expectations, avoiding equating non-core gains with an improvement in core operating profitability.

• Event-driven trading and behavioral financeEvent-driven analysis

  Analysis of earnings release and management conference call

  The report treats the previously released preliminary results as information that had largely been priced in by the market and focuses on newly disclosed judgments from the conference call regarding order acceleration, overseas validation, and supply-chain execution.

• Industry/value-chain analysis frameworkUpstream-midstream-downstream value-chain transmission

  Transmission from advanced processes and three-dimensional chips to equipment demand

  Starting from process changes such as multiple patterning and NAND's transition from 2D to 3D, the report infers increases in etching, thin-film deposition, inspection, and certain wet-process steps and uses this to assess the demand potential for AMEC's product lines.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Advanced Micro-Fabrication Equipment Inc China (AMEC, 688012.CH)

  Domestic demand is strong, overseas customer validation is increasing, orders are expected to reaccelerate in 2H26, and the product portfolio is expanding from etching into multiple categories of wafer fabrication and advanced packaging equipment.

  Strengths

  Achieved 100% on-time delivery in 1H26; more than 300 reaction chambers for etching equipment are in stable mass production, with final yields exceeding 90%; thin-film equipment, advanced packaging, and MOCVD provide multiple growth avenues.

  Weaknesses

  2Q26 revenue fell short of expectations, while the net profit beat was mainly driven by investment income, and the net margin excluding this factor remained below consensus. Order acceleration in 2H26 will increase supply-chain and delivery pressure.

  Comparison

  The report states that the company's MOCVD equipment for GaN LEDs and other applications accounts for nearly 90% of the international market. The CD-SEM and InP MOCVD segments are currently still dominated by overseas equipment.

  Risks

  MOCVD revenue could decline more than expected due to weak demand for LED equipment, Chinese fab capital expenditure could fall short of expectations, and validation of domestic equipment and capacity bottlenecks could slow the localization process.

Key data

• RatingOutperformBernstein reiterates the rating
• Target priceCNY 660.00Previous target price maintained unchanged
• Closing priceCNY 365.50August 20, 2026
• Target price upside81%Calculated using the closing price and target price stated in the report
• 1H26 on-time delivery rate100%No shipment delays as of the report date
• Cleanroom revenue capacityRMB 70bnMaximum revenue scale supportable by current capacity
• 1H26 new advanced packaging ordersMore than RMB 1bnFigure from the detailed main text; the front-page summary separately records more than RMB 10bn
• Thin-film equipment revenue growthApproximately 224.23% YoYYear-over-year growth in 2025
• High-aspect-ratio etching mass-production scaleMore than 300 reaction chambersStable mass production on memory production lines, with final yields exceeding 90%
• Target valuation multiple41x PERaised from the previous 39x
• 2028E EPSRMB 16.06Earnings basis used for the target price
• Revenue forecasts2026E RMB 16.818bn; 2027E RMB 30.707bn; 2028E RMB 60.755bnBernstein model forecasts
• Net profit forecasts2026E RMB 5.086bn; 2027E RMB 6.855bn; 2028E RMB 15.229bnBernstein model forecasts
• R&D investmentExpensed R&D accounted for 69% of total R&D; R&D expense ratio was 30%2Q26 data

Impact & implications

The report believes AMEC's growth thesis is expanding from a single etching equipment business to one jointly driven by orders, delivery, and a multi-product platform. Whether orders can accelerate in 2H26 and be smoothly converted into revenue depends on component supplies, domestic validation, and manufacturing capacity ramp-up. Medium- to long-term growth depends on advanced packaging, thin-film, MOCVD, and inspection equipment completing customer validation and volume adoption as planned. Bernstein therefore maintains its positive rating, but the 2Q26 revenue miss, weak core net margin, and high R&D investment indicate that product expansion still requires sustained investment and execution.

Risks

• Weak demand for LED equipment could cause MOCVD revenue to decline more than expected.
• Chinese fab capital expenditure may fall short of expected targets.
• Unexpected technical difficulties in specific manufacturing processes or capacity bottlenecks at domestic equipment manufacturers could cause equipment localization to progress more slowly than expected.

What to watch

• Watch whether order growth reaccelerates in 2H26 as management expects and exceeds that of 1H26.
• Watch whether the company can continue maintaining on-time delivery and avoid shipment delays amid tightening component supplies.
• Watch the equipment validation progress of new overseas customers and continued purchasing by the existing leading global foundry customer.
• Watch whether ultra-high-aspect-ratio etching equipment of 90:1 and above can secure volume orders in 2027.
• Watch whether the 700:1 SiGe/Si high-selectivity etching equipment can mature and enter production lines within approximately one year.
• Watch whether CD-SEM can enter production-line validation in less than one year.
• Watch whether InP MOCVD can enter production lines as planned in 2H27.
• Watch whether advanced packaging and thin-film equipment orders and customer validation can support the platform coverage targets.