China WFE imports are still declining, but signs of an inflection toward recovery are strengthening
AI summary card
China WFE imports are still declining, but signs of an inflection toward recovery are strengthening
Jefferies believes that China's April WFE imports fell 6% year over year, but the decline narrowed significantly from earlier levels; a widening semiconductor trade deficit, AI demand, and memory capacity expansion will drive a recovery in WFE demand over the next 3 years.
- In April, China's SPE imports fell 4% year over year and WFE imports fell 6% year over year, but both declines eased significantly from the double-digit drops seen in previous months.
- Test equipment and packaging equipment grew 21% and 42% year over year in April, respectively, echoing demand related to advanced packaging, hybrid bonding, and TSV.
- In 4M26, China's SPE imports fell 13% year over year, of which WFE fell 12%, while packaging equipment grew 6%.
- China's WFE imports totaled US$8.9bn in 4M26, with deposition, etching, and lithography accounting for 29%, 22%, and 21%, respectively.
- China's semiconductor imports rose 58% year over year in April, and the semiconductor trade deficit widened 17% in 4M26, which may drive an acceleration in future semiconductor capex.
Report interpretation
Overview
This report tracks China's semiconductor production equipment and wafer fab equipment import data. The core view is that although China's WFE imports are still in negative growth territory, the downward pressure is bottoming out. In April, SPE imports fell 4% year over year and WFE imports fell 6% year over year, both markedly improved from the double-digit declines of prior months; meanwhile, rapid growth in test and packaging equipment imports suggests that advanced packaging and AI-related demand may be forming a support base.
Core views
Jefferies believes China's WFE demand is likely to recover over the next 3 years, mainly driven by a widening semiconductor trade deficit, strong domestic AI demand, and capacity expansion pressure brought by IPOs of large memory companies. Even as China continues to raise WFE localization rates, overseas WFE suppliers will still play an important role in rapid capacity expansion and yield improvement. The report maintains AMEC as the top pick among China WFE names.
Analysis framework
The report is based on China's customs import data for SPE, WFE, and semiconductors, breaking it down by month, year-to-date, source country, and product category, and combining year-over-year growth, import share, semiconductor trade deficit, and industry events to assess the equipment demand cycle.
Methodology notes
Assess China's semiconductor capex cycle through import value and year-over-year changes in semiconductor production equipment and wafer fab equipment.
SPE has broader coverage, while WFE is the core equipment measure for wafer fab expansion; a narrowing decline in WFE imports usually means wafer fab investment demand may be approaching a bottom.
Growth in semiconductor imports and a widening trade deficit can reflect insufficient domestic supply, thereby driving local capacity expansion and equipment procurement.
The report believes that a widening semiconductor trade deficit, AI demand, and memory capacity expansion will jointly lift WFE demand over the next 3 years.
Evaluate AMEC's target price using forward price-to-earnings multiples.
AMEC's target price of Rmb415.00 is based on 80x/58x 2026E/2027E P/E.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Advanced Micro-Fabrication Eqp Inc China（688012 CH）One of the core beneficiaries of China's WFE recovery; the report calls it the top China WFE pick.
- Strengths
- Benefits from China's equipment localization, wafer fab expansion, and WFE demand recovery; the report assigns a BUY rating and a target price of Rmb415.00.
- Weaknesses
- Valuation is based on relatively high 2026E/2027E P/E multiples, implying demanding growth delivery expectations.
- Comparison
- Compared with overseas equipment makers, AMEC benefits more directly from China's localization trend; compared with the broader industry, the report ranks it as the top pick.
- Risks
- Further sanctions from the U.S. Department of Commerce, slower-than-expected customer capacity expansion, slower-than-expected acquisition of new overseas customers, and slower-than-expected new equipment development.
- China WFE IndustryThe report's main research subject, currently in a phase of negative import growth but narrowing declines.
- Strengths
- AI demand, semiconductor import growth, and a widening trade deficit may drive a recovery in capex over the next 3 years.
- Weaknesses
- 4M26 WFE imports were still down 12% year over year, indicating the industry has not yet fully recovered.
- Comparison
- April WFE was down 6%, improved from the double-digit declines of previous months; packaging and test equipment performed better than WFE.
- Risks
- U.S. export restrictions, weaker-than-expected demand recovery, and friction between localization progress and overseas equipment supply.
- Overseas WFE SuppliersMay benefit from the recovery in China's semiconductor capex.
- Strengths
- Still play an important role in rapid capacity expansion and yield improvement.
- Weaknesses
- More heavily affected by export restrictions and geopolitical policy.
- Comparison
- Even if China raises localization rates, the report still believes overseas WFE is irreplaceable during capacity ramp-up.
- Risks
- Escalation of U.S. restrictions, customers shifting procurement to domestic equipment, and changes in trade policy.
- Memory Industry ChainA widening semiconductor trade deficit and large memory IPOs may drive capacity expansion.
- Strengths
- AI is pushing up memory prices and demand, which may stimulate equipment procurement.
- Weaknesses
- The pace of capacity expansion depends on financing, pricing cycles, and end demand.
- Comparison
- Compared with other chip categories, the report particularly emphasizes the pull-through effect of memory expansion on WFE demand.
- Risks
- A decline in memory prices, delays in IPO or financing progress, and weaker-than-expected AI demand.
Key data
- April SPE Import YoY-4%Same as March, with a clear easing from the double-digit declines of the prior three months.
- April WFE Import YoY-6%Improved from the double-digit declines from November to February, but still in negative growth.
- April Test Equipment Import YoY+21%Test equipment imports increased significantly.
- April Packaging Equipment Import YoY+42%Packaging equipment imports surged, possibly related to demand for advanced packaging.
- 4M26 SPE Import YoY-13%Still down year to date, mainly dragged by the decline in WFE.
- 4M26 WFE Import YoY-12%WFE remains in a downtrend, but the report believes the weakness may be bottoming out.
- 4M26 Packaging Equipment Import YoY+6%Maintained growth despite the overall decline in SPE.
- 4M26 WFE Import ValueUS$8.9bnDeposition equipment accounted for 29%, etching 22%, and lithography 21%.
- 4M26 SPE Import ValueUS$13.5bnWFE accounted for 66%, components 13%, and test equipment 9%.
- April Semiconductor Import YoY+58%The highest since January 2018; the report believes this was mainly driven by rising prices of memory and AI-related chips.
- 4M26 Semiconductor Trade Deficit+17%Reversing the trend of declining or flat deficits since 2021.
- Singapore's Share in China's WFE Imports24%Tied for first with Japan in 4M26, above 2025's 16%.
- Malaysia's Share in China's WFE Imports12%Above 2025's 10%, but import growth was lower than in 2025.
- AMEC Target PriceRmb415.00Based on 80x/58x 2026E/2027E P/E.
- AMEC Current Price and RatingCNY273.00，BUYThe report lists AMEC as a BUY-rated name.
Impact & implications
If China's semiconductor trade deficit continues to widen, domestic wafer fabs and memory companies may accelerate capacity expansion, thereby driving a recovery in WFE orders. Domestic equipment makers are likely to benefit from the localization trend, with AMEC listed as the top pick; meanwhile, Japanese and some U.S. equipment suppliers may also benefit from a recovery in China's semiconductor capex.
Risks
- Further sanctions from the U.S. Department of Commerce may affect equipment supply and customer procurement.
- Slower-than-expected customer capacity expansion would weaken the recovery in WFE demand.
- AMEC may acquire new customers outside China more slowly than expected.
- Slower-than-expected new equipment development may affect gains in domestic equipment market share.
- If semiconductor prices, AI demand, or memory capacity expansion fall short of expectations, improvement in the trade deficit and capex may slow.
- Exchange rates, market volatility, and policy changes may affect the target price and investment returns.
What to watch
- Whether China's monthly SPE and WFE import year-over-year growth turns from negative to positive.
- Whether the high growth in test equipment and packaging equipment can continue.
- Whether semiconductor import growth and the trade deficit continue to widen.
- The IPO progress and capacity expansion plans of Chinese memory companies.
- Whether U.S. export restrictions on semiconductor equipment to China change.
- Progress in AMEC's orders, customer capacity expansion, new customer acquisition, and new equipment development.
- Changes in the import-source shares of Singapore, Japan, the Netherlands, and Malaysia in China's WFE imports.