China wafer fabrication equipment demand re-accelerates, with market size expected to reach US$101 billion in 2028

Overview

The report updates the demand model for China's wafer fabrication equipment. Based on channel checks, fab cleanroom construction, orders at domestic equipment vendors, and global suppliers' revenue trends in China, Bernstein believes China's capacity expansion in logic, DRAM, and NAND is stronger than previously expected. Flat import trends in 2026 do not mean a slowdown in total demand, because local vendors' revenue will still grow rapidly; by 2027–2028, new cleanrooms will gradually translate into equipment orders and revenue, and industry growth will clearly re-accelerate.

Core views

The core logic includes two main themes: first, domestic AI computing demand is driving synchronized capacity expansion in advanced logic, mature logic, DRAM, and NAND; second, export restrictions, procurement security, and improvements in local equipment performance are driving a continued increase in import substitution rates. The report believes local equipment vendors are enjoying both market expansion and share gains, with average revenue growth expected to reach 93% in 2028, higher than 68% in 2027. The second derivative of growth is still improving, and it is not yet appropriate to call the cycle peak.

Analysis framework

The report cross-validates market size from both the demand side and supply side: on the demand side, it forecasts based on capacity construction and equipment spending for advanced logic, mature logic, DRAM, and NAND; on the supply side, it aggregates historical revenue, orders, and guidance from the top five global equipment suppliers and the top eleven listed Chinese equipment vendors. The model further incorporates an approximately one-year cleanroom construction cycle, an approximately one-year order-to-revenue recognition cycle for local vendors, customs import data, and channel check results, and values key companies using 2028 expected EPS and P/E ratios.

Methodology notes

• Industry Supply-Demand AnalysisChina Wafer Fabrication Equipment Supply-Demand Model

  Break down equipment demand by end application, and validate the total market size using imported supply and local supply.

  The model covers advanced logic, mature logic, DRAM, and NAND, estimating 2026–2028 market size through capacity expansion plans, cleanroom construction pace, import data, and vendor revenue forecasts.

• Company and Supplier AnalysisBottom-up Supplier Analysis

  Aggregate revenue, orders, and management guidance from major global and Chinese equipment vendors.

  The report uses data from the top five global suppliers and the top eleven listed Chinese equipment vendors to estimate local supply value, import value, and equipment self-sufficiency rates, while considering differences in revenue recognition cycles between domestic and overseas vendors.

• Industry ResearchChannel Checks and Order Leading Indicators

  Use cleanroom construction and equipment orders as leading indicators of future revenue.

  The cleanroom construction cycle for Chinese fabs is about one year, and the time from order receipt to revenue recognition for local equipment vendors is also close to one year; therefore, construction and orders in 2026–2027 can support demand and revenue forecasts for 2027–2028.

• Technology Demand FrameworkHuawei Tau (τ) Scaling Law

  Increase computing power through LogicFolding and larger-scale chip clusters, while increasing wafer consumption.

  The report believes LogicFolding at least doubles wafer consumption per chip, while large-scale superPoDs enable domestic AI chips to cover training demand, thereby significantly increasing advanced logic capacity and equipment demand.

• Equity ValuationForward P/E Valuation

  Determine target prices based on 2028 expected earnings per share and target P/E ratios.

  NAURA, AMEC, and Piotech are valued at about 32x, 39x, and 36x 2028 expected P/E, respectively, corresponding to target prices of CNY 1,380, CNY 660, and CNY 1,200.

Asset mapping & comparison

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

• NAURA (002371.CH)

  China's wafer fabrication equipment leader and the report's top pick

  Strengths

  Its product portfolio covers PVD, CVD, dry etching, thermal processing, and cleaning, with customers across logic, DRAM, and NAND; advanced logic order exposure is close to 40%, making it best positioned to benefit from advanced logic capacity expansion and import substitution.

  Weaknesses

  The report expects second-quarter 2026 results may fall short of expectations, and the share price has already risen significantly year-to-date.

  Comparison

  Compared with AMEC and Piotech, it has a broader product portfolio and customer coverage, therefore earning top-pick status.

  Risks

  Short-term earnings volatility, elevated valuation, capacity expansion or order conversion slower than expected, and equipment performance still lagging global leaders.

• AMEC (688012.CH)

  Core beneficiary in etching equipment

  Strengths

  It has strong technical capabilities in CCP and ICP dry etching and is rapidly expanding into deposition equipment such as ALD, LPCVD, and EPI; its technical recognition and global visibility are relatively high among Chinese equipment vendors.

  Weaknesses

  The business remains relatively concentrated in etching, and the scaled ramp-up of new deposition products needs validation.

  Comparison

  Its technical capabilities stand out, but product coverage is narrower than NAURA's; the report raises its 2028 EPS by the largest margin among the three key companies.

  Risks

  New product validation falling short of expectations, fluctuations in customer capital expenditure, slower import substitution, and relatively high valuation.

• Piotech (688072.CH)

  Growth name in deposition and advanced packaging equipment

  Strengths

  It focuses on PECVD, HDPCVD, SACVD, and ALD, and is expanding into W2W and C2W hybrid bonding equipment, with a strong track record of product innovation.

  Weaknesses

  Its scale and product breadth are below NAURA's, and contributions from new advanced packaging products still need to materialize.

  Comparison

  Compared with NAURA, it is more focused on deposition equipment; compared with AMEC, it has differentiated positioning in hybrid bonding and advanced packaging equipment.

  Risks

  Product introduction progress, customer validation cycles, intensifying competition, valuation, and risks around capacity expansion execution.

• Global wafer fabrication equipment suppliers

  China market share may continue to be replaced by local vendors

  Strengths

  They still hold leading advantages in yield, equipment uptime, advanced process capabilities, and global customer base.

  Weaknesses

  Export restrictions, delivery uncertainty, and reduced purchasing willingness from Chinese customers weaken growth in China; some local equipment is priced about 20% lower.

  Comparison

  The report expects global suppliers' revenue in China to achieve only single-digit CAGR through 2028, while Chinese local vendors' revenue CAGR over the same period is about 66%.

  Risks

  Further decline in China's revenue contribution, intensifying local competition, and changes in export controls.

Key data

• China wafer fabrication equipment market sizeUS$57 billion in 2026; US$73 billion in 2027; US$101 billion in 2028Previous forecasts were US$58 billion, US$67 billion, and US$77 billion, respectively; the 2025–2028 CAGR is about 26%.
• Revenue of local equipment vendorsUS$16 billion in 2026; US$27 billion in 2027; US$52 billion in 2028Year-on-year growth is expected to be 41%, 68%, and 93%, respectively, indicating continued acceleration in growth.
• Equipment self-sufficiency rate23% in 2025; 28% in 2026; 37% in 2027; 52% in 2028Import substitution is further spreading from advanced logic and NAND to DRAM and mature logic.
• Memory equipment demandUS$14 billion in 2026; US$26 billion in 2027; US$42 billion in 2028Year-on-year growth is expected to be 88%, 81%, and 62%, mainly driven by capacity expansion at CXMT and YMTC and the resumption of capacity expansion at JHICC.
• Advanced logic equipment demandUS$26 billion in 2027; US$33 billion in 2028Year-on-year growth is expected to be 13% and 30%, driven by domestic AI chips, LogicFolding, and cluster computing demand.
• Mature logic equipment demandUS$21 billion in 2027; US$25 billion in 2028Year-on-year growth is expected to be 10% and 22%, driven by demand for supporting analog, discrete devices, and MCUs, as well as outsourcing demand from memory fabs.
• NAURA target price adjustmentRaised from CNY 680 to CNY 1,3802026–2028 EPS forecasts are raised by 5%, 23%, and 89%, respectively; the target price corresponds to about 32x 2028 expected P/E.
• AMEC target price adjustmentRaised from CNY 336 to CNY 6602026–2028 EPS forecasts are raised by 64%, 59%, and 121%, respectively; the target price corresponds to about 39x 2028 expected P/E.
• Piotech target price adjustmentRaised from CNY 580 to CNY 1,2002026–2028 EPS forecasts are raised by 3%, 28%, and 90%, respectively; the target price corresponds to about 36x 2028 expected P/E.

Impact & implications

At the industry level, local wafer fabrication equipment vendors will grow significantly faster than global suppliers, with domestic demand expansion and import substitution creating dual drivers. At the stock level, NAURA is listed as the top pick because it has the broadest product portfolio and nearly 40% exposure to advanced logic orders; AMEC benefits from its etching technology advantages and deposition business expansion; Piotech benefits from innovation in deposition equipment and hybrid bonding equipment. By contrast, overseas vendors' revenue growth in China is expected to be only in the single digits, and the share of revenue from China may fall back from the highs of 2024–2025.

Risks

• China fab capacity construction, cleanroom ramp-up, or equipment procurement progress falls short of expectations.
• Demand for AI computing power, DRAM, NAND, and mature logic falls short of forecasts.
• Changes in financing or listing progress at CXMT, YMTC, and others lead to weaker-than-expected capital expenditure capacity.
• Visibility into import equipment demand in 2027–2028 is limited, and inventory pre-purchases may distort import and supply data.
• Local equipment may still lag global leaders in yield, uptime, and other aspects, creating uncertainty around the pace of import substitution.
• Key local equipment stocks have already risen about 60%–110% year-to-date, and high valuations may amplify drawdowns if results fall short of expectations.
• NAURA's second-quarter 2026 results may fall short of expectations.
• Export controls, trade policy, and changes in global supply chains may alter the pace of equipment procurement and capacity construction.

What to watch

• Teardown of Huawei's Kirin 2026 mobile application processor and the wafer consumption of the first LogicFolding chip.
• Deployment progress of Huawei's Atlas 950 superPoD and actual demand for clusters with up to 8,192 chips.
• YMTC's initial public offering prospectus and capital expenditure plan.
• CXMT's financing capability after listing and the pace of new fab capacity expansion.
• Progress on JHICC's resumption of DRAM equipment procurement starting in the second half of 2026.
• Whether China's wafer fabrication equipment imports improve as expected in the second half of 2026.
• Local equipment vendors' order growth in 2026–2027 and the pace of conversion into revenue.
• Whether localization rates for mature logic and DRAM equipment see the expected step-change improvement.
• NAURA's second-quarter 2026 results and post-results share price performance.