CXMT is poised to become a core beneficiary of the memory supercycle and China's DRAM localization

Overview

CXMT Corporation is China's largest and most technologically advanced integrated DRAM manufacturer, covering R&D, design, and production. UBS believes the company is positioned along three major themes: the global memory supercycle, China's semiconductor self-sufficiency, and rising memory demand for AI infrastructure. The report expects global DRAM supply shortages to persist at least until the second quarter of 2028. Together with CXMT's capacity expansion, process upgrades, customer expansion, and volume ramp-up in server DRAM and HBM, the company's revenue is expected to rise from Rmb61.8bn in 2025 to approximately Rmb860.0bn in 2028. UBS initiates coverage with a Buy rating and a target price of Rmb70.00.

Core views

First, AI servers' demand for memory capacity and bandwidth will drive structural growth in DRAM demand, while global supply is constrained by fab space, equipment lead times, and installation resources, making industry shortages likely to continue. Second, through capacity expansion in Beijing, Hefei, and Shanghai, CXMT is expected to raise its share of global DRAM bit supply to approximately 10% by 2028. Third, demand from Chinese local customers for independent supply of traditional DRAM and HBM is increasing, and the company has relatively prominent technology accumulation, scale, and capital strength among domestic suppliers. Fourth, the rising share of server DRAM, HBM, and advanced products, combined with price increases and operating leverage, is expected to keep EBIT margins at 75%-85% in 2026-28. Fifth, although the forecast 2027 P/B is 6.4x, the company's valuation remains attractive relative to its expected 83% ROE and domestic wafer foundry peers.

Analysis framework

The report organizes the investment logic around a key-questions framework, combining global DRAM supply-demand and price forecasts, AI server memory demand models, CXMT wafer capacity and process migration plans, bit shipments, and customer and supply chain research to forecast earnings. Valuation uses a method matching the forecast 2027 P/B ratio with average ROE in 2028-30, and assesses share price potential through upside, base, and downside scenarios.

Methodology notes

• Investment thesisKey-questions framework

  Tests the core investment thesis around revenue growth, server and AI market share, and margin sustainability.

  The report separately addresses whether CXMT can achieve ultra-high-speed revenue growth in 2025-28, whether it can increase its share of China's server and AI infrastructure markets, and whether it can maintain an EBIT margin above 70% in 2026-28.

• Industry analysisDRAM supply-demand and price model

  Assesses the memory cycle based on server demand, memory content per server, industry capacity constraints, and product price forecasts.

  UBS expects global DRAM demand to grow at a 30% CAGR in 2025-27, server bit demand to grow 66%, and supply shortages to persist at least until the second quarter of 2028.

• Operating forecastCapacity-wafer-bit shipment model

  Links designed capacity, actual wafer output, process upgrades, yield losses, and bits per wafer to revenue forecasts.

  The report refers to equipment lead times, engineering readiness, lithography equipment imports in major regions, and industry chain research, expecting designed capacity to reach 466k wpm by the end of 2028 and bit shipments to achieve a 40% CAGR in 2025-28.

• Valuation analysisP/B-ROE valuation method

  Determines the target P/B ratio based on sustainable ROE, cost of equity, and peer valuations.

  The target price uses 8.6x forecast 2027 P/B, corresponding to an average ROE of 37% in 2028-30 and an 8.5% cost of equity; this multiple represents an approximately 40% premium to the average 6.1x of major domestic wafer foundry peers.

Asset mapping & comparison

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

• CXMT Corporation (688825.SS)

  A direct beneficiary of global DRAM price increases, AI server demand, and China's domestic substitution.

  Strengths

  China's largest and technologically leading integrated DRAM manufacturer, with capital for capacity expansion, a server customer base, complete R&D and manufacturing capabilities, and technology accumulation in HBM3/3E.

  Weaknesses

  Advanced processes still lag the world's top three DRAM suppliers; unable to obtain EUV equipment, making process migration and yield improvement more difficult.

  Comparison

  Forecast 2027 P/B is approximately 6.4x, close to Chinese memory-related companies, but forecast ROE is significantly higher; compared with domestic wafer foundry peers, it has stronger margins and ROE.

  Risks

  DRAM price declines, capacity expansion or yields falling short of expectations, tightening export restrictions, and delays in HBM R&D and customer certification.

• China DRAM and semiconductor supply chain

  CXMT's capacity expansion and localization are expected to drive coordinated development of domestic equipment, materials, packaging and testing, design, and downstream customers.

  Strengths

  Policy supports self-sufficiency, and domestic cloud service providers, mobile phone, automotive, and communications customers have clear local procurement demand.

  Weaknesses

  Key equipment and advanced processes remain constrained by overseas technology and export controls, and the maturity of the industry chain still lags the global leading system.

  Comparison

  Compared with assets purely dependent on the wafer foundry cycle, the DRAM industry chain benefits simultaneously from memory price increases and domestic share gains, but earnings volatility is also stronger.

  Risks

  Reversal of the capital expenditure cycle, slow validation of domestic equipment, weaker-than-expected end demand, and duplicated construction.

• Global DRAM suppliers

  They share the benefits of memory price increases with CXMT, while also competing in the China market, server DRAM, and HBM.

  Strengths

  Global leaders have advantages in 1c and more advanced processes, product density, yield, HBM mass production, and global customer certification.

  Weaknesses

  They face share pressure in the China market from local substitution and export controls.

  Comparison

  CXMT still lags Samsung Electronics, SK Hynix, and Micron in technology and product breadth, but has greater advantages in Chinese local customers, policy support, and incremental capacity.

  Risks

  Rapid capacity expansion or price competition by global leaders could shorten the supply-tightness cycle and pressure CXMT's profitability.

Key data

• 12-month target priceRmb70.00Based on 8.6x forecast 2027 P/B.
• Current share priceRmb51.96As of August 6, 2026, the target price implies approximately 34.7% upside.
• Revenue forecastRmb307.5bn/659.2bn/860.0bnCorresponding to forecasts for 2026/2027/2028, respectively.
• 2025-28 revenue CAGR141%Revenue is expected to rise from Rmb61.8bn in 2025 to approximately Rmb860.0bn in 2028.
• Net profit forecastRmb139.7bn/332.8bn/428.2bnCorresponding to forecasts for 2026/2027/2028, respectively, averaging 19% above Wind consensus expectations.
• EBIT margin75%/85%/85%Corresponding to forecasts for 2026/2027/2028, respectively, versus 12% in 2025.
• Year-end DRAM capacity240k wpm rising to 466k wpmIncrease from end-2025 to end-2028.
• Bit shipment CAGR40%Corresponding to 2025-28, expected to reach 58bn GB in 2028.
• Global DRAM bit supply shareApproximately 10%Forecast for 2028; global market share in 2025 is approximately 7%.
• Data center revenue CAGR208%Corresponding to 2025-28; expected to account for 54% of total revenue in 2028, up 28 percentage points from 2025.
• Server-related DRAM bit shipments4.9bn Gb rising to 29.5bn GbIncrease from 2025 to 2028, corresponding to a CAGR of approximately 82%.
• Forecast 2027 valuation6.4x P/BCorresponding to forecast 2027 ROE of approximately 83%; domestic A-share wafer foundry peers average approximately 6x P/B and 4% ROE.

Impact & implications

The core implication of this report is that CXMT is not merely a pricing beneficiary of the DRAM cycle upswing, but may also achieve sustained share gains through capacity expansion, domestic customer adoption, and HBM capabilities. If supply-demand tightness, capacity ramp-up, and product upgrades materialize as expected, high margins and cash accumulation may support significant book value growth, thereby absorbing the currently high absolute P/B ratio. However, DRAM price normalization after 2028 is expected to cause revenue and profit to decline, and investment value is highly dependent on the duration of the supercycle, execution of capacity expansion, and advanced-process yields.

Risks

• DRAM is clearly cyclical; if global supply recovers faster than expected or demand slows, prices, revenue, and margins could be significantly below forecasts.
• Rapidly rising memory costs for AI infrastructure may create affordability constraints, and cloud service providers' reliance on capital markets to bridge the gap between capital expenditure and operating cash flow will also increase demand risk.
• The inability to import EUV lithography equipment, restricted support from U.S. equipment suppliers, and further tightening of export controls could affect advanced-process migration, equipment utilization, and yields.
• Construction, equipment installation, engineer allocation, or ramp-up speed for new capacity in Beijing, Hefei, and Shanghai may fall short of expectations.
• HBM technology still lags global leaders, and mass production, packaging coordination, customer certification, and commercialization may be delayed.
• Server and consumer electronics customer adoption, domestic substitution share gains, or implementation of long-term procurement agreements may be below expectations.
• The report's forecast of 2025-28 revenue growth and 75%-85% EBIT margins is relatively aggressive; slight deviations in prices or shipments could amplify downward revisions to earnings forecasts.

What to watch

• Whether the global DRAM supply-demand gap and DDR and HBM contract prices can continue rising as expected through the second quarter of 2028.
• CXMT's quarterly ramp-up of designed capacity and actual wafer output, as well as the fulfillment of new capacity plans in 2026/2027/2028.
• The share of G4 and G5 processes, bits per wafer, and progress in yield improvement.
• Progress in server DRAM procurement and long-term agreements with Chinese cloud service providers such as ByteDance, Alibaba, and Tencent.
• HBM3/3E mass production, adaptation to domestic AI accelerators, customer certification, and the share of HBM bit shipments.
• Whether data center revenue contribution can rise to 54% in 2028, and whether server-related bit shipments can reach 29.5bn Gb.
• Changes in U.S. and other countries' export controls on lithography, semiconductor equipment, and HBM-related technologies.
• The magnitude of DRAM price normalization after 2028, and whether the company can maintain revenue above Rmb500bn during the downcycle.
• Whether actual EBIT margin, ROE, and book value growth can support the 8.6x target P/B.