China's WFE imports are recovering month by month, turning positive YoY in July but remaining down 7% YTD

Overview

The report uses monthly Chinese customs data to track the total value, equipment categories, and source regions of China's WFE imports, and maps changes in imports to the China revenue of global equipment companies through historical regressions. The core conclusion is that imports continued to improve sequentially in July. Although imports remained down 7% YoY YTD, the report expects a recovery in the second half, driven by stronger memory-related WFE imports. At the same time, the near-term China revenue outlook varies significantly across equipment suppliers.

Core views

China's WFE imports improved further in July. Monthly imports reached $3.9 billion, up 15% MoM and 4% YoY, significantly above the prior-year monthly average of $3.2 billion–$3.3 billion cited under the report's different summary conventions. However, imports remained down 7% YoY YTD in 2026. The sequential increase was primarily driven by dry-etch imports. The report expects imports to continue recovering in the second half because memory-related WFE imports should strengthen considerably, although cumulative data have not yet fully turned positive. Performance varied across equipment categories. Deposition and doping equipment were the main drags on July's YoY performance, while weakness in dry etching and deposition offset strong growth in process-control equipment; thermal-processing and process-control imports achieved double-digit YoY growth. Lithography imports are recovering from the record low in April: in US-dollar terms, July lithography imports were approximately $870 million, with the report summary showing growth of about 3% MoM and 7% YoY; in euro terms, imports totaled €713 million, up 2% MoM and 10% YoY. Despite the monthly improvement, lithography imports remained down 14% YoY YTD, which the report attributes to supply shortages. Lithography equipment's share of WFE imports declined from 28% in 2023 and 2024 to 27% in 2025 and further to 19% YTD in 2026; its share was 22% in July alone, broadly unchanged from July 2025. The import-source mix shows that shipments from US suppliers remain strong, although some production and shipping locations have shifted to Southeast Asia. YTD in 2026, the United States, Malaysia, and Singapore together accounted for approximately 42%–43% of China's WFE imports, up from 35% in 2025 and 33% in 2024. Japan's share declined from 26% in 2024 and 23% in 2025 to 21%, while the Netherlands' share fell from 25% in both 2024 and 2025 to 18%. Excluding lithography, imports into China from Singapore and Malaysia have gradually increased since 2021, while direct imports from the United States have declined. The report believes this may reflect increased shipments by US equipment suppliers from production facilities in Singapore or Malaysia. YTD imports originating from Singapore and Taiwan, China, increased 24% and 20% YoY, respectively. Shanghai and Beijing remained the principal import regions, accounting for 39% and 20%, respectively, with imports becoming increasingly concentrated in these two locations. The source mix for lithography is highly concentrated in the Netherlands. The Netherlands' share of China's lithography imports has increased since August 2023, reaching a record 89% in 2024 and rising further to 92% in 2025, where it remained YTD in 2026. Japan's share of lithography imports declined after August 2023 and has remained low. The report also notes that the share of lithography imports did not change immediately following the October 2022 export controls but began to rise markedly in June 2023, illustrating a lag between policy events and changes in actual import data. For ASML, the report uses China's lithography imports in the first month of each quarter to forecast China system sales, with a regression R² of 0.80. China's lithography imports were €713 million in July, implying estimated third-quarter China system sales for ASML of €2.2 billion, up 141% QoQ and down 5% YoY. China is expected to account for 25% of third-quarter system sales, up 11 percentage points from the second quarter but 17 percentage points below the 42% recorded in the third quarter of 2025. ASML management expects China's share of revenue to decline from 33% in FY25 to 20% in FY26. The report likewise expects the share to decline but believes Chinese demand will remain resilient over the next several years, driven primarily by continued capacity expansion, particularly investment in advanced logic. ASML's plan to expand DUV capacity by 30% over the next two years is viewed by the report as supporting evidence for this assessment. The report rates ASML Outperform with a €2,500 target price, implying 66% upside, and identifies it as its top European semiconductor pick. Regression results for US equipment suppliers are mixed. LRCX's regression using one month of data has an R² of approximately 0.83 and points to a roughly 13% QoQ decline in China revenue for the September quarter, with China representing approximately 18% of revenue based on consensus total revenue; the chart compares this with previous exposure of approximately 26%. Management has not formally guided China revenue for the quarter but expects full-year China WFE spending to be flat to slightly higher and emphasizes that quarterly trends may be uneven. The report therefore explicitly states that one month of data should not be overinterpreted. AMAT has already reported results for the July quarter, so the three-month import regression is used only for validation rather than forecasting. The model has an R² of 0.88 and had forecast approximately 30% QoQ growth in China revenue and a 29.7% revenue share, versus actual results of approximately 20% QoQ growth and a 27.5% share, directionally consistent with the model. KLAC's regression using one month of data has an R² of approximately 0.85 and forecasts approximately 31% QoQ growth in China revenue for the September quarter, with China's revenue share rising from approximately 26% in the June quarter to approximately 31%. However, management previously stated that China's WFE growth could be slower than overall global WFE growth this year. Among Japanese equipment suppliers, TEL's regression using one month of data has an R² of approximately 0.55 and limited predictive power, but points to China revenue growth of 18% YoY and 34% QoQ, above the 20% QoQ growth implied by consensus expectations. China's share of SPE revenue is expected to increase from 30% in the June quarter to 35%. Kokusai's regression using one month of data has an R² of approximately 0.45 and only modest predictive power. The model points to China revenue growth of 15% YoY and 70% QoQ, well above the 10% QoQ growth implied by consensus expectations. China is expected to contribute approximately 42% of revenue under the report's forecast and approximately 44% under consensus expectations, up from 28% in the June quarter. Screen's regression using one month of data has an R² of approximately 0.55 and forecasts a 45% YoY decline and 7% QoQ growth in China revenue, significantly below the 69% QoQ growth implied by consensus expectations, with China accounting for approximately 15% of SPE revenue. Advantest's model points to China revenue growth of 10% YoY and a decline of 17% QoQ, below consensus expectations for 16% QoQ growth. China's revenue share is approximately 14%, versus 19% in the June quarter. The investment implications are not determined solely by a single month's regression. The report is positive on NAURA, AMEC, and Piotech as beneficiaries of domestic WFE substitution in China and accelerating market-share gains. NAURA has the broadest local product portfolio, spanning deposition, etching, thermal processing, and cleaning, as well as a diversified customer base. AMEC focuses on dry etching and is rapidly expanding its deposition products, including ALD, LPCVD, and EPI; the report states that its technology and global recognition lead among local vendors. Piotech primarily offers multiple types of deposition equipment and is expanding into wafer-to-wafer and chip-to-wafer hybrid-bonding equipment required for advanced packaging, supported by a strong track record of product innovation. All three companies are rated Outperform, with target prices of CNY 1,380, CNY 660, and CNY 1,200, respectively. Among other covered companies, TEL is rated Outperform with a ¥79,300 target price due to its pricing competitiveness following yen depreciation, market-share gains, and expected margin expansion. Kokusai benefits from increasing adoption of batch ALD at advanced nodes, particularly GAA, as well as an accelerating recovery in NAND capital expenditure, and is rated Outperform with a ¥12,420 target price. Screen faces pressure from the lack of an increase in cleaning intensity and competition from both global and Chinese rivals. It is rated Market-Perform with a ¥15,000 target price, although potential upside from panel-level packaging warrants monitoring. Advantest benefits from increasing HBM and Blackwell testing intensity. The report states that it holds approximately 65% of the HBM tester market and 100% of the Nvidia AI GPU testing market, and believes product migration, particularly HBM4 in 2025 as described in the report, could support higher average selling prices and margins. It is rated Outperform with a ¥45,800 target price. AMAT, LRCX, and KLAC are all rated Outperform, with target prices of $700, $385, and $250, respectively. AMAT has exposure to key technology inflection points and an attractive valuation relative to peers; LRCX benefits from GAA, advanced packaging, HBM, and NAND upgrades; and KLAC has structural growth drivers, a durable competitive position, lower risk from Chinese substitution, and disciplined capital allocation, which the report believes warrant a valuation premium.

Analysis framework

The report first extracts monthly WFE import values covering 11 customs codes from Chinese customs statistics, then breaks them down by equipment type, source region, and Chinese import region, comparing MoM, YoY, and YTD growth as well as historical shares. The institution then selects import categories relevant to each equipment supplier's products and regresses either the first month of each quarter or full-quarter import data against the company's historical China revenue, using R² to assess fit and predictive power. After forecasting China revenue, it calculates China's business share using consensus total revenue. For AMAT, which has already reported results, the model is used only for ex-post validation. For companies with only one month of data or low R² values, the report explicitly lowers the strength of its conclusions.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Tracking equipment demand and supply changes through China's WFE imports

  The report uses customs import values as an important indicator of equipment investment by Chinese wafer fabs and combines them with memory capital expenditure, advanced-logic capacity expansion, and lithography-equipment supply shortages to explain changes in imports and the subsequent recovery path.

• Quantitative/Factor/Portfolio Theory

  Historical regression between import values and equipment suppliers' China revenue

  The report establishes regression relationships between Chinese import data relevant to each company's products and historical quarterly China revenue, using either the first month of the quarter or three months of data to forecast revenue and R² to measure goodness of fit. The R² values for the ASML, LRCX, AMAT, and KLAC models are approximately 0.80, 0.83, 0.88, and 0.85, respectively, while those for TEL, Kokusai, and Screen are approximately 0.55, 0.45, and 0.55, making the latter forecasts less reliable.

• Event Games and Behavioral FinanceEvent-driven analysis

  Tracking the structure of lithography imports before and after export controls

  The report examines import changes following the October 2022 export controls and finds that lithography's share of imports did not adjust immediately but began to rise in June 2023, while the Netherlands' source share increased markedly from August 2023, illustrating a lag between policy events and changes in trade data.

Asset mapping & comparison

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

• ASML (ASML)

  The recovery in China's lithography imports points to a sharp QoQ rebound in third-quarter China system sales to €2.2 billion.

  Strengths

  DRAM capacity expansion, higher EUV intensity at the 1c node, and a 30% expansion in DUV capacity over the next two years; identified by the report as its top European semiconductor pick.

  Weaknesses

  China's revenue share is expected to decline from 33% in FY25 to 20% in FY26.

  Comparison

  China is expected to account for 25% of third-quarter system sales, up 11 percentage points from the second quarter but down 17 percentage points from the third quarter of 2025.

  Risks

  China's revenue share is declining, while lithography imports remain affected by supply shortages YTD.

• Lam Research (LRCX)

  The one-month import regression points to an approximately 13% QoQ decline in China revenue for the September quarter, with China accounting for approximately 18% of revenue.

  Strengths

  Benefits from GAA, advanced packaging, HBM, and NAND upgrades, with supportive commentary regarding CY26/27.

  Weaknesses

  Near-term regression results for China revenue are weak.

  Comparison

  The chart shows China revenue exposure declining from approximately 26% previously to approximately 18%.

  Risks

  Management stated that China's WFE growth may fluctuate from quarter to quarter, and the report warns against overinterpreting one month of data.

• Applied Materials (AMAT)

  The three-month import regression provides directional validation of already reported results.

  Strengths

  Strong exposure to key technology inflection points, with a valuation the report considers attractive relative to peers.

  Weaknesses

  The model's forecasts for China revenue growth and share exceeded the actual results.

  Comparison

  The model forecast approximately 30% QoQ growth in China revenue and a 29.7% share, versus actual results of approximately 20% and 27.5%, respectively.

• KLA Corporation (KLAC)

  The one-month import regression points to approximately 31% QoQ growth in China revenue for the September quarter, with the revenue share rising to approximately 31%.

  Strengths

  Structural growth drivers, a durable competitive position, lower risk from Chinese substitution, and disciplined capital allocation.

  Comparison

  China's revenue share is expected to increase from approximately 26% in the June quarter to approximately 31%; the report believes it should command a valuation premium.

  Risks

  Management previously stated that China's WFE growth could be slower than overall global WFE growth.

• Tokyo Electron (TEL)

  The regression points to China revenue growth of 18% YoY and 34% QoQ, slightly above consensus expectations.

  Strengths

  The world's fourth-largest SPE supplier and Japan's largest SPE supplier, covering six major product areas and potentially benefiting from greater pricing competitiveness following yen depreciation.

  Weaknesses

  The one-month regression has an R² of approximately 0.55, indicating limited predictive power.

  Comparison

  The model's 34% QoQ growth exceeds consensus expectations of 20%, with China's revenue share expected to rise from 30% to 35%.

• Kokusai

  The regression points to 70% QoQ growth in China revenue, significantly above consensus expectations.

  Strengths

  Increasing adoption of batch ALD at advanced nodes, particularly GAA, and an accelerating recovery in NAND capital expenditure.

  Weaknesses

  The one-month regression has an R² of approximately 0.45 and only modest predictive power.

  Comparison

  The model forecasts 70% QoQ growth, versus consensus expectations of 10%; China's revenue share is approximately 44% under consensus expectations, compared with 28% in the June quarter.

• Screen

  The regression points to a 45% YoY decline and 7% QoQ growth in China revenue, significantly below consensus expectations.

  Strengths

  Panel-level packaging may provide potential upside.

  Weaknesses

  Cleaning intensity has not increased, and market competition is intense.

  Comparison

  The model's 7% QoQ growth is below consensus expectations of 69%, with China accounting for approximately 15% of SPE revenue.

  Risks

  Faces pressure from global and Chinese competitors, including TEL, Lam, ACMR, and NAURA.

• Advantest

  The regression points to China revenue growth of 10% YoY and a decline of 17% QoQ, below consensus expectations.

  Strengths

  Benefits from increasing HBM and Blackwell testing intensity; the report states that it holds approximately 65% of the HBM tester market and 100% of the Nvidia AI GPU testing market.

  Weaknesses

  The near-term China revenue forecast is weakening.

  Comparison

  The model forecasts a 17% QoQ decline, versus consensus expectations for 16% growth; China's revenue share is expected to be approximately 14%, compared with 19% in the June quarter.

• NAURA

  As China's leading local WFE supplier, the report believes it will benefit from domestic substitution and accelerating market-share gains.

  Strengths

  Has a broad product portfolio covering PVD, CVD, ICP etching, thermal processing, and cleaning, with customers spanning logic, DRAM, and NAND manufacturers.

  Comparison

  The report states that it has the broadest product portfolio among local Chinese WFE suppliers.

• AMEC

  The report believes it will benefit from domestic WFE substitution in China and accelerating market-share gains.

  Strengths

  Focuses on CCP and ICP dry etching while rapidly expanding into ALD, LPCVD, and EPI; viewed as a local Chinese WFE company with leading technology and global recognition.

  Comparison

  The report states that it has strong technical capabilities and broad global recognition among local Chinese WFE companies.

• Piotech

  The report believes it can gain market share through domestic substitution, product innovation, and expansion into advanced-packaging equipment.

  Strengths

  Covers PECVD, HDPCVD, SACVD, and ALD, and has entered wafer-to-wafer and chip-to-wafer hybrid-bonding equipment.

  Comparison

  The report positions it as a rapidly growing local WFE supplier with a strong track record of product innovation.

Key data

• China WFE imports in July 2026$3.9bnUp 15% MoM and 4% YoY; above the prior-year monthly average of $3.2bn–$3.3bn cited in the report
• YTD WFE import growth in 2026-7% YoYCumulative imports remain below the prior-year period, but monthly data are improving
• July lithography imports€713mn / $870mnDifferent currency conventions; up 2% MoM and 10% YoY in euro terms, and approximately 3% MoM and 7% YoY under the US-dollar summary convention
• YTD growth in lithography imports-14% YoYThe report states that supply shortages kept lithography a relatively weak equipment category
• Lithography's share of WFE imports YTD in 202619%28% in 2023 and 2024 and 27% in 2025; 22% in July 2026 alone
• Combined import share of the United States, Malaysia, and SingaporeApproximately 42%–43%YTD in 2026; 35% in 2025 and 33% in 2024
• The Netherlands' share of China's lithography imports92%In 2025 and YTD in 2026, versus 89% in 2024
• ASML third-quarter China system sales forecast€2.2bnUp 141% QoQ and down 5% YoY, accounting for 25% of third-quarter system sales
• ASML regression R²0.80Uses China's lithography imports in the first month of the quarter to forecast quarterly China system sales
• LRCX September-quarter China revenue forecastApproximately -13% QoQRegression R² of approximately 0.83, with China accounting for approximately 18% of revenue
• AMAT July-quarter China revenueActual approximately +20% QoQThe model forecast approximately +30%; actual China revenue share was 27.5%, versus the model forecast of 29.7%
• KLAC September-quarter China revenue forecastApproximately +31% QoQRegression R² of approximately 0.85, with China's revenue share expected to rise from approximately 26% to approximately 31%
• TEL China revenue forecast+18% YoY, +34% QoQChina's share of SPE revenue is expected to be 35%, with a regression R² of approximately 0.55
• Kokusai China revenue forecast+15% YoY, +70% QoQChina's revenue share is approximately 44% under consensus expectations, with a regression R² of approximately 0.45
• Screen China revenue forecast-45% YoY, +7% QoQBelow consensus expectations of +69% QoQ, with China accounting for approximately 15% of SPE revenue
• Advantest China revenue forecast+10% YoY, -17% QoQBelow consensus expectations of +16% QoQ, with China accounting for approximately 14% of revenue

Impact & implications

The report believes that July's data support the view that China's WFE imports have gradually recovered from their lows and may improve further in the second half, although cumulative YoY growth remains negative and performance varies across equipment categories. Source-location data indicate that shipments to China by US equipment suppliers have not simply disappeared but have partially shifted to production facilities in Singapore and Malaysia. The impact on listed companies depends on product mix and China exposure: near-term China revenue signals are stronger for ASML, KLAC, TEL, and Kokusai, but weaker for LRCX and Advantest. Although Screen shows sequential growth, it is significantly behind consensus expectations. Over the medium to long term, the report continues to emphasize the differing benefits to relevant equipment suppliers from Chinese capacity expansion, domestic substitution, GAA, HBM, advanced packaging, and the NAND recovery.

Risks

• Lithography imports remained down 14% YoY YTD, with the report stating that supply shortages made lithography a relatively weak equipment category.
• Regressions using only the first month of a quarter may be affected by monthly volatility, and the report explicitly warns against overinterpreting the LRCX result.
• The one-month regressions for TEL, Kokusai, and Screen have R² values of only approximately 0.55, 0.45, and 0.55, indicating limited predictive power.
• ASML expects China's revenue share to decline from 33% in FY25 to 20% in FY26.
• Screen faces pressure from stagnant cleaning intensity and intense competition from global and Chinese vendors.

What to watch

• Track whether China's WFE imports can sustain their recovery in the second half of 2026, driven by stronger demand for memory equipment.
• Monitor whether the monthly divergence among dry-etch, deposition, doping, process-control, and lithography imports narrows.
• Compare the actual China revenue of ASML, LRCX, KLAC, TEL, Kokusai, Screen, and Advantest with the regression forecasts.
• Monitor the actual demand alignment between ASML's declining China revenue share and its planned 30% expansion in DUV capacity over the next two years.
• Track changes in the share of shipments to China by US equipment suppliers through production facilities in Singapore and Malaysia.
• Monitor whether Screen's panel-level packaging business can deliver the potential upside described in the report.