JPMorgan favors selective China technology opportunities driven by domestic AI chip volume growth

Overview

This is a JPMorgan conference note on China’s technology sector. After two days of research visits across China’s AI-enabling industries, the team focused on domestic AI chips, semiconductor equipment, OSAT, upstream materials and services, consumer electronics, and the iPhone supply chain. The core conclusion is that the domestic AI-related localization chain is building strong growth momentum, but profit potential and investment opportunities need to be differentiated by where a company sits in the chain; the closer a segment is to AI chip volume growth and domestic capital spending, the higher the certainty, while traditional consumer electronics, especially the Android chain, remains under pressure.

Core views

The most favored directions in the report include domestic AI chips, WFE equipment, back-end equipment/OSAT, and the high-end iPhone supply chain. Domestic AI chip suppliers are expected to see a meaningful pickup in shipments starting in the second half of 2026, while also expanding products from inference demand into training use cases; WFE vendors benefit from domestic AI supply-chain buildout, capex in memory and advanced logic fabs, and a clearer IPO timeline for CXMT and YMTC; OSAT and back-end equipment benefit from advanced packaging and testing demand driven by local AI chip volume growth. In contrast, demand for Android smartphones may remain weak, and upstream price increases are likely to continue squeezing downstream margins.

Analysis framework

Based on exchanges with multiple technology companies during the Global China Summit, the report decomposes the impact of AI demand spillover, domestic substitution, capital expenditure, supply-demand tightness, and price transmission across the value chain, and then maps those dynamics to key stocks.

Methodology notes

• Supply-chain analysisDomestic AI chip localization beneficiary chain

  Starting from domestic AI chip volume growth, assess the degree to which chip design, WFE, OSAT, back-end equipment, foundry, memory, and consumer electronics benefit or come under pressure.

  The report views AI chip shipment growth as the main theme, but profit transmission differs by link in the chain: equipment and OSAT benefit more directly, while downstream consumer electronics may face higher costs.

• Supply-demand and pricing analysisUpstream supply tightness and price transmission

  Tight supply in upstream materials, foundry, memory, and OSAT drives price increases, but the ability to pass through costs downstream depends on demand strength and bargaining power.

  AI demand spillover creates upstream tightness; AI-related applications have stronger pricing support, while Android smartphones and non-AI applications have more limited cost pass-through.

• Stock mappingTheme-to-stock mapping

  Map industry trends to key names such as Iluvatar CoreX, NAURA, AMEC, Luxshare, and Cowell.

  The report evaluates relative beneficiaries based on product breakthroughs, customer mix, capex exposure, and iPhone model mix.

Asset mapping & comparison

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

• Iluvatar CoreX - H (9903.HK)

  Top fabless name for domestic AI chips

  Strengths

  Supply remains intact, with customer and product breakthroughs; benefits from domestic AI chip shipment growth and expansion from inference to training demand.

  Weaknesses

  Customer mix is concentrated, and rising memory costs may limit margin upside.

  Comparison

  Compared with general downstream application companies, it benefits more directly from domestic AI chip demand growth.

  Risks

  Uncertainty around advanced chip approvals, customer concentration, rising memory costs, and slower-than-expected volume ramp-up.

• NAURA - A (002371.SZ)

  A Chinese WFE platform company benefiting from domestic AI supply-chain buildout

  Strengths

  Benefits from strong capex in memory and advanced logic fabs, as well as potential improvements in fundamentals and sentiment from CXMT and YMTC IPO timelines.

  Weaknesses

  Sensitive to the domestic wafer-fab capex cycle.

  Comparison

  The report views semiconductor equipment as a high-certainty sub-sector, and NAURA stands out more clearly as a leading Chinese WFE platform.

  Risks

  Capex below expectations, slower-than-expected domestic substitution, and sector valuation volatility.

• AMEC - A (688012.SS)

  A Chinese WFE platform company benefiting from domestic AI supply-chain buildout

  Strengths

  Benefits from domestic AI chain buildout, capex in memory and advanced logic fabs, and the relatively high certainty of the semiconductor equipment segment.

  Weaknesses

  Still exposed to wafer-fab expansion timing and equipment order cycles.

  Comparison

  Along with NAURA, it is one of the Chinese leading WFE platforms the report favors.

  Risks

  Delayed wafer-fab expansion, slower-than-expected order conversion, competition, and valuation volatility.

• Luxshare - A (002475.SZ)

  A beneficiary name in the iPhone supply chain

  Strengths

  High exposure to premium iPhone models, benefiting from stronger-than-expected sales of iPhone 17/18 Pro/Pro Max and a favorable product mix.

  Weaknesses

  Overall consumer electronics demand is weak, and non-iPhone or Android-related businesses may face pressure.

  Comparison

  Compared with the Android smartphone chain, the company is more leveraged to strong iPhone sales and a premium model mix.

  Risks

  iPhone sales below expectations, weaker-than-expected product mix, higher upstream costs, and customer concentration.

• Cowell e Holdings - H (1415.HK)

  One of the report’s key China technology recommendations

  Strengths

  Listed among China technology top picks and rated OW.

  Weaknesses

  The excerpt does not provide a detailed fundamental discussion.

  Comparison

  It is included alongside Iluvatar CoreX, NAURA, AMEC, and Luxshare as a key recommendation.

  Risks

  The report excerpt does not disclose specific risks; please refer to the company-specific report.

• Android smartphone supply chain

  A downstream application area on which the report is cautious

  Strengths

  May have room to recover if demand improves or cost pass-through becomes easier.

  Weaknesses

  Demand weakness may persist, while higher prices for upstream materials, memory, foundry services, and OSAT will pressure margins.

  Comparison

  Compared with the iPhone supply chain and AI-related upstream segments, the Android chain has weaker bargaining power and lower demand visibility.

  Risks

  Continued demand weakness, rising cost pressure, and failed price pass-through.

Key data

• Report date2026-05-25Unless otherwise noted, the stock prices disclosed in the report are as of the close on 2026-05-25.
• Key recommended namesIluvatar CoreX, Naura, AMEC, Luxshare, CowellThe report describes these as top picks in China technology.
• Iluvatar CoreX current price/rating9903.HK HK$487.00 / OWPrice date is 2026-05-22.
• NAURA current price/rating002371.SZ Rmb698.19 / OWThe report identifies this as an A-share covered company.
• AMEC current price/rating688012.SS Rmb485.30 / OWThe report identifies this as an A-share covered company.
• Luxshare current price/rating002475.SZ Rmb74.70 / OWThe report believes it benefits from high-end iPhone models and stronger-than-expected iPhone sales.
• Cowell e Holdings current price/rating1415.HK HK$30.04 / OWPrice date is 2026-05-22.

Impact & implications

The investment takeaway is that positioning within China technology should remain selective: prioritize AI chip platforms with higher certainty in the domestic AI chip supply chain, WFE, back-end equipment/OSAT, and suppliers benefiting from strong high-end iPhone sales and favorable product mix; stay cautious on the Android smartphone chain and downstream applications lacking AI demand support, as weak demand and upstream price increases may jointly compress margins.

Risks

• Low visibility on advanced NVIDIA chip approvals may affect domestic AI chip supply-demand assumptions and competitive dynamics.
• Domestic AI chip suppliers have concentrated customers and rising memory costs, which may limit margin expansion.
• Higher prices for upstream materials, memory, foundry services, and OSAT may compress margins at downstream consumer electronics companies.
• Weak demand for Android smartphones may persist, dragging on related supply-chain companies.
• Non-AI applications such as automotive may lack sufficient bargaining power to pass costs downstream.
• The beneficiary logic for WFE and OSAT depends on continued delivery of domestic wafer-fab and advanced packaging capex.

What to watch

• The shipment ramp of domestic AI chip suppliers in the second half of 2026 and the extent to which 2027E sales growth materializes.
• The competitiveness of new AI chip products in training workloads and customer breakthroughs.
• Changes in memory costs and their impact on gross margins for AI chip fabless companies.
• The IPO timelines for CXMT and YMTC, and the resulting catalyst for fundamentals and market sentiment in the equipment segment.
• Domestic OSAT capex and incremental demand for advanced packaging and testing.
• Whether Android smartphone demand has bottomed and whether upstream price increases can be passed through downstream.
• Whether sales of iPhone 17/18 Pro/Pro Max and the product mix continue to outperform expectations.