Author: Rita
China's semiconductor industry has caught up in "quantity," but the gap in "quality" remains significant.
Goldman Sachs released its fourth annual report on the "Chips Act" series on August 24, pointing out that as of June 2026, China's semiconductor IC self-sufficiency rate had reached 70%, nearly doubling from 38% in January 2010. However, the gap in value self-sufficiency remains huge, with the core bottleneck being the absence of lithography equipment. Goldman Sachs has raised its forecast for China's semiconductor capital expenditure in 2030 to $82 billion, a 79% increase from the previous prediction, to capture demand growth driven by the improvement in self-sufficiency, generative AI, and customer "localization" strategies. The report for the first time covers China's DRAM leader ChangXin Memory Technologies (CXMT), giving it a Buy rating with a target price of 129 yuan.
Significant Capital Expenditure Revision, Advanced Node Gap Narrows Rapidly
Goldman Sachs expects China's semiconductor capital expenditure to maintain an annual growth rate of 10% to 15% from 2026 to 2030, reaching $82 billion by 2030. Front-end wafer fab equipment (WFE) spending is projected to grow by 13%, 20%, and 15% in 2026, 2027, and 2028, respectively, mainly driven by investments in memory and advanced nodes.
The supply-demand gap for advanced logic nodes is narrowing at an accelerating pace. Goldman Sachs's model shows that China's demand for 7nm and below wafers will grow at a CAGR of 17% from 2025 to 2035, reaching 619,000 wafers per month by 2035, primarily driven by AI server demand. The wafer demand from AI servers during the same period is expected to grow at a CAGR of 42%. Supply growth is even faster, with 7nm and below wafer supply growing at a CAGR of 46% from 2025 to 2035, reaching 410,000 wafers per month by 2035. This is mainly due to SMIC's annual capacity expansion of 30,000 to 50,000 wafers per month and yield improvements gradually rising from 23% in 2026 to 75% in 2035. The supply-demand gap is expected to shrink from 92% in 2025 to 34% in 2035.
Strong Growth in AI Chip and DRAM Markets, $678 Billion and $257 Billion Expected
Goldman Sachs has released its first total addressable market (TAM) estimates for China's AI chip and DRAM markets. In the base-case scenario, China's AI chip market is expected to reach $678 billion by 2030, with a CAGR of 69% from 2025 to 2030. This scale corresponds to the shipment of 27 million H800-equivalent AI chips and IT power demand of 32GW. Under a more optimistic scenario, the AI chip market could reach $4.1 trillion, corresponding to 238 million chips and power demand of 196GW.
China's DRAM market is also expanding rapidly. Goldman Sachs forecasts a CAGR of 50% for China's DRAM market from 2026 to 2028, reaching $257 billion by 2028. HBM is expected to grow at a CAGR of 188%, reaching $32 billion by 2028, reflecting strong demand for high-bandwidth memory from AI inference and training.
CXMT is becoming a core supplier in China's DRAM market. Goldman Sachs expects its capacity to grow from 270,000 wafers per month in 2026 to 447,000 wafers per month in 2028, more than doubling to 665,000 wafers per month by 2030 compared to 2026. Average annual capital expenditure from 2026 to 2030 is expected to increase from 60 billion yuan (2024-2025) to 84 billion yuan (approximately $12 billion). CXMT's supply of conventional DRAM is expected to reach 41% and 50% of Samsung and SK Hynix's supply by 2028, up from 28% and 35% in 2025. For HBM, Goldman Sachs expects CXMT's HBM revenue to grow at a CAGR of 166% from 2026 to 2030.
Accelerated Domestic Equipment Substitution, Global Suppliers Remain Key
The localization rate of China's semiconductor equipment is steadily increasing. Goldman Sachs expects the revenue share of China's domestic equipment suppliers in the domestic WFE market to rise from 31% in 2026 to 38% in 2028. Deposition, etching, and lithography are the three largest segments in the WFE market, with China's WFE market expected to reach $53 billion by 2027.
Japanese equipment suppliers continue to benefit from the expansion of the Chinese market. The combined China revenue of four major Japanese front-end equipment companies—Tokyo Electron, SCREEN, Kokusai Electric, and Ebara—reached 1.21 trillion yen in FY2025, accounting for 35% of their semiconductor equipment revenue. This proportion is down from 41% in FY2024, but all four companies expect their absolute China revenue to continue growing. As Chinese fabs move toward more advanced nodes, they increasingly rely on non-Chinese equipment suppliers to ensure yield.
American equipment suppliers face export control pressures, and Goldman Sachs believes their shipments to China will remain around 25% of revenue. Goldman Sachs maintains a bullish view on global equipment stocks, with WFE expected to grow 36% and 45% in 2026 and 2027, respectively. Etching and deposition equipment benefit from the expansion of Gate-All-Around transistors, 3D NAND, and advanced packaging. In the U.S. coverage, Goldman Sachs' top picks are Applied Materials, Lam Research, and Onto Innovation.
CXMT Benefits from Scarcity and AI Demand Dual Drivers
CXMT is China's only DRAM IDM enterprise with mass production capabilities, covering DRAM chip design and manufacturing, serving major domestic cloud service providers and consumer electronics brands. Goldman Sachs expects its net profit to grow at a CAGR of 47% from 2026 to 2030.
Growth drivers come from two aspects: the expansion of China's AI infrastructure driving demand for server DRAM and HBM; and consumer electronics customers diversifying their supplier networks to ensure supply security. Goldman Sachs expects CXMT's conventional DRAM revenue to grow at a CAGR of 34% from 2026 to 2030.
The target price of 129 yuan is based on a 2030 discounted P/E valuation method, with a target P/E of 16.6x, discounted back to 2027. This valuation implies a 2027 P/E of 24x, corresponding to average EPS growth of 77% for 2027-2028, and a PEG of 0.31x, significantly lower than Cambricon's 1.12x, Silergy's 1.46x, and AMEC's 2.21x. Goldman Sachs believes CXMT's scarcity, product portfolio upgrade, and AI demand make its valuation attractive.
Downside risks include intensifying market competition, weaker-than-expected end demand, and geopolitical uncertainty.
China's semiconductor industry is at a critical stage of transitioning from "quantitative expansion" to "qualitative breakthrough." Three intertwined themes—significant upward revision of capital expenditure, continuous narrowing of the supply-demand gap for advanced nodes, and the explosion of demand for AI chips and HBM—jointly drive the revaluation of the industrial chain. Accelerated domestic equipment substitution, the rise of memory leaders, and AI computing infrastructure constitute three major directions with strong certainty.
Disclaimer
This article is a summary and interpretation of a third-party brokerage research report (Goldman Sachs, August 24, 2026) by ChaoXiang Research, combined with the compilation of publicly available market information. The ratings, target prices, profit forecasts, and related judgments cited in this article are the views of the analyst from that brokerage firm, representing only the position of their institution, and do not represent the views of ChaoXiang Research, nor do they constitute any investment advice.
The market has risks, and decisions should be made independently. This article should not be used as a basis for buying or selling any securities.
