Mirae Asset initiates China chip coverage, names Naura top pick

Mirae Asset Securities has initiated coverage of China's semiconductor sector, naming Naura — China's largest front-end chipmaking equipment maker — as its top pick.

The brokerage said 2026 marks the start of a new structural investment cycle for the Chinese chip industry, driven by the convergence of AI infrastructure spending and Beijing's semiconductor localization policy. The call comes as the one-sided rally in domestic chip stocks such as Samsung Electronics and SK Hynix has begun to lose steam, drawing attention to whether China's semiconductor value chain could emerge as a fresh investment alternative.

Mirae Asset Securities initiated coverage of the Chinese semiconductor sector Thursday through a research note titled "China Semiconductors (Overweight/Initiation)," naming front-end equipment maker Naura as its top pick. The firm assigned a buy rating and set a target price of 1,100 yuan ($163), implying upside of 47.4 percent from the stock's closing price of 746.10 yuan as of Monday.

Kang Min-hee, the Mirae Asset Securities analyst who authored the note, said "2026 is the inaugural year in which China's semiconductor industry enters a new investment cycle," describing the dynamic as "policy-driven demand substitution and a capital-led structural upcycle." She added that China has entered a phase of excess GPU demand and assigned an Overweight rating to the sector.

Initiating coverage means the analyst is formally adding a company or sector to their official research universe and committing to publishing regular reports going forward. The move signals that China's semiconductor industry is now a sector warranting close and sustained attention.

Underpinning the call is the accelerating pace of China's semiconductor ambitions. Chinese AI models have already demonstrated their competitiveness in the market, drawing fresh attention to the materials, components and equipment industries that support them.

Just as the surge in US AI investment translated into a quantum leap for domestic chipmakers, observers now suggest that China's AI infrastructure spending could trigger a broad rerating of its semiconductor value chain. With the one-sided rally in Samsung Electronics and SK Hynix shares having lost momentum, Chinese chip plays are emerging as an alternative destination for investment.

Naura is China's leading front-end semiconductor equipment company, supplying a wide range of tools including etching, deposition, cleaning and thermal processing equipment. It stands as a key beneficiary of China's push for semiconductor localization and capacity expansion. Particularly notable is that Naura is the only domestic supplier capable of covering all four equipment categories — etching, deposition, cleaning and thermal processing — allowing it to respond to customers' line-level procurement orders.

A robust order backlog further supports earnings visibility. Naura's order backlog as of the end of the first quarter stood at 82 billion yuan, up 58 percent from a year earlier and more than double its full-year 2025 revenue. With capacity expansions proceeding simultaneously at both logic (SMIC) and memory (CXMT) customers, orders continue to accumulate, and the firm said earnings visibility through 2028 is already secured.

China's government localization policy also provides a favorable backdrop for Naura. The localization rate for front-end semiconductor equipment rose 10 percentage points in a single year, from 25 percent in 2024 to 35 percent by end-2025, and the Ministry of Industry and Information Technology has set a target of raising the domestic equipment procurement ratio to at least 65 percent by 2027.

A rule requiring that at least 50 percent of equipment in new fabs be domestically sourced is also in effect. Naura's front-end equipment coverage stands at 51 percent, ahead of rivals AMEC at 44 percent and ACM at 29 percent, suggesting that gains from rising localization requirements will be concentrated at Naura.

On investment strategy, Mirae Asset Securities recommended spreading exposure across the value chain rather than concentrating in individual names. China's semiconductor sector has a strong policy-driven character, meaning the entire value chain tends to move in tandem with policy momentum — but the timing and path through which actual profits materialize differ by segment, including equipment, foundry, fabless and memory.

Accordingly, Mirae Asset Securities named SMIC (foundry), Cambricon (fabless) and CXMT (memory) as secondary picks alongside Naura. SMIC was assigned a target price of HK$100, with the investment thesis centered on its status as in effect the only leading-edge process line serving domestic AI chips and the pricing power that flows from capacity scarcity defined by the pace of domestic equipment adoption.

Cambricon received a target price of 2,020 yuan, with the firm highlighting its status as in effect the only domestic alternative capable of addressing inference-driven AI demand, as well as product mix improvement from the mass production of its new Siyuan 690 chip. CXMT was assigned a target price of 80 yuan, with the investment thesis built on direct benefits from AI accelerator localization, its ability to absorb the supply gap in China's domestic general-purpose DRAM market, and revenue growth visibility underpinned by long-term supply agreements.

For retail investors in Korea, the note also introduced the Global X China Semiconductor ETF (3191 HK) as a practical alternative. Most Chinese semiconductor stocks are listed on China's Star Market or the Shenzhen Stock Exchange, limiting direct access for retail investors, so an ETF covering the top names across the value chain was presented as a realistic option.