Greater China Semiconductors: Sector Re-Rating Lifts Valuations Across the Board; Model Update

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Greater China Semiconductors: Sector Re-Rating Lifts Valuations Across the Board; Model Update

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21 Jun 2026 23:19:33 ET │ 26 pages

Greater China Semiconductors

Sector Re-Rating Lifts Valuations Across the Board; Model Update

CITI'S TAKE

Kevin Chen AC

We update our forecasts and raise TPs for the 3 China OSATs – JCET, TFME, +852-2501-2125

and TSHT. OSAT valuations have re-rated significantly over the past year as kevin.y.chen@citi.com

they became key enablers for advanced packaging (AP), critically important

for furthering chip performance amid restricted access to advanced WFE. SJ Kyna Wong

Semi’s 15x fwd. P/B also lifted valuation benchmark for all peers. We expect kyna.wong@citi.com

OSAT valuations to stay elevated. Prefer JCET > TFME > TSHT.

Karen Huang

Unprecedented AI-driven upcycle, prolonged industry tight supply — The OSAT karen.xw.huang@citi.com

industry has entered an unprecedented upcycle driven by AI/HPC. Demand is visibly

Yiming Li, CFArising, with JCET’s Computing revenue growing 42% YoY to 21% of FY25 revenue

(from 16% in FY24) on strong demand for HPC and peripherals (power, analog, etc.). yiming.li@citi.com

Industry capacity UTR has remained at full-loading (80%-85%) since 4Q25. OSATs

are lifting capex budget for 2026 to meet the strong, persisting industry demand.

AP an increasingly critical focus — China’s 5-Year Rmb2tn AI investment requires

local data centers to be powered by >80% local AI chips. Given China’s restricted

access to advanced WFE, we see chip makers adopting innovative chip designs

(such as Huawei’s LogicFolding) that utilize advanced bonding/packaging to narrow

the technology gap. We expect growing reliance on AP for chip performance gains

beyond process scaling, thus lifting OSAT valuations.