China Tech: A decade of investment, a potential inflection in CFROI

研报英文原文证据摘录

China Tech: A decade of investment, a potential inflection in CFROI

Global Research

10 July 2026ab

HOLT APAC Equities

ChinaChina Tech: A decade of investment, a potential

inflection in CFROI Technology

Shawn Lee

HOLT Sector Specialist

shawn.lee@ubs.com

China's self-sufficiency drive has transformed the technology sector through a wave of +65-6212 3370

R&D and capex investments over the past decade. While returns have yet to fully

Jeff Huang

materialize, CFROI and Economic Profit are forecast to inflect as AI-driven demand

accelerates. jeff-za.huang@ubs.com

+852-3712 2234

China tech is approaching a potential inflection from investment to returns.

After a decade of policy-driven expansion, sector R&D and capex exceeded US$127bn in

2025, more than 3x 2015 levels, yet aggregate CFROI declined ~200bp to 4% over the

same period. CFROI is forecast to exceed 9% by 2027F, suggesting the next phase will

be defined by monetizing past investments rather than continued capacity build-out.

The core issue has been weak conversion of investment into productivity.

Despite sustained capital deployment, China tech’s sales per unit of capitalized R&D fell

from 7.9x to 5.2x, while asset efficiency declined from 1.0x to 0.7x over the past decade

—evidence that localization and capacity expansion are still absorbing capital ahead of

corresponding revenue generation, even if they may be laying the groundwork for

stronger long-term returns.

Structural constraints—particularly in semiconductors—remain binding. China

continues to lag in leading-edge chips, with capacity skewed toward mature nodes,

limiting margin expansion. Sector profitability has reverted to 2016 levels, while DM

tech achieved ~700bp margin expansion over 2015–2025, underscoring a persistent

gap in value capture.