3 Chinese Semiconductor Players With Huge Upside Potential

Matthew Farley

Mon, Feb 26, 2024, 6:45 AM 4 min read

From consumer electronics to automotive technologies and industrial machinery, the reliance on semiconductor products continues to grow. I also feel that the growth prospects of these companies in China could be higher than those found elsewhere. Mostly that’s due to investors being primarily focused on the U.S. markets and companies in Taiwan.

So here are three Chinese semiconductor stocks for investors to consider this month. There are substantial risks with these companies but for investors with the right risk tolerance, the huge upside potential could outweigh the negatives.

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Hua Hong Semiconductor (HHUSF)

Hua Hong Semiconductor (OTCMKTS:HHUSF) is one of China’s leading pure-play foundries specializing in semiconductor manufacturing services.

In 2023, the company made significant strides by gaining approval for a $2.6 billion listing on the Shanghai Stock Exchange. This move — marked as China’s biggest listing of the year — is set to position it well in the future, especially with its “8-inch + 12-inch” specialty technologies sector.

In terms of performance and market position, Hua Hong Semiconductor’s strategy to leverage its $2.6 billion listing for expansion and its focus on specialized semiconductor technologies suggest a long-term growth trajectory.

Hua Hong is a crucial foundry in China. As the country pivots to producing semiconductors internally and pulling away from its reliance on Taiwan and other countries, I expect that HHUSF stock will only appreciate in value.

Intchains Group (ICG)

Intchains Group (NASDAQ:ICG) is a provider of high-performance computing ASIC chips and software for blockchain applications.

ICG is another one of those Chinese semiconductor stocks that is worth considering. It is, however, a contrarian pick, as the company’s stock price has fallen 24.6% year to date. Part of this drop includes a decline in ICG’s top line. In 2022, ICG’s revenue saw a significant decrease of 25% compared to the previous year. Sales dropped from 631.8 million renminbi (or $68.7 million) to RMB 473.7 million. Earnings also decreased by 21.1% to RMB 355.2 million.

However, there are a few things that I feel make the company an attractive pick. For one, the company announced the acquisition of assets related to the Goldshell brand from a Singapore-based company. This acquisition, valued at $550,000, includes intellectual property focusing on Web3 infrastructure, which synergizes with ICG’s existing operations.

Also, despite its losses and decline in revenue last financial year, ICG remains in a solid financial position. It has $97 million in cash, equivalents and short-term investments and only $1.9 million in total liabilities. Losses over the past 12 months were just $3.09 million.

ICG could then be a solid pick for investors who want to invest in both a Chinese semiconductor and blockchain stock with a cheap valuation.

ACM Research (ACMR)

ACM Research (NASDAQ:ACMR) specializes in developing wet processing technology and products for the semiconductor industry. The company has subsidiaries in Shanghai and Wuxi, serving the IC manufacturing and wafer-level packaging sectors. Unlike ICG, which faces short-term struggles, ACMR stock’s prospects for the immediate future look bright.

The reason is that it updated its financial outlook for fiscal year (FY) 2023 and provided initial guidance for FY2024. For 2023, ACMR revised its revenue forecast to a range of $530 to $545 million, up from the previously projected range of $520 to $540 million. Looking ahead to 2024, ACM Research anticipates revenue to be between $650 million and $725 million. The backdrop surrounding this optimism is a return from its expected investments in mature node capacity by China-based customers and the company’s efforts to expand its product portfolio.

Wall Street is also bullish on the stock. ACMR stock has a consensus rating of “Strong buy” and a one-year target price increase of 23.5%. Three analysts have maintained their accretive price targets so far for 2024. Revenue and EPS are forecast to increase by 40.6% and 139%, respectively.

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.