Global X China Semiconductor ETF: Capturing Domestic Substitution and Memory Re-Rating

• Chinese semiconductors are benefiting from three forces at the same time: domestic substitution, policy support, and rising AI compute demand. The investment theme has expanded from “self-sufficiency and controllability” to memory, semiconductor equipment, and AI chip design.
• Global X China Semiconductor ETF (HKEX:3191) offers diversified exposure to China’s semiconductor value chain, covering key segments such as semiconductor equipment, memory components, AI chip design, foundry manufacturing, and advanced packaging.
• However, valuations in the sector have already priced in substantial future growth expectations. investors who would like to capture the long-term industry trend while staying mindful of valuation, policy, and portfolio concentration risks.

Global X China Semiconductor ETF | Four Structural Tailwinds Driving the Sector

• The U.S.–China tech rivalry continues to escalate.

Since October 2022, the U.S. Department of Commerce has progressively expanded export controls on China's semiconductor industry — from advanced GPUs and EDA (chip-design software) tools to High Bandwidth Memory (HBM) and advanced-process equipment, accelerating the de-Americanization of the supply chain and the reconstruction of indigenous capability. Against this backdrop, semiconductor self-sufficiency has shifted from an "option" to a "necessity" for China.

• Big Fund III is now deployed, with a scale exceeding the previous two phases combined.

The third phase of the National IC Industry Investment Fund ("Big Fund III") was officially established in 2024 with registered capital of RMB 344 billion, exceeding the combined size of Phases I and II. Phase III is focused on semiconductor equipment, upstream materials, and advanced processes, with direct beneficiaries including domestic equipment leaders and foundries.

• The 15th Five-Year Plan (2026–2030) elevates technology self-reliance to a core national strategy.

The 15th Five-Year Plan (2026–2030), formally adopted at the Two Sessions in March 2026, explicitly designates "technology self-reliance" and "semiconductor self-sufficiency" as national strategic priorities. Local government special funds increased centralized procurement by state-owned enterprises, and the deployment pace of Big Fund III together provides a multi-year demand backbone for the industry.

• Memory repricing waves in the AI inference era.

The proliferation of AI agents has shifted the key bottleneck in AI inference from pure compute to memory. As LPDDR and NAND become indispensable layers of the AI memory hierarchy, China’s domestic memory leaders, CXMT and YMTC, are emerging as direct beneficiaries of the global memory shortage.

Global X China Semiconductor ETF | Product Positioning

Table 1: Global X China Semiconductor ETF Fund Profile

Global X China Semiconductor ETF	Details
Fund Manager	Mirae Asset Global Investments (Hong Kong) Limited
Inception Date	6 August 2020
Underlying Index	FactSet China Semiconductor Index (Net Total Return)
Ongoing Charges	0.68% per annum
Replication Strategy	Full replication
Number of Holdings	20
Assets Under Management	HKD 3.17 billion
Board Lot Size	50 shares
Source: Mirae Asset Global Investments (Hong Kong) and iFAST Compilation. Data as of 26 May 2026.

Global X China Semiconductor ETF’s ongoing charge of 0.68% per annum is broadly in line with Hong Kong-listed thematic peers such as the Global X Asia Semiconductor ETF (3119). However, it is almost double the fee level of major U.S.-listed semiconductor ETFs, with SMH and SOXX charging around 0.35%. Investors should therefore be mindful that 3191’s relatively higher fee structure may create a modest drag on long-term returns.

Global X China Semiconductor ETF | A Deeper Look at the Holdings

To facilitate a layer-by-layer understanding of the holdings, we have decomposed the constituents into five industry tiers, ordered by weight from highest to lowest. The equipment layer supplies both memory and logic foundries.

Graph 1: Sectors Distribution of Global X China Semiconductor ETF

Table 2: Top 10 Holdings of Global X China Semiconductor ETF (3191)

#	Holdings	Ticker	Weight (%)	Sub-Sector
1	Cambricon Technologies	688256.SH	11.11	AI Chip Design
2	GigaDevice Semiconductor	603986.SH	10.40	Memory Components and Modules
3	Hygon Information	688041.SH	9.42	AI Chip Design
4	SMIC	688981.SH	9.16	Logic Process and Specialty IC
5	Montage Technology	688008.SH	8.84	Memory Components and Modules
6	Naura Technology	002371.SZ	8.36	Semiconductor Equipment
7	AMEC	688012.SH	6.99	Semiconductor Equipment
8	Changchuan Technology	300604.SZ	3.96	Semiconductor Equipment
9	Piotech	688072.SH	3.72	Semiconductor Equipment
10	JCET Group	600584.SH	3.38	HBM Advanced Packaging
Source: Global X and iFAST Compilation. Data as of 26 May 2026.

Semiconductor Equipment — The Core Beneficiary of Export Controls

With U.S. export restrictions imposed on ASML, Applied Materials, and Lam Research, Domestic logic and memory manufacturers have been compelled to source from domestic equipment suppliers to sustain capacity expansion, and the scale of this substitution has exceeded market expectations. As of the end of 2025, domestic equipment accounted for approximately 55% of total spending on newly built or expanded 12-inch wafer fabs in China.

Naura Technology, the largest equipment holding in 3191, epitomizes this structural shift. Its etch tools have been qualified for SMIC's 7nm pilot line, and the company is supplying advanced etch equipment required for 300-layer-plus 3D stacking at CXMT and YMTC, directly capturing order momentum from both memory expansion and logic-process advancement. The same dynamic plays out across the rest of the equipment cohort: Piotech (thin-film deposition), Changchuan Technology (test equipment), and Hwatsing Technology (CMP) are each absorbing localization orders within their respective domains.

Memory Components and Modules — Direct Beneficiaries of the Global Shortage

This tier is the most prominent theme in this update. The global memory market has entered a structural shortage. Samsung, SK Hynix, and Micron are prioritizing wafer capacity for HBM destined for AI data centers, leading to a sharp contraction in the supply of conventional DRAM and NAND. According to TrendForce and other industry estimates, Q1 2026 DRAM contract prices rose 80%–95% QoQ, while NAND Flash rose 55%–60% QoQ; Goldman Sachs has revised its full-year 2026 DRAM price forecast upward to a 250%–280% increase.

Chinese players are the winners of the price hike. With no memory supply from US and Korean players, smartphone, PC, consumer electronics, and industrial buyers have been forced to seek alternatives — and CXMT (DRAM) and YMTC (NAND) are positioned to fill the gap with rapid capacity expansion. CXMT recorded FY2025 revenue growth of 155.6% YoY, Q1 2026 revenue growth of 719% YoY, and capacity utilization of 95.7%; YMTC's Q1 2026 revenue approximately doubled YoY. For 3191’s memory components and module names, this creates a powerful structural tailwind and supports both volume growth and pricing power.

AI Chip Design — The Closed Loop of Domestic AI and HBM

Cambricon is China’s leading domestic AI training and inference chip designer, and is currently the largest holding in 3191. Hygon Information focuses on x86 server CPUs.

As major Chinese internet companies, including ByteDance, Alibaba, and Tencent, have clearly raised their AI capex guidance, and with U.S. chip export controls remaining in place, the strategic value of China’s domestic AI chip designers is becoming increasingly important.

Logic Process and Specialty IC — The Logic Self-Sufficiency Anchor

With U.S. export controls tightening, Chinese foundries are unable to procure cutting-edge EUV equipment. Nonetheless, driven by the strategic mandate of semiconductor self-sufficiency, foundries led by SMIC are advancing volume production of leading-edge logic nodes via DUV lithography and multi-patterning techniques. SMIC, as the exclusive foundry for Huawei's Ascend AI chips and the primary producer of the N+2 (approximately 7nm-equivalent) process, represents the core direction of China's logic self-sufficiency. Hua Hong Semiconductor focuses on specialty processes — including BCD and IGBT for power and analog ICs — benefiting from rising automotive and industrial electronics demand.

HBM Advanced Packaging

In "Memory supercycle: A structural shift rewriting supply and demand paradigm", we detailed the strategic importance of HBM to AI development. U.S. export controls restricting China's access to leading-edge HBM are paradoxically creating a window of opportunity for the domestic memory value chain. CXMT plans to commence HBM3 mass production in 2026 and to ramp HBM3E by year-end.

HBM manufacturing relies heavily on advanced packaging, enabling vertical integration and multi-layer wafer stacking to dramatically improve bandwidth and transfer efficiency. Within China's value chain, JCET Group is well-positioned to capture CXMT's back-end HBM3/HBM3E packaging orders and comparatively more advanced in hybrid bonding R&D, making it a critical node within the domestic HBM ecosystem.

Global X China Semiconductor ETF | Near-Term Catalysts

The three catalysts below are the primary reasons the market is willing to assign a premium valuation to Chinese semiconductors.

Catalyst 1: Huawei's "Tau Scaling Law" Reshapes the Long-Term Path of "Performance Advancement Without EUV

On 25 May 2026, Huawei formally introduced the "Tau Scaling Law". The core concept replaces the geometric scaling of Moore's Law with "time compression," combined with a Logic Folding architecture to shorten signal propagation delay — thereby increasing equivalent transistor density. Huawei stated that this methodology has underpinned the mass production of 381 chips over the past six years, and the next-generation Kirin chip, scheduled for release in autumn 2026, will fully adopt the Logic Folding architecture.

For 3191, the long-term significance of the Tau Scaling Law lies in providing a methodological pathway for the Chinese semiconductor industry to continue performance advancement under EUV restrictions. This forms a long-term demand foundation for SMIC, the exclusive foundry for Huawei's Ascend chips, and represents a critical pivot in the valuation narrative for the broader sector — from "defensive positioning under sanctions" to "active innovation within constraints."

Catalyst 2: CXMT Approval and YMTC IPO Tutoring

China's memory "twins" are simultaneously accelerating their listing timelines in Q2 2026, representing the most powerful near-term event-driven catalyst for 3191:

• CXMT received approval from the STAR Market Listing Committee on 27 May 2026, with a planned raise of RMB 29.5 billion — the second-largest IPO in STAR Market history. Market consensus places pre-IPO valuation at over RMB 3 trillion. CXMT's global DRAM market share is approximately 7.67%, ranking fourth globally.

• YMTC's parent, YMTC Holdings, completed IPO tutoring filing on 19 May 2026, with the formal application expected to be submitted in mid-June. The targeted listing window is Q4 2026 to Q1 2027. Market consensus pre-IPO valuation is RMB 2–3 trillion.

However, since CXMT and YMTC are not yet listed, they do not appear directly in 3191's holdings. As such, 3191 provides indirect exposure to the memory twins via related equipment, materials, packaging, memory module, and AI-compute demand-side companies — rather than direct ownership. As the IPO processes progress, we expect investor sentiment toward China's memory ecosystem to strengthen further, providing near-term support to the broader value chain.

Catalyst 3: Internet Hyperscaler AI CapEx Acceleration and ASIC Localization (Aligned with the AI Chip Design Layer)

China's leading internet platforms (ByteDance, Alibaba, Tencent, Baidu) have meaningfully raised their AI CapEx guidance since 2H 2025. With access to NVIDIA's high-end GPUs restricted, domestic players have become the principal substitute for both training and inference workloads. Cambricon and Hygon together represent approximately 21% of 3191's weight, making them the primary lever for the "AI compute localization" narrative.

Global X China Semiconductor ETF | Risk Factors

• Valuation risk: The FactSet China Semiconductor Index's forward P/E has exceeded two standard deviations above its historical mean. Based on 2028 earnings projections, the current share price has effectively priced in three years of high growth, leaving virtually no margin of safety. Multiple constituents — including Cambricon, Naura, and SMIC — are all trading at historical valuation highs.
• Policy risk: Further expansion of the U.S. BIS Entity List, or a tightening of secondary controls on U.S.-origin equipment and materials, could directly impact core holdings such as SMIC and Naura.
• Concentration risk: The top 5 holdings account for approximately 49% of the portfolio. The daily price limit on STAR Market A-shares may amplify ETF premium/discount volatility.

Global X China Semiconductor ETF | Investment Implications

Based on Table 5, even assuming sustained high earnings growth from 2026E to 2028E, the implied potential upside through end-2028 is only -1% based on the current share price — indicating that the market has already fully priced in three years of high growth.

Furthermore, for long-term investors, an annualized expense ratio of 0.68% compounds to a return drag of approximately 6.6% over a 10-year horizon. Combined with elevated valuations, the present moment may not be the optimal entry point for this ETF.

Comparison with Other Semiconductor ETFs — 3191 is Not the Only Option

For investors seeking exposure to the semiconductor but requiring a wider valuation margin of safety, Global X Asia Semiconductor ETF (HKEX:3119) offers attractive alternatives with more downside cushion.

Table 4: Three-Way Comparison: SMH / 3119 / 3191

	SMH	3119	3191 (HKEX)
Core Holdings	NVIDIA, Micron, TSMC	SK Hynix, Samsung, TSMC	Domestic equipment + memory ecosystem + AI compute
Forward P/E	~31x	~17x	~81x
Primary Catalysts	SOCAMM2 repricing, Vera Rubin ramp	HBM4 ramp, AI memory ASP uplift	CXMT / YMTC IPOs, Tau Scaling Law, shortage cycle
Expense Ratio	0.35% per annum	0.68% per annum	0.68% per annum
Source: Bloomberg, ETF issuer disclosures, and iFAST Compilation Data as of 26 May 2026.

On balance, the more reasonable approach at this stage is to keep 3191 on the watchlist rather than initiate a position immediately. For investors without existing exposure, a more rational stance would be to wait for valuations to be retraced to more reasonable levels, or for major events to crystallise, before reassessing entry timing.

Graph 1: FactSet China Semiconductor Net Total Return Index — Forward P/E

Table 5: FactSet China Semiconductor Net Total Return Index Forecast

FactSet China Semiconductor NTR Index	2025A	2026E	2027E	2028E
EPS (CNY)	3.0	4.7	6.6	9.6
Earnings Growth		60.2%	39.1%	44.8%
Implied Valuation (40x PE)				382.2
Potential Upside				-1%
Source: Bloomberg and iFAST Compilation. Data as of 26 May 2026.

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.