Goldman Sachs picks 6 Chinese chip stocks — some with over 50% upside

Published Sun, Sep 19 20217:31 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts at Goldman Sachs have picked their top Chinese semiconductor stocks that they say are set for growth — some with a potential upside of more than 50% to the bank's 12-month price targets. Semiconductor chips are found in everything from cars to smartphones and are currently in short supply . "We expect companies' new products and new end-market expansion to be key incremental growth drivers through cycles," Goldman's analysts led by Allen Chang stated in a Sept. 13 note to investors. Of Goldman's "key stock ideas," several can be bought by investors outside China as they are listed on U.S. or Hong Kong stock exchanges. Semiconductor Manufacturing International Corp and Hua Hong , listed on the Hong Kong stock exchange, both have "strong growth potential off a low base and strong local demand," according to Goldman. Both are foundries, which means they make chips for other companies. SMIC has a 59% potential upside to Goldman's price target, while Hua Hong has 37%. Taiwan Semiconductor Manufacturing Company , the world's largest chipmaker , is set for an 80% market share in a type of processor known as 3 nanometer by 2023, Goldman estimated, and it will also have "dominant pricing power." TSMC is listed on the New York Stock Exchange and has a 66% potential upside to Goldman's 12-month price target. New product development for semiconductor foundry United Microelectronics Corp is set to add 30% to sales in 2025, Goldman estimated. UMC has a potential 65% upside to its 12-month price target and is listed on the NYSE. Nasdaq-listed ACM Research , which supplies chipmakers, is "rapidly" ramping up production of plating tools that add a thin layer of metal to a semiconductor, Goldman said, and it is also launching new equipment that the company expects to raise its serviceable addressable market from $5 billion to $10 billion. Goldman said the stock has a potential 41% upside to its 12-month price target. Goldman likes smartphone component-maker AAC Tech , listed in Hong Kong, for its "multiple components portfolio" for Android phones and "strong" shipments growth in camera lenses. The stock has a potential 60% to Goldman's 12-month price target. In a separate note published earlier this month, Goldman raised growth forecasts for TSMC and UMC and said it expects both companies to increase product prices.

Workers work on a Panasonic SMT machine at guiyang Zhenxin Technology Co., Ltd. in Guiyang, Guizhou Province, China, July 27, 2021.

Costfoto | Barcroft Media | Getty Images

Analysts at Goldman Sachs have picked their top Chinese semiconductor stocks that they say are set for growth — some with a potential upside of more than 50% to the bank's 12-month price targets.